COMMISSIONER OF INCOME TAX Vs. CHAMPLAL JAIN

JUDGEMENT

(1.) The question involved in this case relates to penalty for the assessment year 1963-64. It appears that the assessee returned a total income of Rs. 11,084 for the said assessment year. The return was filed on the 15th September, 1964. The Income-tax Officer completed the assessment for the assessment year on an income of Rs. 1,33,192. As the total income returned by the assessee was less than 80 per cent, of the total income on which he was assessed, the Income-tax Officer initiated penalty proceedings under Section 271(1)(c) of the Income-tax Act, 1961. As the minimum penalty leviable was more than Rs. 1,000 he referred the case to the Inspecting Assistant Commissioner for taking further action in this matter. The Inspecting Assistant Commissioner issued notice under Section 274(2} of the Income-tax Act, 1961, to the assessee to show cause why penalty should not be imposed upon him for failure to disclose the correct particulars of his income in his return. In reply to the said show-cause notice, the assessee offered an explanation contending that the addition in the assessment was made merely on estimate and that he did not conceal any income and, therefore, no penalty should be imposed. The Inspecting Assistant Commissioner rejected the contention of the assessee and held that the income returned by the assessee was less than 80 per cent. of the total income on which he was assessed to tax by the Income-tax Officer and the onus lay upon him under the Explanation to Section 271(1)(c) of the Income-tax Act, 1961, to prove that his failure to return his correct income did not arise from any fraud or gross or wilful neglect on his part and that as he failed to discharge that onus of proof he must be deemed to haVe concealed the particulars of his income. In that view of the matter, the Inspecting Assistant Commissioner levied upon the assessee the penalty of Rs. 10,000.

(2.) Against the assessment order, the assessee filed an appeal before the Appellate Assistant Commissioner disputing the addition made by the Income-tax Officer. The Appellate Assistant Commissioner reduced the assessed income of the assessee from Rs. 1,33,192 to Rs. 49,712. Against the order of the Appellate Assistant Commissioner, the assessee filed further appeal before the Tribunal. The Tribunal confirmed the order of the Appellate Assistant Commissioner and dismissed the assessee's appeal.

(3.) Against the order of the Inspecting Assistant Commissioner levying a penalty of Rs. 10,000 under Section 271(1)(c) of the Income-tax Act, 1961, the assessee preferred an appeal before the Tribunal, Before the Tribunal it was contended on behalf of the revenue that since the return of income was filed by the assessee on the 15th September, 1964, the penalty proceedings were governed by the Explanation under Section 271(1)(c) of the Income-tax Act, 1961, which was introduced on 1st April, 1964. The Tribunal held that the said Explanation which was added with effect from 1st April, 1964, had no application to the assessment for the assessment year 1963-64. In these circumstances, the Tribunal allowed the assessee's appeal and cancelled the penalty. Upon that the following question has been referred to this court, as directed under Section 256(2) of the Income-tax Act, 1961.