George Vadakkel, J.
1. The Income-tax Appellate Tribunal has referred the following questions to this court under Section 256(2) of the I.T. Act, 1961 ;
' 1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in cancelling the penalty of Rs. 13,781 imposed under Section 271(1)(c) of the Income-tax Act, 1961, for the assessment year 1961-62?
2. Whether, on the facts and in the circumstances of the case, and having found that there is concealment of income in the original assessment proceedings, the Income-tax Appellate Tribunal is right in law in holding that there could be no concealment in the reassessment proceedings and that the provision of law applicable is Section 28(1)(c) of the Indian Income-tax Act, 1922, and not Section 271(1)(c) of the Income-tax Act, 1961?
3. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in casting the burden of proof of concealment on the Department
4. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in finding that the Department has not proved that the assessee had intentionally concealed income or deliberately furnished inaccurate particulars of income for the assessment year 1961-62, and is not such finding perverse, unreasonable and unsupported by any materials '
2. The assessee is a firm. It is running a chitty business. It is also carrying on banking business. The assessee is maintaining regular books of account in respect of the banking business, but not in respect of the chitty business. There is no dispute about the income computed from the banking business. This case concerns the income computed from the chitty business for the assessment year 1961-62 (accounting year being the year ended on December 30, 1960). For the assessment year 1961-62 the assessee filed a return on July 17, 1961, showing the income from the chitty business as Rs. 49,233 out of the total income shown as Rs. 72,745. The assessment was completed on a total income of Rs. 98,078. This was later reduced to Rs. 95,321. On April 26, 1968, the ITO proposed to reopen the assessment under Section 147(a) of the Act. While this proposal was pending consideration the assessee filed a revised return on May 31, 1968. In this return the assessee showed, besides the income of Rs. 95,321 originally assessed, three items of income in respect of the chitty business, namely,
1% commission on two chitties and
commission in parallel chitties
3. On May 8, 1968, the ITO issued a notice under Section 148 of the Act. Thereupon the assessee filed a other return on the same lines as the revised return filed on May 31, 1968. The ITO accepted this return with an addition of Rs. 7,200 representing interest which the assessee would have earned in respect of certain idle funds but this addition has been subsequently deleted.
4. Thereafter, on June 24, 1970, the ITO initiated penalty proceedings for concealment of income and referred the matter to the IAC. He passed an order on March 6, 1973, imposing a penalty of Rs. 13,781 under Section 271(1)(c) of the Act. The assessee appealed to the Tribunal.
5. The Tribunal held that there could be no concealment in the reasessment proceedings since the ITO accepted the revised return and that, therefore, concealment, if any, could be only in the return filed on July 17, 1961, on the basis of which the assessment was originally completed. The Tribunal further held that the law regarding penalty as it stood at that time governs the penalty proceedings. Since the present Act of 1961 came into force only on April 1, 1962, the Tribunal held that Section 28(1)(c) of the Indian I.T. Act, 1922, is to be applied with all its rigour. The Tribunal then considered each of the three items of income shown in the revised return, Parithoshikam, 1% commission on two chitties and commission in parallel chitties, and took the view that not showing these 3 items in the first return cannot be characterised as intentional concealment or deliberately furnishing inaccurate particulars of such income. The Tribunal, therefore, allowing the appeal cancelled the levy of penalty.
6. The requirement of Section 28(1 )(c) of the earlier Act of 1922 is :
' 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,......'
7. Compare the above provision with the requirement mentioned in Section 271(1)(c) as obtained prior to April 1, 1964-
'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,......'
8. We have adverted to the above provisions, which are substantially identical, to point out that so far as the questions raised in this case are concerned, Section 297(2)(g) of the 1961 Act, on which much reliance has been placed on behalf of the Revenue, has no relevance. Under Section 297(2)(g) of the present Act:
' any proceeding for the imposition of a penalty in respect of any assessment for the year ending on the 31st day of March, 1962, or any earlier year; which is completed on or after the 1st day of April, 1962, may be initiated and any such penalty may be imposed under this Act. '
9. Notwithstanding the repeal of the Indian I.T. Act, 1922, in so far as the elements constituting the offence are the same both under Section 28(l)(c) of the old Act and Section 271(l)(c) of the present Act as obtained till April 1, 1964, it is of little significance and of no consequence whether the penaltyproceedings are under one or the other of the above points unless it be to contend that the quantum of punishment provided under the provision in the later Act is greater than that provided under the earlier Act, in which case, in view of the second part of Clause (1) of Article 20 of the Constitution that no person shall be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence, no greater punishment than that provided for in the earlier Act can be imposed. (See Tiwari Kanhaiyalal v. CIT : 100ITR5(SC) . No contention about the quantum of punishment has been raised in this case by the assessee, and, therefore, it is not necessary to examine that aspect here.
10. It is a fundamental principle of penal jurisprudence that penalty can be levied only as per the law which was in force on the date of the commission of an offence and not on the basis of the law which came into existence subsequent to the date. The Supreme Court in Brij Mohan v. CIT : 120ITR1(SC) said :
' In the case of penalty, however, we must remember that a penalty is imposed on account of the commission of a wrongful act, and plainly it is the law operating on the date on which the wrongful act is committed which determines the penalty. Where penalty is imposed for concealment of particulars of income, it is the law ruling on the date when the act of concealment takes place which is relevant. It is wholly immaterial that the income concealed was to be assessed in relation to an assessment year in the past. '
11. It is also axiomatic that for what has not been an offence when done, one cannot be punishable because subsequently such an act has been constituted an offence. In other words, the question as to whether a particular act is wrongful and is an offence is to be determined with reference to the law that was in force on the date when the act was done just as the question of penalty for a wrongful act is to be determined with reference to the law operating on the date on which the wrongful act is committed. It is this principle that is enshrined in the first part of Article 20(1) of the Constitution as per which no person shall be convicted of any offence except for the violation of a law in force at the time of the commission of the act charged as an offence.
12. Therefore, two questions arise : (i) When did the assessee commit the act charged as an offence? and (ii) was the commission of the act charged as an offence in violation of a law in force at the time of its commission and, therefore, an offence
13. The assessee committed the act charged as an offence when he on July 17, 1961, filed the original return without showing the three itemsof income which he showed in the revised return. There is no dispute on this point.
14. The law in force then (July 17, 1961) was Section 28(1)(c)of the earlier Act of 1922, since the 1961 Act came into force only on April 1, 1962. Has the assessee violated this provision of law
15. The basis for the levy of penalty, as stated in the Tribunal's order, are:
'(i) The assessee was collecting more commission than what was shown in the books of account as found from the scrutiny of the original contracts.
(ii) All the commission retained for parithoshikam was not distributed but appropriated for themselves.
(iii) Parallel chitties for persons who were not registered as subscribers at all and credits for interest were made for subscribers who were quite unaware of the facts.
(iv) The assessees themselves had filed voluntary return showing this income.
(v) For the earlier years the Income-tax Appellate Tribunal has upheld the levy of penalties under similar circumstances.'
16. The Tribunal found that there is nothing which would show that the assessee deliberately furnished inaccurate particulars when they did not take into account any part of the parithoshikam and that it is not proved that knowing it was wrong the assessee said the full parithoshikam was allowed. In that connection the Tribunal noticed that because the assessee had no proper books of account he could not establish that whether it has not been paid or not, that there might have been some subscribers who might have defaulted in the matter of prompt payment of their subscriptions as an incentive for which prompt payment, parithoshikam is given and that to that extent the assessee might have appropriated to itself that much amount of parithoshikam and earned an income. However, all these are only surmises which will not establish that the assessee deliberately furnished inaccurate particulars, for, it may as well be that he distributed in full the parithoshikam and it may be only that he is not able to establish the same for want of regular accounts. According to the Tribunal the same is the position so far as one per cent. commission in respect of the two chitties is concerned. As regards the commission in parallel chitties the Tribunal accepted the assessee's case that it is only a method adopted to attract funds to the banking department at comparatively lower cost and that these amounts were lent at higher rate of interest through the banking department. The Tribunal found that such income is reflected in the banking department. Consequently the Tribunal found that the assessee had no intention of concealing such income.
17. On the facts found by the Tribunal and in the circumstances adverted to by it, there can be no doubt that the conclusion arrived at by the Tribunal was correct. If so, there was no violation of Section 28(l)(c) of the earlier Act. Under this provision 'penalty on the ground of concealment can be imposed only if there is conscious and deliberate concealment on the part of the assessee', and 'the mere fact that the assessee agreed to the inclusion of cash credits or other amounts in the total income on account of his inability to prove the source or to avoid protracted litigation with the department does not by itself justify the levy of penalty:' (See Kanga and Palki-vala's The Law and Practice of Income Tax, 7th Edn., Vol.1, pp. 1211-12 and the cases relied on there). That this is so is not seriously disputed by the learned counsel for the Revenue. His contention is that in view of Section 297(2)(g) of the 1961 Act, the question of penalty--both initiation of the proceeding for the imposition thereof and imposition of such penalty thereupon--is to be determined with reference to Section 271(1)(c) of the 1961 Act, as that provision stood on June 24, 1970, when the ITO was satisfied that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. As earlier indicated, Section 271(1)(c) of the 1961 Act, was amended by the Finance Act, 1964, with effect from April 1, 1964, as a result of which the word 'deliberately' in that clause was omitted. The contention is that under Section 271(1)(c) as, amended, the furnishing of inaccurate particulars per se and even in the absence of mens rea on the part of the assessee to furnish inaccurate particulars is an offence. The argument is that in view of Section 297(2)(g) of the Act the date of satisfaction of the ITO that a person has furnished inaccurate particulars is the relevant date and it is with reference to the law in force on that date that this case has to be decided.
18. No doubt, penalty proceedings can be initiated and penalty can be imposed only on the concerned authority being satisfied that the assessee has when he committed the Act charged as an offence, by such commission violated the law in force then (here, concealed the particulars of his income or deliberately furnished inaccurate particulars of such income). In respect of any assessment for the year ending March 31, 1962, or any earlier year, which is completed on or after April 1, 1962, such' proceedings may be initiated and penalty may be imposed under the 1961 Act. But this does not mean that Section 271(1)(c) as it stands at the time the penalty proceedings are initiated or penalty is imposed 'literally applies'. It will apply mutatis mutandis, i.e., with the necessary changes being made or subject to suitable modifications : (See Jain Brothers v. Union of India : 77ITR107(SC) ). The question whether the act charged is an offence will depend upon as to whether the assessee has violated any law in force at the time it was done and the quantum of punishment shall be only that which isprovided by the law in force at that time. This is clear from the following passage in the above-mentioned decision (at p. 117):
' Both Sections 271(1) and 297(2)(g) have to be read together and in harmony and so read the only conclusion possible is that for the imposition of a penalty in respect of any assessment for the year ending on March 31, 1962, or any earlier year which is completed after the first day of April, 1962, the proceedings have to be initiated and the penalty imposed in accordance with the provisions of Section 271 of the Act of 1961. Thus, the assessee would be liable to a penalty as provided by Section 271(1) for the default mentioned in Section 28(1) of the Act of 1922, if his case falls within the terms of Section 297(2)(g).'
19. Mark, the default is the default mentioned in Section 28(1)of the earlier Act or, in other words, the ITO's satisfaction should be that the assessee is guilty of one or the other of the defaults mentioned in Section 28(1) of the earlier Act. On being so satisfied the assessee shall be liable to be proceeded against under Section 271(1) of the present Act and he would be liable to a penalty as provided therein. However, the nature and quantum of penalty are also to be governed by the law in force at the time the wrongful act is done. See the Supreme Court decisions in Tiwari Kanhaiyalal v. CIT : 100ITR5(SC) and Brij Mohan v. CIT : 120ITR1(SC) . In the first case the Supreme Court said (p. 9):
'We are inclined to think that the offence, if any, committed by the appellant was under Section 52 of the 1922 Act as the allegedly false statements in declarations were made at a time when the said Act was in force. No false statement in any declaration seems to have been made under the 1961 Act to form the basis of a charge against the appellant under Section 277 of the Act. The punishment provided in this section is greater than the one engrafted in Section 52 of the 1922 Act. To that extent only the appellant would be entitled to press into service the second part of Clause (1) of Article 20 of the Constitution which says that no person shall: 'be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.' '
20. We have earlier in this judgment extracted the material passage from Brij Mohan v. CIT : 120ITR1(SC) . In view of the above discussion, there is no merit in the contention that the law in force as on the date of the ITO's satisfaction is the relevant law for determining whether the assessee herein has committed the offence charged against him.
21. We answer the first three questions and the first part of the fourth question referred to this court in the affirmative, that is to say, in favour of the assessee and against the Department. Our answer to the secondpartof the fourth question is in the negative, that is again in favour of the assessee and against the Department. There shall be no order as to costs .
22. Send a copy of this judgment under the seal of this court and the signature of the Registrar to the Appellate Tribunal as required by Section 260(1) of the 1961 Act.