Mehrotra, J. - (1.) IN this reference the following questions of law have been referred to this court for its opinion : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the provisions of Section 271(1) as they stood prior to the amendment by the Finance Act of 1968 should be applied in the present case ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the provisions of Section 271(1)(c) read with the Explanation thereof will not apply to the assessment years 1962-63 and 1963-64 even though the returns of income had been filed, after April 1, 1964 ? 3. Whether, on the facts and circumstances of the case, the Tribunal was right is holding that no penalty could be imposed with reference to the cash deposits on the principle of Anwar Ali's case [1970] 76 ITR 696 (SC) even after the amendment of Section 271 in 1964 ? 4. Whether, on the facts and the circumstances of the ease, the Tribunal was justified in holding that the INspecting Assistant Commissioner had no jurisdiction to impose penalties under Section 271(1)(c) for the assessment years 1962-63, 1963-64, 1965-66, 1966-67 and 1967-68 and in setting aside his orders ?"
(2.) FIVE assessment years are involved in the references, namely, 1962-63, 1963-64, 1965-66, 1966-67 and 1967-68. The questions referred to us are, however, common. The assessee, Jiwan Lal Shah, was assessed as an individual in the aforesaid assessment years. He filed his returns for the said years but the returned incomes were not accepted and he was assessed on the estimated basis. The following chart gives the necessary details of the returned incomes and the assessed incomes : JUDGEMENT_474_ITR109_1977Html1.htm Subsequently, the Income-tax Officer concerned started proceedings under Section 147 of the Income-tax Act, 1961, for the aforesaid assessment years as he had discovered certain bank deposits in the joint names of the assessee and his wife as well as in the names of the sons and the minor daughters of the assessee. The details of such deposits and interest accrued thereon are as follows : JUDGEMENT_474_ITR109_1977Html2.htm
(3.) IN the returns filed in response to the notices under Section 148 the assessee included the interest income from the aforesaid deposits. However, the amounts of deposits were not returned as income in the revised returns. The assessee maintained that the deposits in question were not his income but arose from four different sources. Some of the deposits were admitted to be correlated to certain withdrawals from banks. Some deposits were said to represent the sale proceeds of the ornaments of the assessee's wife. Some of the deposits were said to have been made out of the savings of the assessee's brother, Hira Lal Shah. The rest were explained as having come out of the assessee's savings from his past earnings. The INcome-tax Officer rejected the explanation of the assessee and the said deposits were added back as income for the relevant years. The interest, of course, had been returned as income by the assessee himself. On appeal, the Appellate Assistant Commissioner accepted some of the deposits and sustained additions in part. The Tribunal in the second appeal gave further relief to the assessee. The following table gives the details of the results which ensued from the appeals to the Appellate Assistant Commissioner and the Tribunal. JUDGEMENT_474_ITR109_1977Html3.htm While completing the reassessment the Income-tax Officer also initiated proceedings under Section 271(1)(c) and referred the matter to the Inspecting Assistant Commissioner as the minimum penalty imposable was held by the Income-tax Officer to exceed Rs. 1,000 in each assessment year. The Inspecting Assistant Commissioner held that the assessee had suppressed his income at the time of the original assessment--(i) in respect of items of credits found to be his income for the various years and (ii) certainly to the extent of the interest that had accrued on these various deposits. He further held that the returns of income in pursuance of the notices under Section 148 having been filed after April 1, 1968, the provisions of Sub-section (1) of Section 271 as amended on April 1, 1968, should be applied. He, therefore, imposed penalties equal to the amount of income concealed. He ignored the item of interest which had been shown in the returns under Section 148 and restricted the penalty amount to the amounts of deposits treated by the Income-tax Officer as the incomes of the various years. The penalties imposed by him were as follows : JUDGEMENT_474_ITR109_1977Html4.htm ;