Decided on February 11,1974

K. AHAMAD Appellant


- (1.) This is a petition styled to be one under S.256 of the Income Tax Act, 1961, for short, "the Act", and S.151 of the Code of Civil Procedure and the prayer therein is: "It is therefore prayed that this Hon'ble Court be pleased to delete the sentence occurring in para 4 in the judgment namely:-'Imposition of penalty by the Inspecting Assistant Commissioner was therefore justified' or to clarify that this court had not intended by the said statement to justify the imposition of penalty even if the Explanation applied and that it is open to the Appellate Tribunal to consider the appeal, regarding the sustainability of the imposition of penalty, under the Explanation."
(2.) The judgment in which the sentence sought to be deleted occurred was pronounced in expressing our opinion on the question referred for our opinion by the Income Tax Appellate Tribunal, Cochin Bench which was in these terms:- "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 -
(3.) For the year of assessment 1963-64, the Income Tax Officer felt that the assessee was liable to be penalised under S.271(1)(c) of the Act and since he also felt that the minimum penalty leviable exceeded Rs. 1,000/- he referred the proceedings to the Inspecting Assistant Commissioner of Income Tax, Calicut Range. That officer took the view that apart from stating that the explanation to S.271(1)(c) was introduced only with effect from 1-4-1964 and no offence can be created with retrospective effect, the assessee has not let in any evidence to prove that the difference between the returned income and 80% of the income assessed did not arise due to any of the defaults contemplated in the Explanation to S.271(1)(c) of the Act. In this view of the matter, he imposed a penalty of Rs. 6,000/-. The assessee appealed to the Appellate Tribunal and the Tribunal was of the opinion that "Certainly this Explanation has introduced a fresh point for the purpose of levy of penalty. Therefore, the Explanation is not declaratory of pre existing law as the department contends, but it clearly affects vested rights which have accrued to the assessee. The vested right is the immunity from the levy of penalty imposable under the circumstances adumbrated in the explanation. If so, the well settled rule of construction precludes us from construing the Explanation as retrospective unless the amending Act expressly or by necessary implication makes it retrospective. The assessment year in the instant case is the year 1963-64 and the Explanation to S.271(1)(c) is not applicable to the facts of the present case. In the view we have taken, it is unnecessary to go into the question raised by the assessee regarding the loss of books. The order of penalty is quashed and we directed the Income tax Officer to refund the amount, if collected from the assessee.";

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