COMMISSIONER OF INCOME TAX Vs. AHAMED K

JUDGEMENT

(1.) 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 -.

(2.) This question has been referred to us by the Income Tax Appellate Tribunal, Cochin Bench at the instance of the Commissioner of Income Tax. The year of assessment is 1963-64. The assessee contended that before 31-3-1963 he had filed a return of the income assessable for the year of assessment 1963-64. The only return available in the records of the case was the one filed by him on 8-9-1966. This return related to the income that is to be assessed for the year 1963-64 is not disputed. The Tribunal has proceeded on the basis that this is the only return and this assumption is not questioned before us either. The amount of income disclosed by the return dated 8-9-1966 was only Rs. 13,764/-. The assessment was completed and the total income was fixed at Rs. 65,570/-. The income returned was therefore less than 80 per cent of the total income assessed. So it was urged before the Tribunal by the department that the Explanation to S.271(1) which was introduced under the Income Tax Act, 1961 by the Finance Act, 1964 was attracted and that it must be presumed that the assessee had concealed particulars of income , or had furnished inaccurate particulars of such income. This contention was negatived by the Tribunal on the ground that the Explanation had no retrospective effect and that it would be against the canons of interpretation of statutes to read the Explanation as if it applied to the year of assessment 1963-64. So it was held by the Tribunal that the Explanation has no application. In a judgment in I. T. R. No. 38 of 1970 to which one of us was a party, a similar view was taken. The relevant paragraph is Para.3 which reads as follows:

(3.) There is no question of the explanation being retrospective in case it is applied to an act or omission committed after the coming into force of the explanation. The only question is whether the act or omission took place after the explanation was introduced in the statute book. The proceeding under S.271 is a separate proceeding, penal in nature, as has been laid down by the Supreme Court. Such a proceeding though it may relate to a particular assessment year can commence only if one of the offences mentioned in that section had been committed. It is the general principle that whether the act or omission would be an offence must be determined with reference to the state of law at the time that act or omission took place. In this case, the act complained of was the furnishing of inaccurate particulars of the income. This was said to have been committed by the return that was filed on 8-9-1966. The law then was S.271(1) with the explanation. Whether the presumption introduced by the explanation is attracted can be determined only when the final assessment is made. This is because whether the presumption is to be applied or not will have to be determined on the basis of the total income fixed in the assessment, but the furnishing of inaccurate particulars is at the time of the filing of the return. If the return was filed before the amendment was made and the explanation was introduced we think it will be open to the assessee to contend that the explanation is not attracted. This is what we said in our decision in Hajee K. Assainar v. Commissioner of Income Tax, Kerala reported in (1971) 81 ITR 423 and this is also in effect what we said in I. T. R. No. 71 of 1968. But what we said in I. T. R. No. 38 of 1970 goes further and as we indicated earlier, lays down incorrect law which has to be set right. The correct principle is what is stated by Sir Lionel Leach, Chief Justice of the Madras High Court in the decision in Commissioner of Income Tax, Madras v. Vedlapatla Veera Venkataramiah and another reported in (1943) 11 ITR 308. The same view has been taken by the Punjab and Hariyana High Court in I. T. R. No. 45 of 1971.