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Commissioner of Income-tax Vs. K.C. Behera and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtOrissa High Court
Decided On
Case NumberS.J.C. No. 157 of 1971
Judge
Reported in[1976]105ITR193(Orissa)
ActsIncome Tax Act, 1961 - Sections 271(1)
AppellantCommissioner of Income-tax
RespondentK.C. Behera and ors.
Appellant AdvocateA.B. Misra, Standing Counsel
Respondent AdvocateK.C. Lenka, Adv.
Excerpt:
.....proceedings under this act, is satisfied that any person--(c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty--5. on april i, 1964, section 271(1)(c) was amended. --where the total income returned by any person is less than eighty per cent, of the total income (hereinafter in this explanation referred to as the correct income) as assessed under section 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud..........less than eighty per cent, of the total income (hereinafter in this explanation referred to as the correct income) as assessed under section 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of clause (c) of this sub-section.'6. in this case the accounting period is from august 31, 1963, to september 17, 1964. the return for this accounting year was.....
Judgment:

G.K. Misra, C.J.

1. The question referred to this court under Section 256(1) of the Income-tax Act, 1961, runs thus :

' Whether, in the facts and circumstances of the case, the order of the Appellate Tribunal in cancelling the penalty was justified in law ?'

2. The short facts are that before the Income-tax. Appellate Tribunal an appeal was filed against the imposition of penalty of Rs. 14,500 under Section 271(1)(c) read with Section 274(2) of the Income-tax Act, 1961. The Tribunal applied the principles in Commissioner of Income-tax v. Anwar Ali : [1970]76ITR696(SC) that the revenue failed to establish that the assessee concealed the particulars of his income or deliberately furnished inaccurate particulars of that income. It is on this conclusion that the Tribunal allowed the appeal and directed refund of the payment of penalty, if already the amount had been recovered from the assessee. The reference arises out of this appellate order.

3. Section 28(1)(c) of the Indian Income-tax Act, 1922, enacted as follows :

'28. (1) If the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal, in the course of any proceedings under this Act, is satisfied that any person--......

(c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income,

he or it may direct that such person shall pay by way of penalty,...'

4. The Income-tax Act, 1961, came into force on April 1, 1962. Section 271(1)(c) runs thus:

'271(1) If the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person--......

(c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income,

he may direct that such person shall pay by way of penalty--......'

5. On April I, 1964, Section 271(1)(c) was amended. The word 'deliberately' was deleted. On the same day an Explanation to the following effect was added:

'Explanation.--Where the total income returned by any person is less than eighty per cent, of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under Section 143 or Section 144 or Section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of Clause (c) of this sub-section.'

6. In this case the accounting period is from August 31, 1963, to September 17, 1964. The return for this accounting year was filed subsequent to September 17, 1964. By that time the Explanation to Section 271(1) had come into force, and the word 'deliberately' in Section 271(1)(c) hadbeen deleted. The Tribunal should have, therefore, determined the questionof validity of the penalty with reference to law as it was subsequent toApril 1, 1964. In other words, the Tribunal should have considered theeffect of Section 271(1)(c) after the amendment and the effect of theExplanation.

7. Without applying the correct law, the Tribunal relied upon Anwar All's case which enunciated the position of law prior to the amendment effected on April 1, 1964. The Tribunal's finding of fact was accordingly vitiated. It was reached without keeping the correct law in view.

8. After the case goes back, the Tribunal will apply the correct law and record its finding, 61 fact whether the penalty imposed was valid or not.

9. We would accordingly answer the question referred to us by saying that in the facts and circumstances of this case the order of the Appellate Tribunal in cancelling the penalty was not justified in law.

10. There will be no order as to costs.

S.K. Ray, J.

11. I agree.


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