ax Reference Case No 15 of 1975
Tax Reference under Section 257 of the Income Tax Act 1961 made by the Income Tax Appellate Tribunal Delhi Bench RA No 508 of 1971 72 arising out of ITA No 3410 of 70 71 for assessment year 1964 65
section L Aneja and K L Taneja for the Appellant
section C Manchanda G A Shah and Miss A Subhashini for the Respondent
The Judgment of the Court was delivered by PATHAK J
Is an assessee who has concealed the particulars of his income liable to penalty under clause iii of sub section 1 of section 271 of the Income Tax Act 1961 as it stood on the date of the concealment or as it stand during the assessment year relevant to the previous year in which the income was earned  That is the question in this reference made by the Income Tax Appellate Tribunal under section 257 of the Income Tax Act
The assessee is a partner in two firms Messrs Hindustan Pottery Agency and Messrs New Crockery House
He filed a return of his total income for the assessment year 1964 65 on April 201 24 1968
He disclosed an income of Rs 460 from his share in the profits of Messrs Hindustan Pottery Agency
He did not disclose the income from his share in Messrs New Crockery House
In the course of the assessment proceedings the Income Tax officer found that the assessee had received income from Messrs New Crockery House also
Because of non compliance by the assessee with a notice issued under section 143 2 of the Act the Income Tax officer made a best judgment assessment under Section 144 of the Act on a total income of Rs 12118 
This included a share income of Rs 1462 from Messrs Hindustan Pottery Agency and a share income of Rs 3456 from Messrs New Crockery House
Certain other items of income were also included
On appeal by the assessee the Appellate Assistant Commissioner reduced the income from Messrs New Crockery House to Rs 2955 and taking into account certain other items determined the figure of concealed income at Rs 7357
The Income Tax officer instituted penalty proceedings and applied clause iii of sub section 1 of section 271 of the Act as it stand after amendment by the Finance Act 1968
Having regard to the minimum penalty which in his opinion was leviable he referred the case to the Inspecting Assistant Commissioner
The Inspecting Assistant Commissioner examined the matter and on the basis that the concealed income was Rs 7357 he imposed a 13 penalty in the like sum in view of the amended clause iii of subsection 1 of section 271 of the Act
The assessee appealed to the Income Tax Appellate Tribunal and contended that the amended provision could not be invoked and what came into operation was the law as it stood in the assessment year 1964 65
The Tribunal rejected the contention
But it reduced the penalty to Rs 2955 taking the view that the assessee was guilty of concealing the share income from Messrs New Crockery House only
The assessee then applied for a reference
The Tribunal saw a conflict of opinion on the point raised by the assessee between the Kerala High Court in Hajee K Asseinar vs Commissioner of Income Tax Kerala and the Punjab and Haryana High Court in Income Tax Reference No 45 of 1971 decided on April 26 1972 which had followed Saeed Ahmed vs Inspecting Assistant Commissioner of Income tax Range ll Lucknow2 decided by the Allahabad High Court 
In the circumstances it made the present reference directly to this Court on the following question of law 202 Whether the Tribunal was in law right in sustaining the penalty of Rs 2955 by applying the provisions of section 2711c iii of the Income Tax Act 1961 as amended with effect from 1 4 1968  Section 271 of the Income Tax Act provides for penalties in certain cases
Clause c of sub section 1 of section 271 speaks of a case where the Income Tax officer is satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income
The measure of the penalty is specified in clause iii of the sub section
During the assessment year 1964 65 clause iii read iii in the cases referred to in clause c in addition to any tax payable by him a sum which shall not be less than twenty per cent but which shall not exceed one and a half times the amount of the tax if any which would have been avoided if the income as returned by such person had been accepted as the correct income That clause was substituted with effect from April 1 1968 by the Finance Act 1968 by the following iii in the cases referred to in clause c in addition to any tax payable by him a sum which shall not be less than but which shall not exceed twice the amount of the income in respect of which the particulars have been concealed or inaccurate particulars have been furnished  It is evident that the quantum of tax which is levied under the substituted clause iii can be greater than that imposable in terms of the original clause iii
The case of the assessee is that an assessment proceeding for the determination of the total income and the computation of the tax liability must ordinarily be made on the basis of the law prevailing during the assessment year and inasmuch as concealment of income is concerned with the income relevant for assessment during the assessment year any penalty imposed in respect of concealment of such income must also be governed by the law pertaining to that assessment year
We are unable to accept the contention
In our opinion the assessment of the total income and the computation of tax liability is a proceeding which for that purpose is governed by entirely different considerations from a proceeding for penalty imposed for concealment of income And this is so notwithstanding that the income concealed is the income assessed to tax
203 In the case of the assessment of income and the determination of the consequent tax liability the relevant law is the law which rules during the assessment year in respect of which the total income is assessed and the tax liability determined
The rate of tax is determined by the relevant Finance Act
In the case of a 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
We do not think that the cases to which the Tribunal has referred can be said to differ on this
The concealment of the particulars of his income was effected by the assessee when he filed a return of total income on April 24 196
Accordingly it is the substituted clause iii brought in by the Finance Act
1968 which governs the case
That clause came into effect from April 1 1968
Another contention raised by the assessee may be noticed
It is urged that under section 139 of the Income Tax Act as it stood during the assessment year 1964 65 the return of income should have been filed by the end of September 1964 and inasmuch as the return although filed as late as April 24 1968 was accepted by the Income Tax officer it should be deemed that the return was treated as filed within time or in other words that the return had been filed by September 3 1964
In that event the submission continues the concealment of the particulars of income must be deemed to have taken place when the original clause iii of section 1 of section 271 of the Act was in operation
This contention is also without force
Under section 139 of the Act although the statute itself prescribes the date by which a return of income must be filed power has been conferred on the Income Tax officer to extend the date of furnishing the return
A return filed within the extended period is a good return in the sense that the Income Tax officer is bound to take it into consideration
But nowhere does section 13 declare that where a return is filed within the extended period it will be deemed to have been filed within the period originally prescribed by the statute
On the contrary the section contains a provision for payment of interest where the return is filed beyond the 204 prescribed date even though within the extended period
That is evidence of the fact that the return filed during the extended period is not regarded by the statute as filed within the time originally prescribed
Accordingly we are of opinion that clause iii substituted in sub section 1 of section 271 of the Income Tax Act 1961 by the Finance Act 1968 governs the case before us and therefore the penalty imposed on the assessee in the instant case is covered by that provision
We answer the question in the affirmative in favour of the Revenue and against the assessee
The Revenue is entitled to its costs of this Reference


Summary:
Section 2711ciii provided that where the Income Tax officer had reason to believe that the assessee had concealed particulars of his income or furnished inaccurate particulars of such income he may impose a penalty of a sum in addition to any tax payable by the assessee which shall not be less than twenty per cent but which shall not exceed one and a half times the amount of the tax
The Finance Act 1968 which came into effect from April 1 1968 enhanced the penalty to a sum which shall not be less than 7 but which shall not exceed twice
the amount of income in respect of which the particulars have been concealed or inaccurate particulars have been furnished
The assessee filed a return of his total income for the assessment year 1964 65 on 24th April 1968
In the course of assessment proceedings the Income Tax officer found that the assessee had concealed the income earned from one of his two firms
Having regard to the minimum penalty which he considered was leviable he referred the case to the Inspecting Assistant Commissioner
The Inspecting Assistant Commissioner imposed a penalty in respect of the concealed income in accordance with section 271 1 c iii as amended by the Finance Act 1968
It was argued on behalf of the assessee that i assessment proceeding for the determination of total income and computation of tax liability must ordinarily he made on the basis of the law prevailing during the assessment year and inasmuch an concealment of income is concerned with the income relevant for assessment during the assessment year any penalty Imposed in respect of concealment of such income must also be governed by the law pertaining to that assessment year ii under section 139 of the Act as it stood during the assessment year 1964 65 the return of income should have been filed by the end of September 1964 and as the return although filed on April 24 1968 was accepted by the Income Tax officer and therefore should be deemed to have been filed within time ie by September 30 1964 the penalty would be governed by the section as it originally stood then
 HELD 1
Clause iii substituted in sub section 1 of section 271 of the Income Tax Act 1961 by the Finance Act 1968 governs the case
Therefore the penalty imposed on the assessee in the instant case is covered by that provision 204B 2
The assessment of the total income and the computation of tax liability is a proceeding which for that purpose is governed by entirely different considerations from a proceeding for penalty imposed for concealment of income
And this is so notwithstanding that the income concealed is the income assessed 200 to tax
In the case of the assessment of income and the determination of the consequent tax liability the relevant law is the law which rules during the 1 assessment year in respect of which the total income is assessed and the tax liability determined
The rate of tax is determined by the relevant Finance Act
In the case of a penalty however it is imposed on account of the commission of a wrongful act
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
202G H 203A C 3
Under section 139 of the Act although the statute itself prescribes the date by which a return of income must be filed power has been conferred on the Income Tax Officer to extend the date of furnishing the return
A return filed within the extended period is a good return in the sense that the Income Tax officer is bound to take it into consideration
But nowhere does section 139 declare that where a return is filed within the extended period it will be deemed to have been filed within the period originally prescribed by the statute
On the contrary the section contains a provision for payment of interest where the return filed beyond the prescribed date even though within the extended period
That is evidence of the fact that the return filed during the extended period is not regarded by the statute as filed within the time originally prescribed
203 F H 204A