Addl. Commissioner of Income Tax vs Mewa Lal Sankatha Prasad

Satish Chandra, C.J.—The questions of law which have been referred by the Tribunal for our opinion are as follows :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that for the purposes of calculating penalty u/s 271(1)(c), the provisions of Section 271(1)(c) as amended by the Finance Act, 1968, with effect from April 1, 1968, were not applicable and that the penalty has to be calculated according to the provisions of the Act which was applicable as per the provisions in force prior to April 1, 1968 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in reducing the amount of penalty imposed u/s 271(1)(c) from Rs. 18,000 to minimum imposable with reference to the tax sought to be evaded ?"

For the assessment year 1961-62, the assessee filed a return of his income before April 1, 1968. In due course, the assessment order was passed. It appears that there was a raid on the business premises of the assessee where some materials were discovered on the basis of which the ITO issued a notice u/s 148 requiring the assessee to file a return which was filed on June 27, 1968. The question of law which arose was whether the imposable penalty was to be calculated in accordance with the law as it" stood prior to its amendment on April 1, 1968, or recourse has to be taken to the amended law. It is not disputed that the relevant amendments giving the measure of penalty came into force with effect from April 1, 1968.

The question, in substance, is whether the taxable event is the date of filing of the original return or the date of the filing of the revised return in pursuance of a notice u/s 148, This point is directly covered by a decision of this court reported in Commissioner of Income Tax Vs. Ram Achal Ram Sewak, . In that case, it was held that the revised return filed in pursuance of a notice u/s 148 was immaterial. The relevant return was the original return and if that return was filed prior to April 1, 1968, the provisions as they stood on that date were alone material. This decision was followed by this court in Addl. Commissioner of Income Tax Vs. Krishna Subh Karan, . In this case also the revised return was filed in pursuance of a notice u/s 148. The original returns were filed in June, 1960, and 1961. It was held that the law as it obtained on the date of the original return would govern the quantum of imposable penalty.

Learned, counsel for the department invited our attention to another decision of this court in Amjad Ali Nazir Ali Vs. Commissioner of Income Tax, . In our opinion, this case is distinguishable. There the principal controversy was whether the voluntary return filed u/s 139(5) of the Act could, in law, supplant a return filed u/s 139(1). The Bench held that it will depend upon the facts of the case. If omission or the wrong statements in the original return were deliberate, the revised return was not a valid return and hence could not supplant the original return for purposes of penalty. In that event, the original return alone could be looked into. But where the omission or the wrong statement in the original return was not deliberate, but the assessee subsequently discovers an error of which he was not cognizant earlier, the revised return is valid u/s 139(5). Such a return amends the original return. The original return stands amended or revised and in such circumstances the revised return is the only validly existing return which could be seen for purposes of imposing penalty. Since the revised return has supplanted the original return, the original return becomes redundant in so far as the imposition of penalty is concerned.

No such situation has arisen in the present case. The assessee did not file a revised return on the basis that he had subsequently discovered an error in the original return. He had to file a revised return because he was asked to do so by a notice. The present case is directly covered by the two earlier decisions mentioned above.

We answer the first question by holding that the provisions as they stood prior to their amendments with effect from April 1, 1968, were applicable and the second question by holding that the Tribunal was justified in reducing the amount of penalty. We, therefore, answer both the questions in favour of the assessee and against the department. The assessee will be entitled to costs which are assessed at Rs. 200.