COMMISSIONER OF INCOME TAX Vs. SHETH C J

JUDGEMENT

(1.) AT the instance of the Revenue, under S. 256(2) of the IT Act, 1961 (hereinafter referred to as "the Act"), the following questions have been referred to this Court for its opinion :

(2.) THE assessee is a firm consisting of two partners and it derives income from business in Oilman Stores. For the asst. year 1959 -60, on May 11, 1959, it filed a return admitting an income of Rs. 1,09,555 and the assess ment was completed on August 12, 1960, on a total income of Rs. 1,18,317. Subsequently, the assessment was reopened under S. 147(a) to con sider the assessment of certain spurious hundi loans in the name of Multani Bankers and a notice was also issued under S. 148 of the Act and in response to that notice, on August 22, 1969, the assessee filed return showing the income as originally assessed on August 12, 1960. In the course of the reassessment proceedings, since the assessee did not substantiate the genuineness of the hundi credits, despite a number of opportunities given, the ITO treated Rs. 2,45,000 represent ing increase in the peak of non -genuine hundi credits as income from undis closed sources and also disallowed a sum of Rs. 61,225 being the interest relating to that and completed the reassessment on February 29, 1972. The assessee preferred appeals before the AAC and also before the Tribunal, but the addition of credits, as well as the dis allowance of interest, were sustained. Pursuant to the completion of the reassessment proceedings, penalty proceedings were initiated against the assessee and in the course of those proceedings, numerous opportunities were given to the assessee, but the assessee merely asked for adjournments and did not offer any explanation as such. The IAC took the view that in view of the Explanation to S. 271 (1)(c) of the Act introduced w.e.f. April 1, 1964, the asses see must be deemed to have concealed income or furnished incorrect par ticulars of the income and that presumption not having been in any manner attempted to be discharged by the assessee, penalty should be levied on the assessee and accordingly imposed a minimum penalty of Rs. 3,06,225 as the return had been filed on August 22, 1969, i.e., after April 1, 1964. Aggrieved by this, the assessee preferred an appeal to the Tribunal and the Tribunal viewed the concealment as referable only to the original return filed by the assessee on May 11, 1969, and, therefore, sec tion 28(1)(c) of the Indian IT Act, 1922, would be applicable and further that the filing of a revised return on August 22, 1969, cannot be taken as amounting to concealment in 1959. On this reasoning, the Tribu nal further held that the burden of establishing that the unexplained cash credits were the income of the assessee was on the Department and as the Department had not produced evidence to show that such credits were either false or represented the income of the assessee or that the payments were fictitious, no penalty was leviable and deleted the penalty.

(3.) BEFORE proceeding to consider the correctness of the order of the Tribunal and decide whether s. 28(1)(c) of the Indian IT Act, 1922, or the provisions of the Act would be applicable, it would be necessary to refer to the provisions relating to repeals and savings under S. 297 of the Act. Under s. 297(1), the Indian IT Act, 1922, was repealed. Sec. 297(2)(f) and (g) are the relevant provisions and they are as follows: