The Commissioner of Income Tax, Kerala vs K. Ahamed

P. Govindan Nair, Ag. C.J.

This Tax Referred Case has come up before the Full Bench on an order of Reference by a Division Bench dated 28th November, 1972. The reference was made because of the conflict between the decisions in ITR. No. 38 of 1970 and ITR. No. 71/1968. The question is:

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the Explanation to S. 271 (1) (c) of the Income tax Act, 1961 is not applicable to this case?.

By the amendments introduced by the Finance Act, 1964, the word "deliberately" has been omitted from Clause (c) of Sub-s. (1) of S. 271 and an explanation was added which is in these terms:

Where the total income returned by any person is less than eighty per cent of the total income (hereinafter in the Explanation referred to as the correct income) as assessed under S. 143 or S. 144 or S. 147 (reduced by the expenditure incurred bonafide by him for the purpose 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, he deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of Clause (c) of this sub-section.

The year of assessment with which we are concerned is 1963-64. It is admitted that the return filed by the assessee for the year is the one dated 8-9-1966. The amount of income disclosed by the return was only Rs. 13,764/-. The assessment was completed fixing the total income at Rs. 65,570/-. The income returned was therefore less than 80 per cent of the total income assessed-The explanation to S. 271 (1) (c) was thus directly attracted. This means that it must be presumed that the assessee had furnished inaccurate particulars of his income, unless he established that the failure to return the correct income did not arise from any fraud or any gross or willful neglect on his part. The act of furnishing inaccurate particulars had taken place after the amendments were introduced to the section. Imposition of penalty by the Inspecting Assistant Commissioner was therefore justified. The Tribunal held that the amended section would not apply because the year of assessment (1963-64) ended before the amendments were effected. It was further observed that to apply the section would be to give retrospective operation to the section as amended.

The year of assessment has nothing to do with the question of liability arising under S. 271 (1) (c) of the income tax Act, 1961. And to apply the section as amended to an act committed after the amendment is not to give the section retrospective effect. The only question is whether the elements of the section bad been satisfied when the act was committed. This is what a Division Bench of this Court said in ITR. No. 71 of 1968. In that case, the concealment had taken place before the section was amended. However in another Division Bench decision ITR. No. 38 of 1970 the view was taken that the amendments introduced by the Finance Act, 1964, which came into force on 1-4-1964 will not apply in relation to the assessment year 1963-64. This view as has been mentioned in the Order of Reference does not appear to be correct. The view taken in ITR. No. 71 of 1968 is in accordance with the decision of another Division Bench decision of this Court in HAJEE K. ASSAINAR Vs. COMMISSIONER OF Income Tax, KERALA., and the decision of the Punjab and Haryana High Court in The Commissioner of Income Tax Vs. Bhan Singh Boota Singh, .

On general principles too, it is the view taken in ITR. No. 71 of 1968 that should prevail. The principle in such cases has been laid down by Sri. Lionel Leach, Chief Justice of the Madras High Court in COMMISSIONER OF Income Tax, MADRAS Vs. VEDLAPATLA VEERA VENKATARAMIAH AND ANOTHER., . Whether an act or omission is an offence must be determined with reference to the law at the time of the commission of the act or omission.

In the light of the above, we overrule the decision in ITR. No. 38 of 1970. The correct principle is that laid down in the decision in ITR. No. 71 of 1968.

We therefore answer the question that has been referred to us in the negative, that is, in favour of the department and against the assessee. We direct the parties to bear their respective costs. A copy of this judgment under the seal of the High Court and the signature of the Registrar will be forwarded to the Appellate Tribunal, Cochin Bench.