1. These two income-tax reference relate to the assessment years 1957-58 and 1958-59 and involve a common question which can be disposed of by a common order though the principal question involved in this reference has already been decided by a Bench of this court to which one of us was a party in Addl. CIT v. Joginder Singh : 151ITR93(Delhi) . It is necessary to state a few facts in order to appreciate the arguments addressed by the learned counsel for the applicant.
2. The facts are as follows : For the assessment years 1957-58 and 1958-59, the assessed, Bawa Singh Chawhan (who is now no more and is represented by his legal representatives), filed his returns of income long prior to March 31, 1968. His assessments were completed for the assessment year 1957-58 on December 22, 1961, on an income of Rs. 21,600 and for the assessment year 1958-59 on December 22, 1962, on a total income of Rs. 11,600. Subsequently, the ITO started proceedings under s. 147(a) of the I.T. Act, 1961, as he had reason to believe that by reason of the omission or failure on the part of the assessed to disclose fully and truly all material facts necessary for his assessments for the above two years, income chargeable to tax had escaped assessment. In response to the notices issued under s. 148 of the Act, the assessed filed returns of income. For the assessment year 1957-58, he filed a return on December 20, 1966, declaring an income of Rs. 10,400, substituted it by another return showing the same income on August 4, 1967, and then filed a revised return showing an income of Rs. 21,600 on July 30, 1968. Similarly, for the assessment year 1958-59, a first return showing an income of Rs. 10,400 was filed on December 19, 1966, a revised return showing the same income was filed on August 4, 1967, and a revised return showing an income of Rs. 11,600 was filed on July 30, 1968. The ITO completed the assessments on December 31, 1968, for both the years, the total income assessed being Rs. 26,063 and Rs. 16,063, respectively. It may be mentioned that during the course of the reassessment proceedings, the assessed had submitted a letter to the Commissioner on December 20, 1968, agreeing that his assessments for the assessment years 1947-48 to 1959-60 could be revised and additions could be made thereto of sums of Rs. 12,629 for each of the assessment years 1947-48 to 1952-53 and Rs. 3,262 for each of the assessment years 1957-58 to 1959-60. In the reassessments made on December 31, 1968, the additional made to the income originally assessed principally comprised of this admitted addition of Rs. 3,263.
3. Simultaneously with the completion of the reassessment proceedings, the ITO also initiated penalty proceedings under s. 274 read with s. 271 of the I.T. Act. Subsequently, on June 27, 1969, the penalty proceedings were referred by the ITO to the IAC under s. 274(2) of the Act. The IAC, after issuing notice to the assessed and hearing his Explanationns, came to the conclusion that as the assessed has concealed the income Rs. 3,263 for each of the years under consideration, a penalty of Rs. 3,263 equal to the amount of income concealed, should be levied upon the assessed for each of the assessment years. He directed accordingly.
4. The assessed preferred appeals to the Income-tax Appellate Tribunal for these and two other assessment years. The Tribunal dealt with all these appeals together. It confirmed the penalty imposed for the assessment years 1950-51 and 1951-52 and with this we are no longer concerned. For the two assessment years under consideration, however, the Tribunal set aside the penalties on a very short ground. It observed :
'However, for the assessment years 1957-58 and 1958-59, we find that the minimum penalties imposable were less than Rs. 1,000 for each of the years. The jurisdiction, thereforee, for levying these penalties rested with the Income-tax Officer. The Inspecting Assistant Commissioner, thereforee, should not have proceeded with those penalty proceedings as they were within the jurisdiction of the Income-tax Officer. On this score, we set aside these penalties.'
5. The Commissioner is challenging the correctness of this decision of the Tribunal. At his request, the following common question has been referred to us which covers the two reference :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the penalty levied under section 271(1)(c)/274(2), Income-tax Act, 1961, by the Inspecting Assistant Commissioner was without jurisdiction and thereforee, deserved to be set aside ?'
6. Mr. Wadhera, learned counsel for the application, contended that the view taken by the Tribunal is incorrect. He pointed out that the assessments which gave rise to the penalties had been competed on the basis of returns the last of which had been filed on July 30, 1968, i.e., after April 1, 1968. He also invited our attention to the fact that the assessments had been completed on December 31, 1968, and that the reference to the IAC were made on June 27, 1969. His argument was that on all these material dates, the provisions of s. 271(1)(c) of the I.T. Act read with sub-clause (iii) following thereupon clearly stipulated that the amount of penalty imposable for any concealment was to be between 100% and 200% of the income sought to be concealed. In other words, the minimum penalty imposable was Rs. 3,263 for each of the years as that was the amount of income concealed. Section 274(2), as it stood at the relevant time, reads as follows :
'274. (2) Notwithstanding anything contained in clause (iii) of sub-section (1) of section 271, if in a case falling under clause (c) of that sub-section, the minimum penalty imposable exceeds a sum of rupees one thousand, the Income-tax Officer shall refer the case to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty.'
7. Since the minimum penalty imposable in the present case exceeded Rs. 1,000, the ITO had no option but to refer the matter to the IAC, and the IAC acted rightly in levying a penalty for each of the years under reference.
8. The argument of the learned counsel appears to be very simple but it cannot be upheld. As pointed out by the Supreme Court in the case of Brij Mohan v. CIT : 120ITR1(SC) , the quantum of penalty imposable in any particular case has to be determined in accordance with the law that prevails on the date on which the return, in respect of which penal action has been taken, was filed. In the present case, the position is somewhat complicated because the assessed filed a number of returns. A return was filed at the time of the original assessment and more than one return was filed in the course of the reassessment proceedings. On these facts, a question will arise as to which of these returns is to be taken into account for purposes of determining the law regarding the quantum of penalty. This is the precise question that came up before a Bench of this court (to which one of us was a party) in the case of Addl. CIT v. Joginder Singh : 151ITR93(Delhi) . After discussing the various aspects of the matter, the Bench has pointed out that in cases of this type, the offence must be taken to have been committed on the date of filing of the original return. In the present case, the original return was filed by the assessed long before March 31, 1968. At the time the return was filed, the law did not impose any minimum penalty. However, though the returns were filed prior to April 1, 1962, and though the assessment years concerned are 1957-58 and 1958-59, the assessments having been completed after April 1, 1962, the provisions of s. 279(2)(g) are attracted and the penalty has to be imposed under the corresponding provisions of the 1961 Act. The Madras High Court has held that in such a case the provisions in the 1961 Act regarding the quantum of minimum penalty will be applicable : vide Gopalakrishna & Bros. v. CIT : 106ITR82(Mad) . It is not necessary for the purpose of this case to go into the question whether the minimum penalty applicable would be that under the 1922 Act or that originally indicated under the 1961 Act, for, whichever of these provisions is taken, the minimum penalty imposable in the present case will be far less than, Rs. 1,000. It is, thereforee, clear that so far as the present case is concerned, the minimum amount of penalty imposable is less than Rs. 1,000 and according to the provisions of s. 274(2), the jurisdiction to levy the penalty remains with the ITO and cannot be transferred to the IAC.
9. Mr. Wadhera, appearing on behalf of the Department, contended that in a case of reassessment under s. 148, the return relevant for the penalty proceedings will be the return filed in response to the notice under s. 148 and not the return filed at the time of the original assessment. He relied for this proposition on the decision of the Madhya Pradesh High Court in Addl. CIT v. Balwantsingh Sulakhanmal 0065/1979 : 127ITR597(MP) . This decision cannot help the Revenue in the present case because, as already pointed, this court has taken a contrary view in the case of Joginder Singh case : 151ITR93(Delhi) . Another Division Bench of this court in the case of CIT v. Sucha Singh Anand : 149ITR143(Delhi) has also dissented from the decision in the Madhya Pradesh case referred to by Mr. Wadhera.
10. Another argument put forward by Mr. Wadhera was that we are concerned in this case only with the question as to whether the penalty should be imposed by the IAC or by ITO and that this was purely a procedural issue. Referring to certain observations made in CIT v. Jagan Nath Maheshwary , Esthuri Aswathaiah v. ITO : 49ITR977(KAR) , CIT v. Royal Motor Car Co. : 107ITR753(Guj) and CIT v. Balabhai & Co. : 122ITR301(Guj) regarding the canon of interpretation of machinery of procedural sections, Mr. Wadhera contended that the reference made by the ITO on June 27, 1969, on the basis of the provisions of the I.T. Act as they stood on that date should be upheld. He urged that we should not take into account the decisions which have subsequently interpreted the provisions of s. 271(1)(c) and clause (iii) thereof as amended from time to time and elucidated the basis on which the applicability of these provisions has to be decided. We agree with Mr. Wadhera that in determining the validity of the reference made by the ITO, we have to place ourselves in the position of the ITO on the date on which he made the reference. But, at the same time, since the competence of the reference to the IAC depends upon the minimum penalty imposable on the assessed, the ITO has to determine, on the facts and the provisions that are properly applicable, whether the matter is one in which the could levy the penalty or one which has to be referred to the IAC. Mr. Wadhera is certainly right in saying that the validity of the ITO's action has to be judged by the factual and legal position as it prevails on the date on which the reference is made. For instance, suppose the ITO on the basis of the assessment made in a particular case determines that the minimum penalty imposable exceeds Rs. 1,000 and refers the matter to the IAC, the latter cannot be divested of his jurisdiction to impose the penalty or even to impose a penalty of less than Rs. 1,000 because the assessment has undergone subsequent modifications and the minimum penalty has got reduced : vide CIT v. Ochhavlal & Co. : 105ITR518(Guj) . So also, the legal position regarding the quantum of penalty livable has to be determined with reference to the provisions as they are applicable on the date on which the reference to the IAC is made. But where we are unable to agree with Mr. Wadhera in regard to his contention that in determining what provisions are applicable to a particular case, the ITO's decision should be upheld irrespective of whether it is the correct one or not. If the correct position in law - and that is what has been decided in the cases of Joginder Singh : 151ITR93(Delhi) , Sucha Singh Anand : 149ITR143(Delhi) and other decisions - regarding the determination of the quantum of the penalty is that it has to be decided in the light of the statutory provision which prevailed on the date on which the original return was filed, we cannot ignore it and uphold the ITO's reference merely because the ITO made the reference honestly and bona fide in the belief that the provisions as amended in 1968 were applicable in a particular case. The question of bona fides of the determination by the ITO is irrelevant. The question to be determined is whether, on the facts and on the proper law applicable as on the date on which the ITO made the reference to the IAC, the minimum penalty imposable could be said to be more than Rs. 1,000 or otherwise. If it is more than Rs. 1,000, the reference would be valid but not otherwise. For the reasons discussed earlier, according to the proper interpretation of the statutory provisions even as on June 27, 1969, the minimum penalty imposable in the present case was much less than Rs. 1,000. The reference to the IAC was, thereforee, invalid and the levy of the penalty by the IAC was, thereforee, without jurisdiction. We, accordingly, agree with the view taken by the Tribunal and answer the question referred to us in the affirmative and in favor of the assessed. As there has been no appearance on behalf of the assessed, we make no order as to costs.