Gopalan Nambiyar, Actg. C.J.
1. The Income-tax Appellate Tribunal, Cochin Bench, has referred the following question of law for our opinion :
' Whether the Tribunal is right in holding that the penalty imposable under Section 271(1)(c) of the Income-tax Act, 1961, for concealment of income is to be computed according to the law as it stood on the 1st day of April of the assessment year relevant for assessment of the income concealed '
2. The assessment years with which we are concerned are 1966-67 and 1967-68 and the question that arises for decision is whether for imposition of a penalty it is the law of the assessment year that governs or not. The facts as stated in the statement of the case are these. For the assessment year 1966-67, the assessee filed on February 13, 1967, a return declaring a loss of Rs. 85,000. On June 13, 1968, it filed a revised return declaring an income of Rs. 22,642. The Income-tax Officer determined the total income at Rs. 1,39,580.
3. For the assessment year 1967-68, the assessee filed on April 10, 1968, a return of income declaring a total of Rs. 2,75,000. A revised return was filed on December 18, 1968, declaring an income of Rs. 3,07,428. The officer determined the total income at Rs. 5,04,090. Penalty proceedings were initiated for both the assessment years under Section 271(1)(c) of the Income-tax Act, 1961, for concealment of income. The Inspecting Assistant Commissioner found the assessee guilty of concealment and he had to impose penalty for these two years. Section 271(1)(c)(iii) of the Income-taxAct, 1961, before it was substituted by the Finance Act, 1968, with effect from April 1, 1968, provided that the penalty imposable shall be a sum which shall not be less than 20% but which shall not exceed 1 1/2 times the amount of tax which would have been avoided if the income as returned by the assessee had been accepted as the correct income. But with effect from April 1, 1968, the Finance Act of 1968 enacted that the penalty shall be a sum less than, but not exceeding twice the amount of, income in respect of which the particulars had been furnished. The Inspecting Assistant Commissioner took the view that as the returns in which the concealment had been made were filed only after April 1, 1968, the penalty imposable was to be computed as per the provisions as substituted with effect from April 1, 1968. So he imposed a minimum penalty of Rs. 87,765 which is equal to the income concealed for the assessment year 1966-67 and a minimum penalty of Rs. 1,64,587 for the assessment year 1967-68, The assessee appealed to the Tribunal. It was the contention of the department that the concealment takes place only when the return is filed, and this having been done after March 31, 1968, the concealment took place after March 31, 1968, that the law at the time of the commission of the offence is the law as it stood after the amendment by the Finance Act, 1968, and, therefore, the minimum penalty had to be computed according to that law. Reliance was placed on behalf of the department on the decision in Commissioner of Income-tax v. Isthmian Steamship Lines : 20ITR572(SC) . The Tribunal held that there was nothing either expressed or implied in the Finance Act of 1968 to show that the law as amended would apply to penalty proceedings prior to the assessment year 1968-69, where returns are filed after March 31, 1968. It was, therefore, of the view that the computation of the penalty for the assessment years in question had to be made according to the provision of law as it stood prior to the Finance Act of 1968. In other words, the Tribunal was of the view that the law as on the 1st April of the assessment year was the law that should apply to the penalty proceedings. It did not go into the question whether for the assessment year 1966-67, the return in which income is concealed is the return filed on February 13, 1967, or on June 13, 1968, because it thought that such a finding was not material for the disposal of the appeals.
4. The Tribunal's view may be gathered from the following passage in its order :
' So, under these circumstances, the question whether the actualconcealment by filing returns took place after March 31, 1968, or before isnot at all material. It is the law as on 1st April of the assessment yearthat should apply to these penalty proceedings. We do not find any reasonto take a view different from that taken by the Cochin Bench in the wealthtax appeals (cited supra).'
5. Reference to the decision of the Cochin Bench is to be found a little earlier in the order of the Tribunal as follows :
' The Bench to which one of us, the Accountant Member was a party, have already held in the wealth-tax appeals (cited supra) that the law as it obtained on the first of April of each assessment year alone should apply even for computation of penalty. '
6. The Tribunal has formulated the above question of law and sent up the same to this court for decision.
7. Counsel for the revenue placed reliance on two Full Bench rulingsof this court in Commissioner of Income-tax v. K. Ahamed : 95ITR599(Ker) (Ker) [FB] and Commissioner of Income-tax v. Gujamt Travancore Agency : 103ITR149(Ker) , besides a number of rulings of the High Courtsand some rulings of the Supreme Court. In Commissioner of Income-tax v. K.Ahamed : 95ITR599(Ker) the reference to the Full Bench wason the question whether, on the facts and circumstances of the case, theAppellate Tribunal was correct in law in holding that the Explanation to Section 271(1)(c) of the Income-tax Act, 1961, is not applicable to the case.The facts were that the year of assessment was 1963-64; return was filedby the assessee for the year on September 8, 1966. The income disclosedwas only Rs. 13,764. The assessment was completed fixing the total incomeat Rs. 65,570. As the income returned was less than 80%'of the totalincome assessed, the Explanation to Section 271(1)(c) was attracted, Jind asthe act of furnishing inaccurate particulars had taken place after theamendment, penalty proceedings were launched and penalty was imposed.The Tribunal held that the amended section would not apply because theassessment year ended before the amendments were effected and that toapply the section in the circumstances, would be to give retrospective effectto it. The Full Bench pointed out that, on the facts, there was no questionof giving retrospective effect to the section. It observed that the year ofassessment has nothing to do with the assessment of liability arising under Section 271(1)(c) of the Income-tax Act, .1961. The Full Bench also pointedout that, on general principles also, the question whether an act or omissionis an offence must be determined with reference to the law at the time ofthe commission of the act or omission. The question referred wasaccordingly answered in the negative, i.e., in favour of the department andagainst the assessee.
8. Counsel for the revenue placed reliance on the-sentence in paragraph 5 of the judgment of the Full Bench that the year of assessment has nothing to do with the question of liability arising under Section 271(1)(c) of the Income-tax Act, 1961, and he contended that liability for penalty must necessarily be fixed at the point of time subsequent to what was material for the purpose of assessment. This aspect which , the counsel wouldcommend to us for acceptance is not a question dealt with or covered by the Full Bench.
9. Counsel also invited our attention to the Full Bench judgment in Commissioner of Income-tax v. Gujarat Travancore Agency : 103ITR149(Ker) to which one of us (myself) was a party. That case was really concerned with the question of the nature of penalty proceedings, viz., whether it could be said to be of a criminal or penal nature, and whether any particular mens rea can be said to be an essential ingredient of penalty proceeding and with the further question of burden of proof in such proceedings. The question received a fairly elaborate consideration, in the course of which the decisions and the authorities were referred to, expounding the concept of penalty as an additional tax. In particular, reference was made to Abraham's case : 41ITR425(SC) , and to the decision of the Supreme Court in Assistant Collector of Customs, Bombay v. L, R. Melwani : 1970CriLJ885 and Him H. Advani v. State of Maharashtra : 1971CriLJ5 . It was observed that these decisions appeared to reinforce the impression that the penalty proceedings under the Act are not proceedings of a criminal nature which warranted the requirement of mens rea in the sense in which the same is required for an offence under the criminal law. The Supreme Court decisions were referred to as having expounded the true nature of the penalty as additional tax. Therefore, counsel for the revenue submitted that if the true nature of the penalty was only as an additional tax, the terminal for the imposition of penalty need not necessarily coincide with the terminal for the imposition of tax in the assessment; and this aspect of the matter required investigation, which the Tribunal was not justified in foreclosing. He referred us to numerous decisions of the High Courts which have in a way adverted to this aspect of the matter. For instance, the decision of the Madras High Court in Commissioner of Gift-tax v. C. Muthukumaraswamy Mudaliar : 98ITR540(Mad) has pointed out the five termini with respect to one or other of which the penalty can be levied. The decision eventually concluded that the law as it stood in the financial year in which the assessment is made cannot in any event regulate the levy of a penalty. But, beyond ruling out negatively this one particular terminal point, no particular choice was indicated in regard to any one of the other termini indicated earlier at page 554.
10. Our attention was called to the decision of the Calcutta High Court in Nawn Estates Pvt. Ltd. v. Commissioner of Income-tax : 106ITR384(Cal) , where again the view was taken that penalty is an additional tax, and to the decision of Additional Commissioner of Income-tax v. Jeewan Lal Shah : 109ITR474(All) , a decision of the Allahabad High Court. In addition to these, we wish only to record that the following decisions - were also referred to:
(1) Commissioner of Income-tax v. K. C. Befaera : 103ITR479(Orissa) , (2) Commissioner of Income-tax v. Mukanddas Visknukumar , (3) Commissioner of Income-tax v. Data Ram Satpal : 99ITR507(All) , (4) Additional Commissioner of Income-tax v. Jeewan Lal Shah : 109ITR474(All) , (5) Additional Commissioner of Income-tax v. Medisetty Ramarao : 108ITR318(AP) , (6) Rajputana Stores v. Inspecting Assistant Commissioner of Income-tax and (7) Continental Commercial Corporation v. Income-fax Officer : 100ITR170(Mad) .
11. On the strength of these decisions, counsel for the revenue advanced a submission that on the basis of the Full Bench ruling in Commissioner of Income-tax v. K. Ahamad : 95ITR599(Ker) , the year of assessment has got nothing to do with the question of liability under Section 271(1)(c) of the Income-tax Act, 1961, and that on the principle of the Full Bench decision in Commissioner of Income-tax v. Gujarat Travancore Agency : 103ITR149(Ker) and the other decisions referred to earlier, the point of time relevant to the imposition of penalty is anything subsequent to what is relevant for the imposition of a tax for the purpose of assessment.
12. Counsel for the assessee submitted that the basis of the judgment in Commissioner of Income-tax v. K. Ahamad : 95ITR599(Ker) would require re-examination in the light of the principle of the Full Bench decision in Commissioner of Income-tax v. Gujarat Travancore Agency : 103ITR149(Ker) . The ground for the submission was that while the earlier Full Bench decision had proceeded on the basis that penalty proceedings are criminal in nature, the latter Full Bench has stated that proceedings are not criminal. One of us (myself) is by no means sure that there is any warrant for the submission that there is a conflict in principle between the two Full Bench rulings. My learned brother, Kochu Thommen J., is quite clear and definite that there is none. Both of us are agreed that for the purpose of this case, it is quite unnecessary to go into this region.
13. Even accepting the view contended for by counsel for the revenue that, as expounded in Commissioner of Income-tax v. Gujarat Travancore Agency. : 103ITR149(Ker) , a penalty imposed is only an additional tax, there is enough warrant for the proposition, as evidenced by the decisions, to which we have referred earlier, that the terminal for the imposition of a penalty is something different from the terminal for the imposition of a tax in assessment proceedings. As this aspect of the matter has not been gone into by the Appellate Tribunal, we answer the question in the negative, i.e., in favour of the department and against the assessee. The Tribunal will pass an order on the appeals before it in the light of the answer^madeTjy us to the question of law referred.
14. A copy of this judgment under the signature of the Registrar and the seal of the court will be communicated to the Tribunal as required by law. No order as to costs.