Commissioner of Income Tax vs United India Periodical (P) Ltd.

R.C. Lahoti, J.—This is an application under s. 256(2) of the IT Act, 1961 relatable to the asst. yr. 1961-62, seeking direction to the Tribunal to draw up a statement of facts and refer the following two questions for the opinion of the Court :

"1. Whether, on the facts and in the circumstances of the case, the Hon''ble Tribunal was correct in law in holding that the provisions of law existing as on the date of filing of original return will be applicable for the purposes of imposing penalty under s. 271(1)(c), whereas even in the return filed under s. 148, the assessed had not disclosed the income which was subsequently detected and added back ?

Whether, on the facts and in the circumstances of the case, the Hon''ble Tribunal was correct in applying the ratio of the case of Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, , whereas the facts of the case are covered squarely under the case D.M. Manasvi Vs. Commissioner of Income Tax, Gujarat, II Ahmedabad, , as a clear cut device of concealment by manipulation of entries in the books of accounts has been established ?"

The facts relevant for the purpose of the present order lie in a narrow compass. For the asst. yr. 1961-62, return of the income was filed by the assessed on 26th July, 1961. The assessment was concluded on 28th February, 1986 under s. 143(3) of the Act. However, a notice under s. 148 of the Act was issued, in response whereof the assessed filed the return on 21st October, 1970. The total income returned by the assessed was found to be less than 80 per cent of the total income as assessed. Consequent to this, penalty proceedings under s. 271(1)(c) of the Act were initiated against the assessee. The Tribunal imposed 100 per cent penalty, which was reduced to 45 per cent in appeal by the assessee. The assessed and the Revenue, both preferred appeals to the Tribunal. The Tribunal, by its order dt. 9th March, 1994, set aside the levy of penalty forming an opinion that merely because the quantum of income returned by the assessed was not found to be correct, it could not be said that it was a case of deliberate concealment or furnishing inaccurate particulars.

With effect from 1st April, 1964, the following Explanation has been appended to s. 271(1)(c) of the Act :

"Where the total income returned by any person is less than eighty per cent of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under s. 143 or 144 or 147 (reduced by the expenditure incurred bona fide by him for the purposes of making or earning any income included in the total income but which has been disallowed as a deduction) such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or willful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of cl. (c) of this sub-section."

It appears that the Tribunal did not apply this Explanation to the present case for the reason that the Explanation had come into existence after the date of the commission of the offence by the assessee, inviting penalty proceedings.

At the hearing, the learned counsel for the Revenue has placed reliance on the cases of Commissioner of Income Tax Vs. Parmanand Advani, , Commissioner of Income Tax Vs. A. Rahman, and Commissioner of Wealth Tax, Meerut Vs. Sharvan Kumar Swarup and Sons, . The learned counsel for the respondent-assessee has relied on Supreme Court decision in the case of Commissioner of Income Tax, Lucknow Vs. M/s. Onkar Saran and Sons, , wherein the cases of Additional Commissioner of Income Tax, Delhi-III Vs. Joginder Singh, and Commissioner of Income Tax, Delhi (Central) Vs. S. Sucha Singh Anand, , both by Delhi High Court were cited with approval. The other decisions cited at the Bar are : Commissioner of Income Tax (Additional), Lucknow Vs. Jeevan Lal Sah, , Varkey Chacko Vs. Commissioner of Income Tax, , Commissioner of Income Tax Vs. Mussadilal Ram Bharose, and D.M. Manasvi Vs. Commissioner of Income Tax, Gujarat, II Ahmedabad, . The learned counsel for the assessed has also referred to Circular No. 20, dt. 7th July, 1964 explaining the amendment and submitted by reference to s. 119 of the Act that the view of the law as set out by CBDT in the Circular above said, is binding on the Department which supports the contention of the assessee.

Having heard the learned counsel for the parties, we are of the opinion that the crux of the controversy centres around the question whether the Expln. to s. 271(1)(c) falls within the domain of substantive law or procedural law. The other question flouring as a corollary to the first question will be whether the Explanation will have its applicability to the penalty proceedings initiated after the date of its enactment though the original return forming the subject-matter of penalty proceedings was filed prior to that date. The questions, as suggested by the Revenue, do not correctly bring out the crux of the controversy. They need to be reframed.

We are of the opinion that the following questions do arise from the order of the Tribunal :

"(1) Whether the Explanation enacted to s. 271(1)(c) of the IT Act, 1961, w.e.f. 1st April, 1964 falls within the domain of substantive law or is merely a rule of evidence, falling within the domain of procedural law ?

(2) Whether on the facts and in the circumstances of the case, the above said Explanation would be applicable to the penalty proceedings, which though initiated after the date of enactment of Explanation arose out of the return filed prior to that date ?"

The Tribunal shall draw up a statement of the facts of the case and refer the above-said questions for the opinion of the Court.

No order as to costs.