Decided on November 24,1971



- (1.) THIS reference made under Section 256 (1) of the Income-tax Act of 1961 by the Appellate Tribunal at the instance of the Commissioner of Income-tax is for the decision on the following question: "whether, on the facts and in the circumstances of the case, since the assessment related to the assessment year 1960-61 governed by the provisions of the Indian Income-tax Act, 1922, the levy of penalty of Rs. 5,000 which was less than the minimum provided for under Section 271 (1) (c) of Income-tax Act, 1961, was justified?"
(2.) THE assessee is a Hindu undivided family having income from property, share from the firm of M/s. Maduri Rajiahgari Kistaiah and from their own business. For the assessment year 1960-61 as against a return of income of Rs. 54,069 the assessable income was fixed at Rs. 1,59,298 as certain amounts were disallowed towards brokerage and entertainment expenses and gross profits disclosed being found to be less. Therefore, holding that the assessee had deliberately inflated these items of expenditure and suppressed the profits, penalty proceedings were started and as the minimum penalty leviable exceeded Rs. 1,000, the case was referred to the Inspecting Assistant Commissioner and he, after enquiry, levied a penalty of Rs. 58,000. On appeal, the Tribunal held that the addition on account of gross profit rate and also some of the disallowances have been made on estimate basis, as the assessing officer was not satisfied with the proof, and this could not form the basis of penalty. But the Tribunal, however, found that with regard to the brokerage as well as vehicle expenses claimed, the points made out by the Income-tax Officer had not been refuted by the assessee and this has been brought about by his own action in including some items of non-genuine nature. Keeping this in view, the Tribunal was of the opinion that a penalty on this score only is leviable and the quantum of penalty levied by the Income-tax Officer was unconscionably high. The Tribunal, however, held that the assessment year under appeal being 1960-61, the provisions of the Indian Income-tax Act of 1922 applied as far as the substantive provisions were concerned and as under the relevant provision no minimum penalty had been prescribed and as the application of the provisions of the Income-tax Act of 1961 would offend the provisions of Article 20 (1) of the Constitution, the Tribunal, applying Section 28 (1) of the Indian Income-tax Act of 1922, which was in existence at the time the alleged "offence" was committed, considered that restricting the levy of penalty to a sum of Rs. 5,000 would meet the ends of justice. Hence this reference.
(3.) THE assessment year was 1960-61. The Act then in force was the Indian Income-tax Act, 1922. Section 28 (1) of that Act reads as follows: "if the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal, in the course of any proceedings under this Act, is satisfied that any person,- -. . . . . (c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, he or it may direct that such person shall pay by way of penalty, in the case referred to in Clause (a), in addition to the amount of the income-tax and super-tax, if any, payable by him, a sum not exceeding one and a half times that amount and in the cases referred to in Clauses (b) and (c) in addition to any tax payable by him, a sum not exceeding one and a half times the amount of the income-tax, and super tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income. ";

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