1. The Income-tax Appellate Tribunal, Delhi Bench 'A', has referred the following question of law for the opinion of this court under s. 256(1) of the I.T. Act, 1961 (for short 'the Act') :
'Whether, on the facts and in the circumstances of the case, and having regard to the contents of the returns filed on October 15, 1965, and November 13, 1969, the penalty livable on the assessed under s. 271(1)(c) should be calculated on the basis of the provisions of s. 271(1)(c), as they stood prior to their amendment in 1968 or whether the provisions of that section as amended in 1968, are applicable ?'
2. Gurbachan Singh was carrying on his business as a sole proprietor in the name of M/s. General Radiator Workshop and was engaged in the manufacture and sale of car radiators and components thereof. For the assessment year 1965-66, he filed his return of income declaring a total income of Rs. 13,831. This was on October 15, 1965. Before the assessment was made, he filed a revised return of his income on November 13, 1969, declaring an income of Rs. 7,393. Gurbachan Singh died and was represented in the assessment proceedings by his legal representatives, Smt. Kulwant Kaur, his wife, etc. The difference between the income in these two returns was due to the fact that in the original return, the assessed did not claim depreciation. This was the only change effected in the revised return. During the course of the assessment proceedings, the ITO called upon the assessed to file an inventory of his closing stock as on the last day of the accounting year, i.e., March 31, 1965. When this was done, the ITO found that the assessed was enjoying overdraft facilities with Lakshmi Commercial Bank Limited, Kamla Nagar, Delhi. He, thereforee, asked the assessed to file a certificate from the bank regarding the stocks pledged with the Bank for the purposes of the overdraft. On examination of the statement filed, it was found that certain raw materials valued at Rs. 26,943, which were found mentioned in the statement of Stock pledged with the bank, were not shown in the list of closing stock as per the inventory filed by the assessed. The ITO did not accept the Explanationn of the assessed and added the sum of Rs. 26,943 as the assessed's income from undisclosed sources on the ground that this represented unaccounted stock of the assessed.
3. The ITO initiated penalty proceedings against the assessed under s. 271(1)(c) of the Act and referred the matter to the Inspecting Asst. Commissioner of Income-tax. After giving opportunity to the assessed, the IAC came to the conclusion that the assessed had not disclosed certain stocks pledged with the bank and the suppressed had his income to the extent of Rs. 26,943. He, accordingly, imposed a penalty of Rs. 26,943. As regards the quantum of penalty, the IAC was of the view that though the original return was filed on October 15, 1965, the revised return was filed only November 13, 1969, which was after the amendment of the provisions of s. 271(1) and which came onto force with effect from April 1, 1968. The minimum penalty under the provisions of the amended section was a sum equal to the amount of income sought to be concealed. Accordingly to the IAC, as the revised return was filed after April 1, 1968, the amended section would be applicable to the case of the assesse.
4. The Tribunal, on appeal by the assessed, agreed with the conclusion of the IAC that, in the facts and circumstances of the case, a penalty should be computed on the basis of the tax sought to be evaded in accordance with the provisions of s. 271(1)(c) of the Act, as they stood prior to their amendment on April 1, 1968, and directed that minimum penalty should be levied in the instance case. At the instance of the CIT, the question set out above was referred for decision of this court.
5. The ITO took into consideration only the original return and there is no mentioned of the revised return in the assessment order. It is only in the order of the IAC that a reference has been made to the original as well as the revised return. The Tribunal found that though the assessed filed a revised return, the said return was nothing but a mere claim for depreciation and that there was no other change. The income of the assessed remained the same as in the original return. 'This claim of the assessed for depreciation might have been entertained if made even otherwise at the time of the assessment proceedings, provided that the assessed could furnish the details of the same', The Tribunal observed. In the view of the Tribunal, depreciation was statutorily allowance on completion of certain formalities or furnishing certain information, and that since there was no vital change in the two returns, the original return held the field. The ITO did not even refer to the revised return. It was thus the original return on the basis of which the assessment proceedings were held. The Tribunal held that there was no continuing default in the case of s. 271(1)(c) of the Act. The Tribunal also held that the penalty should be calculated on the basis of the unamended provisions of s. 271(1)(c) of the Act, as they existed prior to April 1, 1968, inasmuch as the original return was filed on October 15, 1965, and the concealment took place when the assessed file the original return itself. We are of the opinion that the reasoning adopted by the Tribunal is correct in the present case.
6. Some judgments of the High Courts were cited before us where, after complication of the original assessment, notice under s. 148 to the Act was issued the return of income filed in pursuance thereof and the question was whether the penalty was to be levied on the basis of the first return or the one filed in pursuance of notice under s. 148 of the Act. This is, however, not the question in the case before us and it is, thereforee, unnecessary to refer to the judgments cited. It can also be argued that if the revised return was valid under s. 139(5) of the Act, it might take the place of the original return for all intents and purposes. We, however, need not discuss this aspect of the matter as there is a finding of the Tribunal to the effect that the original return filed on October 15, 1965, was the basis of the assessment.
7. We, thereforee, hold that the penalty livable was to be calculated on the basis of the provisions of s. 271(1)(c) of the Act, as they stood prior to their amendments in 1968, and thus answer the question accordingly in favor of the assessed and against the Department. We, however, leave the parties to bear their own costs.