COMMISSIONER OF INCOME TAX Vs. KANTILAL B SHAH

JUDGEMENT

(1.) THE question to be answered in this reference under S. 256(1) of the IT Act, 1961, made at the instance of the Revenue reads thus :

(2.) THE assessee is the sole proprietor of Pears Watch Co. The year of assessment is 1964 65. The assessment was completed on 25th Oct., 1967. In the course of the assessment proceedings for the next assessment year, the ITO received information that officers of the Customs and Central Excise had confiscated 270 foreign watches on the basis that they belonged to the assessee and were smuggled. The ITO, therefore, reopened the assessment for the asst. year 1964 65. During the assessment proceedings, he came to know from the Collector of Custom's order that on 24th Jan., 1964, the officers had seized 90 watches from the assessee himself and another 180 watches from a cupboard in an adjoining premises which bore his name plate. The Collector of Customs had come to the conclusion that the watches belonged to the assessee and had been illegally acquired by him after having been smuggled into India. The ITO noticed that this conclusion of the Collector of Customs had been accepted by the assessee. The ITO called upon the assessee to show how the 90 watches had been accounted for by him and to produce evidence that the other 180 watches had not belonged to him. The assessee produced no evidence. The ITO concluded that the assessee had acquired the 270 watches from out of undisclosed funds, that the investment for such acquisition represented his income from undisclosed the sources and that it was liable to be taxed. The ITO estimated the assessee's investment at Rs. 10,000 and treated that amount as his income from undisclosed sources. His decision was upheld by the AAC.

(3.) THE assessee appealed to the Tribunal against the levy of penalty. The Tribunal held that the assessee was liable to pay the penalty. It held that the assessee had failed to disclose the fact of the income in the return which had been filed by him on 30th June, 1964. It noticed the provisions of S. 271(1)(c), as they stood prior to 1st April, 1968, when the minimum penalty leviable was 20 per cent of the tax which would have been avoided, and as they stood w.e.f. 1st April, 1968, when the minimum was increased to 100 per cent of the income concealed. Keeping in view of the fact that the offence was in respect of the return failed by the assessee on 30th June, 1964, the Tribunal held that the quantum of penalty was governed by the Act as it stood on 30th June, 1964, and not as it came to be amended on 1st April, 1968. It directed, keeping in view the facts and circumstances of the case, that the penalty against the assessee should be computed at 20 per cent of the tax which would have been avoided.