COMMISSIONER OF INCOME TAX Vs. TEZPUR AUTOMOBILES

JUDGEMENT

(1.) IN this reference under Section 256(1) of the INcome-tax Act, 1961 hereinafter called the Act, the following question has been posed for our answer.

(2.) IT appears from the statement of the case that a penalty of Rs. 10,600 had been imposed by the Inspecting Assistant Commissioner of Income-tax under Section 271(1)(c) read with Section 274(2) ot the Income-tax Act, 1961, for alleged concealment of income of Rs. 4,500 only. This penalty proceeding was started in connection with the assessment for the year 1961-62. For this year the assessee filed on January 29, 1962, a return of its total income under Section 22 of the Income-tax Act, 1922 (hereinafter called " the old Act "), admitting Rs. 17,289. But after scrutiny of the accounts, the Income-tax Officer added back Rs. 35,532 out of the expenses account and he also made an estimated addition of Rs. 41,407 in tyres and tubes account. Further, the Income-tax Officer added certain cash credits aggregating to Rs. 8,500 in the account of third parties alleged to be loans as the assessee's income from undisclosed sources. He completed the assessment under Section 23(3) of the Income-tax Act, 1922, long after March 31, 1962. On appeal before the Appellate Assistant Commissioner the addition of Rs. 41,407 to the trading account was reduced to Rs. 10,000 and further retained a sum of Rs 4,500 out of the cash credits found in the assessee's books adopting the peak credit, i.e., accepting those credits which were covered by sufficient prior withdrawals. The penalty proceedings in question were initially started by the Income-tax Officer in respect of the addition as income from undisclosed sources, but since the amount of the penalty was likely to exceed Rs. 1,000 he referred the matter to the Inspecting Assistant Commissioner, who by his order dated February 29, 1966, levied the impugned penalty with the remark that in law the quantum of penalty imposable has to be calculated with reference to the income admitted in the return and the income ultimately assessed and as such the quantum of the penalty may have nothing to do with the quantum of actual concealed income. IT appears from the order of the Inspecting Assistant Commissioner of Income-tax that he imposed a penalty of Rs. 10,600 for concealment of income for the assessment year 1961-62.

(3.) THE Act came into operation on April 1, 1962, and in view of the conflicting decisions we shall have to refer to, in the first instance, the relevant section of the Act under which the penalty proceedings may be drawn up.