1. By these four reference applications moved under s. 256(1) of the I.T. Act, 1961, the Commissioner of Income-tax, Delhi, has got referred the following common question of law for the opinion of this court :
'Whether, on the facts and in the circumstances of the case, the Tribunal was legally right in holding that the provisions of s. 271(1)(c), as amended w.e.f. April 1, 1968, were not applicable in this case and thereby reducing the amount of penalty to 25% of the tax sought to be avoided ?'
2. The assessment years involved are A.Ys. 1950-51, 1958-59, 1962-63 and 1963-64. For the first year, the assessed was the firm, Banwari Lal Dwarka Prasad, and for the other three years, the firm, Chandu Lal Dwarka Prasad. The assessments of the assesseds for the four assessment years in question were completed in due course and the incomes were assessed as follows :
Assessment year AmountRs.1950-51 1,68,3511958-59 69,1561962-63 1,04,5461963-64 97,870
3. It so transpired that in a raid organized at the premises of the assesseds on October 22, 1964, certain documents and other materials were seized which showed that the assesseds had effected several transactions and made payments which were not incorporated in the regular books on dates on which they had in fact been paid. The hundis drawn upon the assesseds by their constituents on the supply of goods were not (?) out of their concealed incomes and entries were made in that direction in the regular account books only when there were sufficient cash balances in the cash books. In one year, it was further found from a register recovered in the search organized at the premises of Shri Dwarka Prasad, one of the partners, that he had effected investment in the construction of property of Rs. 57,000 while that actually disclosed at the assessment stage was only Rs. 40,000. Investigation, thereforee, into the affairs of the assessed proceeded. The two firms were sister concerns with substantially the same partners. Reassessment proceedings, thereforee, by issue of notices under s. 147/148 were commenced. The assessed then filed revised returns showing incomes as per assessments effected at the original stage. However, as the investigation proceeded, the two assesseds found their position indefensible. They then moved the Commissioner for a settlement under s. 271(4A) of the I.T. Act, 1961. A writing was submitted on March 25, 1971, wherein the assesseds agreed that the amounts of concealed income of the firm for various years from A.Ys. 1950-51 to 1964-65 may be taken at Rs. 2,33,000 and the same may be spread over in the five assessment years, including the four assessment years in question, as below :
Assessment year AmountRs.1950-51 52,0001958-59 52,0001962-63 43,0001963-64 43,0001964-65 43,000----------Total 2,33,000----------
4. In this writing, the assessed also agreed to the levy of penalty at the rate of 25% on the amount of tax sought to be avoided in each of the four assessment years in question. It appears that the Commissioner did not accept the offer of the assesseds for settlement. The ITO framed the assessments and initiated penalty action under s. 271(1)(c) against the assesseds. The IAC, to whom penalty action was referred, came to the conclusion that these were clear cases in which the two assesseds had concealed their income in the four assessment years in question respectively and had furnished inaccurate particulars of their income in the revised returns as furnished by them in pursuance of the notices under s. 147/148 of the I.T. Act, 1961. He, on account of the fact that the revised returns in pursuance of the notices under s. 147/148 of the Act were filed after the coming into force of the amendment in s. 271(1)(c) w.e.f. April 1, 1968, levied penalties at hundred per cent. of the amount of income concealed in each of the four assessment years as per the amended provisions of s. 271(1)(c) of the Act. He thus levied penalties of Rs. 52,000, Rs. 52,000, Rs. 43,000 and Rs. 43,000 for the four assessment years in question, respectively.
5. The Appellate Tribunal, to which the matter was taken by the assessed in appeal, came to the conclusion that the concealment of income and the inaccuracy in furnishing of particulars took place long before the provisions of s. 271(1)(c) were amended with effect from April 1, 1968, and, thereforee, penalties were livable as per the provisions of s. 271(1)(c),as they stood prior to its amendment w.e.f. April 1, 1968. The Tribunal, accordingly, directed that penalties as levied on the assesseds be reduced to 25% of the tax sought to be avoided.
6. An identical question arose before a Division Bench of this court in the case of Addl.CIT v. Joginder Singh : 151ITR93(Delhi) . In that case, Shri Joginder Singh, the assessed, filed a return showing an income of Rs. 4,481. This return was filed prior to April 1, 1968. The assessment was completed on January 10, 1969, on an income of Rs. 8,481. Subsequently, this assessment was reopened and the assessed in pursuance to the notices under s. 148 of the I.T. Act, 1961, filed his return on July 7, 1970, showing an income of Rs. 4,481 as before. The assessment was completed on a total income of Rs. 14,481, which included further addition of a sum of Rs. 6,000. The IAC levied a penalty of Rs. 6,000 under s. 271(1)(c) of the I.T. Act, 1961. On appeal by the assessed, the Tribunal directed that penalty be reduced to 20% of the tax sought to be avoided. The Division Bench, consisting of S. Ranganathan and Leila Seth JJ. after a detailed discussion, held that, in such a case, the penalty provision as on the date of the first return filed for the year should govern and not the date of the filing of the revised return. Reference, among other cases, was made to a decision in the case of Malbary and Bros. v. CIT : 51ITR295(SC) , Addl. CIT v. Onkar Saran : 116ITR317(All) and CIT v. Ram Singh Harmohan Singh . The Allahabad High Court and the Punjab and Haryana High Court in the said two cases had taken the same view. The question as to whether the penalty is livable only with reference to the return originally filed or it is livable with reference to the return filed in the reassessment proceedings or with reference to both, although not specifically answered by the Supreme Court in the case of Malbary and Bros. : 51ITR295(SC) , however, the observations of the Supreme Court in that case impliedly mean that penalty for concealment of income or for furnishing inaccurate particulars of income under s. 28(1)(c) of the Indian I.T. Act, 1922, corresponding to s. 271(1)(c) of the Act of 1961, is livable only once for a particular assessment year. In that case, different amount of penalties were levied on the assessed under s. 28(1)(c) of the Act of 1922, one for the return filed originally and the second for the return filed in the reassessment proceedings after notice under s. 28(3) of the Act of 1922 had been served on the assessed. The Tribunal had quashed the penalty levied for the return originally filed and had confirmed the penalty for the return filed in the reassessment proceedings. On a direct reference to the Supreme Court, it was held that the jurisdiction to make the second order was not lost because the ITO had omitted to recall the earlier order, although the two orders could not be enforced simultaneously or stand together. It was further observed that as, however, the first order had been cancelled, there was only one order and the second order was, thereforee, a legal order. We find ourselves in respectful agreement with the aforesaid decision of the earlier Bench of this court and follow the same. We, accordingly, answer the question referred in the affirmative, i.e., in favor of the assessed and against the Revenue. Under the circumstances of the case, the parties are left to bear their own costs of the references.