Commissioner Of Income-Tax v. Bihar Cotton Mills Limited.

Nazir Ahmad, J. (23-4-1986):— A statement of the case has been submitted by the Income-tax Appellate Tribunal, “B” Bench, Patna (hereinafter referred to as the Tribunal), under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as the Act), referring the following question as directed by this court:

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in cancelling the penalty of Rs. 15,000 imposed under section 271(1)(c) of the Income-tax Act?”

2. The relevant facts of the case may be culled from the statement of the case as well as from the orders of the Income-tax Officer, the Inspecting Assistant Commissioner of Income-tax and the Tribunal. The assessment year involved is 1958-59. For the assessment year 1958-59 the Income-tax Officer originally completed the assessment under section 23(3) of the Indian Income-tax Act, 1922 (hereinafter referred to as the old Act). The assessee returned a loss of Rs. 30,519. The Income-tax Officer calculated the loss at Rs. 33,608, which was unabsorbed depreciation which was to be carried forward. This assessment was made on February 19, 1959. The assessment order has been annexed and has been marked as annexure A forming part of the statement of the case. The Income-tax Officer issued a notice dated October 9, 1967, under section 148 of the Act which was served on the assessee by registered post. The assessee again filed a return of income on February 26, 1968, declaring the total loss at Rs. 30,519 as was shown in the original return. The Income-tax Officer found the following cash credits in the account books of the assessee:

Date Name to which entries relate Amount Rs. January 2, 1958 M/s. Sri Kishan Ghanshyam Das, Calcutta 29,000 February 5, 1958 M/s. Ramkrishna Shyam Sunder, Calcutta 31,000 February 24, 1958 do. 29,000

3. Thus the total credits came to Rs. 89,000. The Income-tax Officer asked the assessee to explain these credits. The assessee was informed that the parties against whom credits were shown were ghost parties and not actually existing. The assessee was further requested to prove the genuineness of these credits. The assessee took time till January 6, 1968, but ultimately he did not bring any evidence except writing in the letter dated February 1, 1968, that the parties were genuine. Finally, one more opportunity was given by the Income-tax Officer by letter dated March 11, 1971, for proving the genuineness of the loans. The assessee did not produce any evidence to prove the genuineness of the loans. The Income-tax Officer, therefore, considered the amount of Rs. 89,000 relating to the credits as secret profits from the business of the assessee for 1967. The Income-tax Officer after adding the cash credits of Rs. 89,000 and after allowing depreciation and development rebate, assessed the total income at Rs. 58,235. This reassessment was made on March 17, 1971, on the return in pursuance of the notice under section 148 which was filed on February 26, 1968. The assessment order relating to the reassessment proceeding has been annexed and marked as annexure A-1 forming part of the statement of the case.

4. During the course of reassessment proceedings, penalty proceedings under section 271(1)(c) of the Act were also initiated by the Income-tax Officer with the previous approval of the Inspecting Assistant Commissioner and so the proceeding was referred to the Inspecting Assistant Commissioner as the minimum penalty leviable amounted to more than Rs. 1,000. On behalf of the assessee it was argued before the Inspecting Assistant Commissioner that there was nothing on the record from which it could be proved that the assessee had either concealed its income or had furnished inaccurate particulars thereof. It was also submitted on behalf of the assessee that the cash credits which appeared in the account books represented loans taken by the assessee from genuine parties who were taxpayers and who had duly confirmed the loans in writing and that the Income-tax Officer had also accepted them as genuine in the original assessment. It was, therefore, argued that the amounts were not the income of the assessee. It was also submitted before the Inspecting Assistant Commissioner that the penalty proceedings are quasi-criminal in nature and the Department has failed to discharge the onus and so penalty was not leviable under section 271(1)(c) of the Act.

5. The Inspecting Assistant Commissioner found that the original assessment was made on the loss of Rs. 30,764 and as income had escaped assessment, the Income-tax Officer took action under section 147 and the reassessment was completed on March 17, 1971 and in the reassessment the credit of Rs. 89,000 was treated as the assessee's income, which addition of Rs. 89,000 was confirmed by the Appellate Assistant Commissioner, who dismissed the appeal. The Inspecting Assistant Commissioner agreed with the Appellate Assistant Commissioner that income had escaped assessment on account of omission on the part of the assessee to disclose true facts at the time of original assessment. The Inspecting Assistant Commissioner has pointed out that the assessee did not prove that the credits were genuine. He also found that there was material to show that the transactions were not genuine and the notice issued by the income-tax Officer to the parties at the addresses given by the assessee also remained unserved as the parties were not available at those addresses. The Inspecting Assistant Commissioner also found that even during the course of penalty proceedings no evidence was led to prove the genuineness of the parties and the transactions. The Inspecting Assistant Commissioner held that the assessee had taken a false defence. The Inspecting Assistant Commissioner also pointed out that in the return of income filed in February, 1968, in response to the notice under section 148 of the Act also, the correct facts relating to the cash credits were not furnished. The Inspecting Assistant Commissioner found, that the income returned was less than 80 per cent, of the income as assessed and as confirmed by the Appellate Assistant Commissioner. The Inspecting Assistant Commissioner, therefore, held the assessee to be guilty of concealment within the meaning of the Explanation to section 271. He also held that the discrepancy was on account of the negligence and carelessness on the part of the assessee as there were clear provisions in the law that any unexplained investment and credits will be the income of the assessee and this fact was within the knowledge of the assessee that the credits of Rs. 89,000 were not genuine loans and could not be explained as such. The Inspecting Assistant Commissioner, therefore, held that the assessee was liable to penalty under section 271(1)(c) of the Act. The Inspecting Assistant Commissioner also found that on the basis of the returned income and the assessed income, income-tax which was sought to be evaded amounted to Rs. 29,120. He, however, imposed a penalty of Rs. 15,000 under section 271(1)(c) of the Act. A copy of the order of the Inspecting Assistant Commissioner has been annexed and marked as annexure B forming part of the statement of the case.

6. Being aggrieved by the order of the Inspecting Assistant Commissioner, the assessee filed an appeal before the Tribunal. The Tribunal after hearing the arguments of the parties held that the purpose of the proceedings under section 147 is to tax the income which should have been assessed during the original assessment proceedings and so the return under section 148 of the Act is like a revised return pertaining to the same assessment year and the same income which the assessee was required to return originally and, therefore, the offence committed by the assessee for which he was liable to penalty commenced in the original assessment proceeding (itself). The Tribunal also held that even if the assessee is guilty of no default in proceedings under section 147 of the Act, a penalty may still be imposed in such proceedings in respect of the original default committed by the assessee while filing the original return. The Tribunal took the view that the provisions for imposition of penalty is this case will be applicable as it was on the date of the filing of the original return and so the case was covered by the Supreme Court decision in Commissioner Of Income Tax, West Bengal v. Anwar Ali , [1970] 76 ITR 696.

7. The Tribunal also considered the Explanation to section 271(1)(c) of the Act and held that under the Explanation, the burden on the assessee is of a negative nature and can be discharged if there is nothing positive to show that the assessee committed fraud or gross or wilful neglect in returning its correct income and that there is no such material on record. The Tribunal held that the order of the Inspecting Assistant Commissioner shows that he has proceeded merely on the basis of the assessment order without bringing any further material on record in support of his coming to the conclusion that the disputed amount was in fact the income of the assessee for the year under consideration. The Tribunal also found that the assessee throughout maintained that the disputed amounts were genuine loans taken from the creditors who had duly confirmed the loan transactions and that the creditors were also income-tax assessees. The Tribunal held that the assessee had established the identities of the loan creditors. On behalf of the Department it was submitted that the disputed amount was even accepted by the Tribunal as unexplained income of the assessee in the quantum appeal and, therefore, no further material was necessary to locate the source of the income by the Inspecting Assistant Commissioner for imposition of penalty, but the Tribunal did not accept it, and came to a finding that no penalty could have been imposed in this case and so the penalty order of the Inspecting Assistant Commissioner was cancelled by the Tribunal. The order of the Tribunal has been annexed and marked as annexure C forming part of the statement of the case.

8. On the aforesaid facts, the above question has been referred for our opinion in view of the direction of this court. Admittedly, the assessment year involved is 1958-59 and the original assessment was completed on February 19, 1959, which shows that the original return was filed under the old Act and the original assessment was also made under the old Act on February 19, 1959. It also cannot be doubted that the reassessment proceeding was initiated under section 147 on October 9, 1967, and in pursuance of the notice under section 148 of the Act, the return was filed on February 26, 1968, declaring a total loss at Rs. 30,519 as was shown in the original return. The question is whether the penalty proceeding has to be disposed of with reference to the original return filed under the old Act or with reference to the return filed on February 26, 1968, in pursuance of the notice under section 148 of the Act.

9. The question for the assessment year 1958-59 relating to the reassessment proceeding was raised in CIT v. Bihar Cotton Mills Ltd. and vice versa, [1986] 160 ITR 275 (Pat) (Taxation Cases Nos. 203 and 204 of 1976), which we have disposed of by our judgment dated February 5, 1986. The questions relating to the assessment year 1958-59 were as follows:

“(1) Whether, on the facts and in the circumstances of the case, the proceedings initiated under-section 147(a) were legal and valid?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in coming to the conclusion that Rs. 89,000 was to be added as the assessee's income from undisclosed sources?”

10. This court in the aforesaid taxation cases held that the cash credits of Rs. 89,000 were not genuine and the addition as income from undisclosed sources in the assessment year 1958-59 was upheld. It was also held that the reassessment proceeding under section 147(a) of the Act was legal and valid.

11. Mr. K.N Jain, learned advocate for the assessee, has relied on the case of Brij Mohan v. CIT, [1979] 120 ITR 1 which is a Supreme Court decision. In this case, the assessee who was a partner in two firms filed his return of income for the assessment year 1964-65 on April 24, 1968, in which he disclosed only his share in the profits of one of them and had not included his share in the profits of the other and so penalty proceedings were initiated under section 271(1)(c) of the Act and in those circumstances it was held by their Lordships of the Supreme Court that when penalty is imposed for concealment of particulars of income, it is the law ruling at the date on which the act of concealment takes place which is relevant and it is wholly immaterial that the income concealed was to be assessed in relation to an assessment year in the past. Their Lordships clearly held that penalty was imposed on account of the commission of a wrongful act and it was the law operating on the date on which the wrongful act was committed which determined the penalty and that, therefore, the case was governed by the Finance Act, 1968. Thus, according to this decision, the law on the date when the return is filed will be applicable. In this case, there was no question of considering two returns, as only one return had been filed on April 24, 1968. This decision only shows that the law applicable in the case of penalty will be the law prevailing on the date of the filing of the return.

12. In view of the aforesaid decision, it has to be held that the case of CIT v. Parmanand Advani, [1979] 119 ITR 464, which is a decision of the Patna High Court, was not correctly decided when it was laid down therein that the material event was not the filing of the return, but the satisfaction about the income having been concealed and that no such satisfaction had come on the processing of the first return and the satisfaction required had come only on the processing of the second return and on this basis it was held that it was with reference to the revised return that the proceeding for penalty had to be initiated and as the revised return was filed on February 8, 1966, after the coming into force of the Explanation, the Explanation would apply. For giving this observation, reliance was placed on the observations made in the case of Jain Brothers v. Union of India, [1970] 77 ITR 107 (SC), which observation was made with reference to section 297(2)(g) of the Act, which clearly laid down that the penalty was to be imposed on the basis of the completion of the assessment and the satisfaction has to be on the completion of the assessment. The special case of section 297(2)(g) cannot be applied to all the other cases in general. Hence this decision cannot be followed in view of the decision in Brij Mohan v. CIT, [1979] 120 1 (SC).

13. Mr. K.N Jain, learned counsel for the assessee, relied on the case of Commissioner Of Income-Tax, Bihar v. A. Rahman, [1979] 119 ITR 475, which is a decision of the Patna High Court. In this case, the assessee submitted his returns for 1965-66 and 1966-67 on March 1, 1967. In 1969, a notice under section 148 was served on him in respect of those years and on the basis of the returns submitted, assessment was completed and penalty proceedings were initiated. The Tribunal imposed penalties by applying section 271 as it stood prior to April 1, 1968, and in those circumstances it was held that the Tribunal was correct in its decision to impose a minimum penalty for each of the two assessment years in question by applying the law which was in force at the time when the assessee filed his original return. Thus, in this case, although a return was filed in pursuance of the notice under section 148 of the Act, it was held that the penalty could be imposed on the basis of the original return.

14. Mr. K.N Jain has relied on the case of CIT v. S. S.K.G Arthanari Swamy Chettiar, [1982] 136 ITR 145, which is a decision of the Madras High Court, where it has been held that the provisions of the Act contemplate concealment in the original return filed under section 139 alone and penalty has to be imposed with reference to that concealment. It has also been held that the subsequent revised returns filed only enable the officer to determine the real income of the assessee and the amount concealed and that every filing of return will not create a fresh cause of action or fresh concealment and that neither the provisions of the Act nor the decided cases authorise the imposition of penalties with reference to each of the returns for the same assessment year or more than once for the same offence. It has also been held in this decision that the filing of the revised returns not disclosing the real income or furnishing inaccurate particulars cannot be taken as fresh offences or a repetition of the same offence giving rise to a fresh cause of action though it may be considered as a continuing offence till the entire real income is disclosed. It has also been held in this decision that it is possible to recall an earlier order of penalty and pass another imposing a higher penalty if, on the later occasion, the true facts ascertained show a higher amount of concealment.

15. Mr. K.N Jain has also relied on the case of CIT v. S. Sucha Singh Anand, [1984] 149 ITR 143, which is a decision of the Delhi High Court, where it has been held that where the assessee files a first return of income prior to April 1, 1964, and a revised return after that date, the offence of concealment of income takes place when the first return is filed and the law applicable for imposing penalty would be the law as is in force on the date when the original return is filed, i.e, section 271(1)(c) of the Act as it stood prior to its amendment with effect from April 1, 1964, will apply. In this case, the original return was filed on September 2, 1963, and the revised return was filed on November 22, 1967, and in spite of it, it was held that the penalty has to be imposed with reference to the original return.

16. Mr. K.N Jain has also relied on the case of Addl. Commissioner Of Income-Tax…Applicant v. Ltshri Joginder Singh…, [1985] 151 ITR 93 (Delhi), where it has been held that in both the types of cases, viz., (i) where the assessee after filing an original return files a revised return under section 139(5) of the Act, and (ii) where the assessee files a return pursuant to a reassessment notice under section 148 after an original assessment on his original return, the substantive provisions of law relating to penalty for concealment of income applicable would be those in force at the date of the original return from which income has been concealed and the filing of a subsequent return either under section 139(5) or section 148 in which the act of concealment may be repeated will not alter the position. It has also been held in this decision that the basic obligation of an assessee is only one, viz., to file a proper and correct return of income for a particular assessment year and it is appropriate that the offence should be co-related to the point of time when the first return is filed in which concealment took place and any subsequent returns, though they may, in a sense, be said to be repetitions of the concealment, should be left out of consideration and that it is the law on the date of the first return in which the income is concealed that should govern the calculations for levy of penalty.

17. It has also been held in the case of Commissioner Of Income-Tax, Lucknow v. Ram Achal Ram Sewak., [1977] 106 ITR 144, by the Allahabad High Court that the relevant return for the purposes of section 271 of the Act is the original return and not any return filed subsequent thereto and that the Tribunal was legally correct in holding that the provision of section 271(1)(c) and the Explanation thereto were not attracted in respect of the assessment year under consideration as the original return was filed before April 1, 1964. In this case, the original return was filed on the basis of which the original assessment was made and then a revised return was filed in pursuance of the notice under section 148 of the Act and hence those observations were made.

18. Mr. K.N Jain for the assessee also relied on the case of CIT v. Ram Singh Harmohan Singh, [1980] 121 ITR 381, which is a Full Bench decision of the Punjab and Haryana High Court, where the present Chief Justice of this court was also the Chief Justice in the Full Bench case. In this case, the assessee filed its return for the assessment year 1963-64 on April 21, 1967, and in the assessment proceedings for the said year, an amount of Rs. 20,000 was added as undisclosed income, and on a reference by the Income-tax Officer, the Inspecting Assistant Commissioner, by order dated March 15, 1971, imposed on the assessee penalty under section 271(1)(c)(iii) of the Act as amended from April 1, 1968, on the basis that the offence was committed on February 19, 1969, when the assessee filed a fresh return in response to a notice under section 148 of the Act, which return was an exact replica of the earlier return filed on April 21, 1967, under section 139 of the Act. On appeal, the Tribunal held that the offence of concealment was committed when the original return dated April 21, 1967, had been filed by the assessee and, therefore, penalty was leviable only in accordance with sub-clause (iii) as it existed before the amendment with effect from April 1, 1968. In those circumstances, it was held by the Full Bench of the Punjab and Haryana High Court that on a literal reading of section 271(1)(c), concealment of particulars of income or furnishing of inaccurate particulars of such income is considered as an offence under this provision, and for a particular year, an assessee can commit the offence only once when he furnishes the incorrect particulars of his income and that he does by filing the return, and even if he is asked to file a number of returns for that very year and he sticks to his original position, he will not be committing the offence again and again and that the offence will be the one which he committed for the first time when he filed the return concealing his income and by filing subsequent returns on being called upon to do so, what he does is that he shows by his persistence that he has not committed any offence of concealment of income and that neither in law nor on the authority nor on first principles can it be said that the same offence is committed again and again. It also appears from this decision of the Punjab and Haryana High Court that it was contended for the Revenue that if another return is filed by the assessee in pursuance of a notice under section 148 of the Act, then only the subsequent return should be looked into for all practical purposes under the Act. It was also contended that, if in the return filed in pursuance of a notice under section 148 of the Act, instead of concealment of Rs. 1 lakh, which was made in the original return, the assessee makes a concealment of Rs. 50,000 or makes no concealment, the assessee would be liable to penalty on the basis of the original return and it will be open to the Income-tax Officer to ignore the subsequent return, that is to say, it is for the Income-tax Officer to choose any return in the case of a given assessee and impose penalty on the basis of the law as it was applicable on the date of the filing of the return, whether the original return or a subsequent return. In this connection, it was observed by the Full Bench of the Punjab and Haryana High Court that if that be the position, it would be open to the assessing authorities to abuse the penalty provisions from time to time and from case to case on their whims, either to favour the assessee or harm him and that this could not have been the intention of the Legislature and, therefore, it must be held that the date of filing of the first return should be taken into consideration for imposition of penalty according to the law applicable on that date and in this view of the matter, if any assessee, in pursuance of a notice under section 148 of the Act, makes a clean breast of his original default and furnishes a return making no concealment whatsoever, even then he would be liable to penalty on the basis of his original return. It has also been held in this decision that once the offence under section 271(1)(c) of the Act is complete, it cannot be said that it can, be repeated again and again whenever an assessee is called upon to furnish a fresh return under section 148 of the Act and to take a view to the contrary would mean that for the same offence an assessee can be punished twice over.

19. Mr. K.N Jain for the assessee has also relied on another Full Bench decision of the Kerala High Court in the case of Commissioner Of Income-Tax v. C.P Antony, [1982] 155 ITR 467. In this case, the assessee-firm filed its return for the assessment year 1965-66 on December 31, 1965, under section 139 of the Act and another return in response to a notice under section 148 on January 5, 1970. The Tribunal held that the penalty had to be levied with reference to the return filed on December 31, 1965, and the law prior to the amendment with effect from April 1, 1968, applied, and it was held by the Full Bench of the Kerala High Court that the Tribunal had taken the correct view and the penalty proceedings had to be completed in accordance with the provisions of section 271 as it stood at the time when the assessee filed the return under section 139 of the Act on December 31, 1965. It has also been held by the Full Bench of the Kerala High Court that if an assessee who was bound to disclose his real total income in the return filed by him under section 139 of the Act, fails to do so, the offence of concealment or furnishing of inaccurate particulars with respect to his income in that return becomes complete, and that it might be that where the Income-tax Officer invokes the provision under section 147(a) and issues a notice under section 148 of the Act, the assessee may submit a revised return, which might be the same as the assessee filed in the first instance and it could also be that the revised return makes a partial or full disclosure of the income concealed at the time when he filed the first return under section 139. It was also held by the Full Bench of the Kerala High Court that the penalty proceedings had to be completed in accordance with the provisions of section 271 as it stood at the time when the assessee filed the first return under section 139 of the Act.

20. It appears that the Punjab and Haryana High Court and the Kerala High Court in the Full Bench decisions have accepted the reasoning of the Delhi High Court in the case reported in Addl. Commissioner Of Income-Tax…Applicant v. Ltshri Joginder Singh…, [1985] 151 ITR 93.

21. I have already pointed out that the view taken by the Patna High Court in the decision, CIT v. Parmanand Advani, [1979] 119 ITR 464, is not the correct legal view in view of the Supreme Court decision in Brij Mohan v. CIT, [1979] 120 ITR I, where it was held by the Patna High Court, that the material event was not the filing of the return but the satisfaction about the income having been concealed and that no satisfaction had come on processing the first return and the satisfaction required had come only on processing the second return and, therefore, it was with reference to the revised return that proceedings for penalty had to be initiated. In the case in Commissioner Of Income-Tax, Bihar v. A. Rahman, [1979] 119 ITR 475, which is also a decision of the Patna High Court, it was held that the penalty was to be imposed by applying the law which was in force at the time when the assessee filed his return. In this case, there was discrepancy between the return filed in pursuance of the notice under section 148 of the Act and the assessment made under section 147(a) of the Act but the penalty was imposed with reference to the original return. If one principle is not accepted, then it will be left to the Income-tax Officer sometimes to impose penalty on the basis of the original return and sometimes to impose penalty on the basis of the revised return. The Full Bench of the Punjab and Haryana High Court has clearly held that it was never the intention of the Legislature.

22. However, a view contrary to the Full Bench decisions has been taken in the case of Addl. CIT v. Balwantsingh Sulakhanmal, [1981] 127 ITR 597 by the Madhya Pradesh High Court. In this case, for the assessment year 1959-60, the assessee filed his return of income and the assessment was completed. The Income-tax Officer reopened the assessment for that year and issued notice to the assessee under section 148 of the Act. In response to that notice, the assessee filed another return on December 21, 1969, declaring an income of Rs. 5,000. The Income-tax Officer, however, added an amount of Rs. 20,000 as the assessee's income from undisclosed sources. On appeal, the Appellate Assistant Commissioner reduced the addition to Rs. 11,000. Penalty proceedings were initiated against the assessee and the Inspecting Assistant Commissioner imposed a penalty of Rs. 11,000. The Tribunal held that the default of the assessee was attributable to the return filed in the original assessment proceedings and that the law applicable for the assessment year 1959-60 was that laid down in section 271(1)(c) of the Act, prior to its amendment with effect from April 1, 1968, and reduced the amount of penalty. In those circumstances, the Madhya Pradesh High Court held that the proceedings giving rise to the reference were initiated in connection with the return filed in response to the notice under section. 148 of the Act and the Tribunal, therefore, was not right in holding that the default would be attributable to the return filed in the original assessment proceedings when the concealment was in the revised return. It was also held in this decision that the wrongful act took place on December 21, 1969, when the return in response to the notice under section 148 was filed by the assessee and the Tribunal was, therefore, not right in holding that the law applicable to the imposition of penalty was that contained in section 271(1)(c) prior to its amendment with effect from April 1, 1968.

23. In the case of CIT v. Monghyr Gun Manufacturing Co-operative Society Ltd., [1984] 147 ITR 649, which is a decision of the Patna High Court, the assessee had filed several returns and one of the revised returns was filed on July 12, 1969, and as this return had been filed after April 1, 1968, the Inspecting Assistant Commissioner held that the minimum penalty imposable was equal to the amount of concealment and he, therefore, imposed a penalty of Rs. 20,000. In those circumstances, the Patna High Court held that the provisions of law applicable to the penalty proceedings would be those governing on the date on which the return is filed and that the relevant date for the purpose of determining the quantum of penalty would be the date on which the delinquency was committed, namely, when the return or the revised return was filed and since the revised return was filed on July 12, 1969, the quantum of penalty would be governed by the provisions of law which may be in force from April 1, 1968. Thus, it appears that the three Patna High Court decisions have taken three different views.

24. Before I advert to other legal positions, it is necessary to refer to Taxation Case No. 40 of 1975 (sic). In Taxation Case No. 40 of 1975, the original assessment for the assessment year 1953-54 was completed on April 17, 1956, when the assessment was governed by the old Act. The Department conducted a raid in the premises of the assessee on December 16, 1966, and seized several books of account and a discrepancy of Rs. 1,02,807 was found and then a proceeding under section 147(a) of the Act was initiated after complying with the requirement of the approval of the Central Board of Direct Taxes and a notice was served on the assessee on January 8, 1969, under section 148(1) of the Act. In response to the notice, the assessee filed return dated January 31, 1969, showing “as per original return” and the reassessment under section 147(a) of the Act was completed on October 8, 1969. In that connection, section 297(2)(g) of the Act was considered which lays down that any proceeding for the imposition of penalty in respect of any assessment for the year ending on the 31st day of March, 1962, or any earlier year, which is completed on or after the 1st day of April, 1962, may be initiated and any such penalty may be imposed under this Act. This clearly goes to show that a penalty for concealment in the return filed under the old Act can be imposed under the Act if the assessment has been completed on or after the 1st day of April, 1962. This clearly goes to show that if the assessment is pending before the Act came into force under the old Act and the assessment is completed after the Act came into force, then the penalty, under section 297(2)(g) of the Act, can be imposed.

25. Mr. K.N jain, for the assessee, has submitted that the view taken in Taxation Case No. 40 of 1975 (sic) that in section 2(8) of the Act “assessment” includes reassessment can never mean a reassessment which was itself commenced under section 297(2)(d)(ii) of the Act. He has also pointed out that section 297(2)(d) clearly lays down that where in respect of any assessment year after the year ending on the 31st day of March, 1940, —(i) a notice under section 34 of the repealed Act had been issued before the commencement of this Act, the proceedings in pursuance of such notice may be continued and disposed of as if this Act had not been passed. Whereas, under section 297(2)(d)(ii), any income chargeable to tax had escaped assessment within the meaning of that expression in section 147 and no proceedings under section 34 of the repealed Act in respect of any such income are pending at the commencement of this Act, a notice under section 148 may, subject to the provisions contained in section 149 or section 150, be issued with respect to that assessment year and all the provisions of this Act shall apply accordingly. On this basis, Mr. K.N Jain has argued that if the reassessment proceeding under section 34 of the old Act had already commenced for the period covered by the old Act, then it could have been said that assessment included reassessment as well, but if the reassessment proceeding for the period prior to the coming into force of the Act is commenced after the Act came into force, then it cannot be said that an assessment proceeding was pending before the Act came into force. Mr. K.N Jain submitted that in such a case, the reassessment after the Act came into force for the period covered by the old Act cannot be said to be a case of reassessment which was pending prior to the coming into force of the Act and which was completed after the coming into force of the Act. I accept the submission of Mr. K.N Jain for the assessee and I hold that the interpretation of section 297(2)(g) of the Act was not correctly taken in Taxation Case No. 40 of 1975.

26. Mr. K.N Jain has referred to the case of Jain Brothers v. Union of India, [1970] 77 ITR 107, which is a decision of their Lordships of the Supreme Court. In this case, the assessee filed a return on November 18, 1961, for the assessment year 1960-61, showing income of Rs. 3,55,566 and the Income-tax Officer completed the assessment on November 23, 1964, computing the total income of the assessee-firm at Rs. 4,75,368 and on November 23, 1964, a notice under section 271 of the Act read with section 274 of the Act was issued calling upon the assessee-firm to show cause why an order imposing a penalty should not be passed on account of its failure to furnish the return within time and in that connection, section 297(2)(g) of the Act was referred to and it was held that the assessee would be liable to pay the penalty as provided by section 271(1) of the Act for the default mentioned in section 28(1) of the old Act if his case falls within the terms of section 297(2)(g). This was a case where the assessment had commenced before the Act came into force and the assessment was completed after the Act came into force; Hence, the decision of their Lordships of the Supreme Court cannot be applicable to the facts of a case where the assessment under section 147(a) is initiated in view of section 297(2)(d)(ii). Under such circumstances, it has to be held that, to that extent, the decision in Taxation Case No. 40 of 1975 has not been correctly taken. However, it cannot be doubted that the satisfaction has to be in the course of the reassessment proceeding which is initiated under section 297(2)(d)(ii) of the Act.

27. Mr. K.N Jain has also relied on the case of Govinddas v. ITO, [1976] 103 ITR 123, which is a decision of the Supreme Court, where it has been observed that the words “all the provisions of this Act shall apply accordingly” in clause (ii) of section 297(2)(d) of the Act, merely refer to the machinery provided in the Act for the assessment of escaped income, and they do not import any substantive provisions of the Act which create rights or liabilities and that the word “accordingly” in the context means nothing more than “for the purpose of assessment” and it clearly suggests that the provisions of the Act which are made applicable are those relating to the machinery of assessment. It has also been held by their Lordships of the Supreme Court that the substantive law to be applied for determining the liability to tax must necessarily be the law under the old Act, for that is the law which applied during the relevant assessment years and it is that law which must govern the liability of the parties. It has also been observed in this decision that it is a well-settled rule of interpretation that unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure and that if the enactment is expressed in a language which is fairly capable of either interpretation, it ought to be construed as prospective only.

28. On the basis of the aforesaid decision, Mr. K.N Jain has submitted that the reassessment under section 297(2)(d)(ii) of the Act relates only to the machinery section for the reassessment and the satisfaction of about concealment can be found out from this principle but the penalty has to be imposed according to the law which existed at the time when the original return was filed, which in the present case was filed before February 19, 1959, and so the law applicable on that date should be applied for the purpose of the penalty.

29. Mr. K.N Jain has also submitted that if the aforesaid views are accepted that in this case penalty has to be imposed on the basis of the return filed prior to February 19, 1959, then penalty will have to be imposed in view of section 28(1)(c) of the old Act and then he has submitted that the penalty matter will have to be governed by the case of CIT v. Anwar Alt, [1970] 76 ITR 696 (SC). This decision of the its Lord ships of the Supreme Court has clearly laid down that the proceedings under section 28 of the old Act are penal in character and the gist of the offence under section 28(1)(c) is that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income and the burden is on the Department to establish that the receipt of the amount in dispute constitutes income of the assessee. It has also been held in this decision that if there is no evidence on the record except the explanation given by the assessee, which explanation has been found to be false, it does not follow that the receipt constitutes his taxable income and that it would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents income and that it cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive; however, it is good evidence. Their Lordships of the Supreme Court have also laid down that before penalty can be imposed, the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and that the assessee had consciously concealed the particulars of his income or had deliberately furnished inaccurate particulars. In the case of Anwar Ali, [1970] 76 ITR 696 (SC), while making assessment on the respondent for the assessment year 1947-48, the Income-tax Officer discovered an undisclosed bank account of the respondent in which a cash deposit of Rs. 87,000 had been made. According to the respondent's explanation, that sum represented diverse amounts entrusted to him by his relatives who had got panicky during the communal riots in Bihar in 1946. The Income-tax Officer rejected the explanation and brought the sum of Rs. 87,000 to tax as his income from undisclosed sources. Thereafter, penalty of Rs. 66,000 was imposed on the respondent under section 28(1)(c) of the old Act for concealment of particulars of his income. On appeal, the Tribunal held that no penalty could be imposed, on the ground that the onus lay upon the Department to show by adequate evidence that the amount of cash was of a revenue nature and that the respondent had concealed it and that the onus was not discharged by showing merely that the respondent's explanation was found to be unacceptable. The High Court agreed with the finding of the Tribunal. Their Lordships of the Supreme Court held that in the absence of cogent material evidence, apart from the falsity of the respondent's explanation, from which it could be inferred that the respondent had concealed the particulars of his income or had deliberately furnished inaccurate particulars in respect of the source and that the disputed amount was a revenue receipt, penalty could not be imposed.

30. On the other hand, Mr. B.P Rajgarhia, for the Revenue, has submitted that the Patna High Court has clearly held in the case reported in CIT v. Monghyr Gun Manufacturing Co-operative Society Ltd., [1984] 147 ITR 649, that the relevant date for the purpose of determining the quantum of penalty would be the date on which the delinquency was committed, namely, when the return or revised return was filed and since the revised return was filed on July 12, 1969, the quantum of penalty would be governed by the provisions of law which were in force from April 1, 1968, and in view of this decision, this court should not follow the decisions of the Delhi High Court reported in CIT v. S. Sucha Singh Anand, [1984] 149 ITR 143 or Addl. Commissioner Of Income-Tax…Applicant v. Ltshri Joginder Singh…, [1985] 151 ITR 93 or the decision of the Madras High Court in CIT v. S.S.K.G Arthanariswamy Chettiar (Dissolved), [1982] 136 ITR 145 or even the decision of the Allahabad High Court reported in Commissioner Of Income-Tax, Lucknow v. Ram Achal Ram Sewak., [1977] 106 ITR 144 or even the Full Bench decisions of the Punjab and Haryana High Court and the Kerala High Court reported in CIT v. Ram Singh Harmohan Singh, [1980] 121 ITR 381 and Commissioner Of Income-Tax v. C.P Antony, [1985] 155 ITR 467, respectively.

31. Mr. B.P Rajgarhia has also submitted that if his view is accepted that the penalty has to be imposed on the basis of the revised return, then, in the present case, the return in pursuance of the notice under section 148 of the Act was filed on February 26, 1968, and so the law applicable on February 26, 1968, relating to imposition of penalty has to be followed which was as follows:

“(iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than twenty per cent, but which shall not exceed one and a half times the amount of the tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income.”

32. Under section 28(1)(c) of the Act, in the case of concealment of particulars of income or deliberate furnishing of inaccurate particulars of such income by a person, penalty could be, in addition to any tax payable by him, a sum not exceeding one and a half times the amount of income-tax and super-tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income.

33. Again on February 26, 1968, the following Explanation to section 271(1) of the Act was applicable:

“Explanation.—Where the total income returned by any person is less than eighty per cent, of the total income (hereinafter in this Explanation referred to as the correct income) as assessed under section 143 or section 144 or section 147 (reduced by the expenditure incurred bona fide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of clause (c) of this sub-section.”

34. In view of the aforesaid Explanation; Mr. B.P Rajgarhia has relied on the case of CIT v. Swarup Cold Storage and General Mills, [1982] 136 ITR 435, which is a decision of the Allahabad High Court, where it has been held that the Explanation to section 271(1)(c) of the Act does not require that there should be a conscious concealment of income and that the effect of the deletion of the word “deliberately” in the Explanation to section 271(1)(c) of the Act by the Finance Act, 1964, is that even if the furnishing of inaccurate particulars is not deliberate but is the result of gross or wilful neglect, a penalty may still be attracted and there is no onus on the Department to show that there was gross or wilful neglect on the part of the assessee in furnishing inaccurate particulars and that the onus is on the assessee to prove that the omission to return the correct income was not due to any fraud or gross or wilful neglect on his part and the nature of proof is as in a civil suit and for the degree of proof necessary to dislodge the presumption, the preponderance of probabilities of a case ought to be examined. Similar view has been taken by the Allahabad High Court in the case of Additional Commissioner Of Income-Tax, Kanpur v. Mangalsen Mohanlal., [1982] 136 ITR 905.

35. Under such circumstances, the question that arises is as to which of the views should be accepted. I agree with the decisions of the Delhi High Court in CIT v. S. Sucha Singh Anand, [1984] 149 ITR 143, Addl. Commissioner Of Income-Tax…Applicant v. Ltshri Joginder Singh…, [1985] 151 ITR 93 and also the decision of the Madras High Court in CIT v. S.S.K.G Arthanariswamy Chettiar (Dissolved), [1982] 136 ITR 145, the decision of the Allahabad High Court in Commissioner Of Income-Tax, Lucknow v. Ram Achal Ram Sewak., [1977] 106 ITR 144 and the Full Bench decisions of the Punjab and Haryana High Court and the Kerala High Court in CIT v. Ram Singh Harmohan Singh, [1980] 121 ITR 381 and Commissioner Of Income-Tax v. C.P Antony, [1985] 155 ITR 467 respectively. I, therefore, hold that the proceeding relating to the penalty in the present case before us has to be governed by the old Act and not by the Act. Once it is held that the penalty proceeding has to be governed by the old Act as the return was filed before the original assessment was made on February 19, 1959, and so the penalty proceeding has to be governed by the old Act, then it has to be held that the case has to be governed by the decision in the case of Commissioner Of Income Tax, West Bengal v. Anwar Ali , [1970] 76 ITR 696. I have already discussed this decision in paragraph 29 (at p. 305 supra) of this judgment.

36. I have already discussed above that in view of the various decisions mentioned above, the view taken in Taxation Case No. 40 of 1975 (sic) is not the correct view and that matter is still pending before a third judge and has not yet been finally disposed of It also cannot be doubted that the assessee had filed confirmatory letters relating to the cash credit which have been added to the extent of Rs. 89,000 and in the assessment proceedings the assessee failed to produce the evidence to prove the genuineness of the cash credit, but in view of the decision in Commissioner Of Income Tax, West Bengal v. Anwar Ali , [1970] 76 ITR 696, it has to be held that in this case, the burden under section 28(1)(c) of the old Act is on the Department to establish that the receipt of the amount in dispute constitutes income of the assessee and that the assessee has consciously concealed the particulars of his income or has deliberately furnished inaccurate particulars of such income. In the case of Anwar AH, [1970] 76 ITR 696 (SC), it was held that it would be perfectly legitimate to say that the mere fact that the explanation of the assessee is false does not necessarily give rise to the inference that the disputed amount represents income and that it cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive. In the case of Anwar Ali, [1970] 76 ITR 696 (SC), the Income-tax Officer had discovered the undisclosed bank account of the respondent in which a cash credit of Rs. 87,000 had been made. According to the respondent's explanation, that sum represented diverse amounts entrusted to him by his relatives who had got panicky during the communal riots in Bihar in 1946 and in respect of the addition in the assessment, their Lordships of the Supreme Court held that in the absence of cogent material evidence, apart from the falsity of the respondent's explanation, from which it could be inferred that the respondent had concealed the particulars of his income or had deliberately furnished inaccurate particulars in respect of the source and that the disputed amount was a revenue receipt, penalty could not be imposed. I hold that in the present case the penalty proceeding has to be governed by section 28(1)(c) of the Act and so penalty could not be imposed in view of the decision of their Lordships of the Supreme Court in Anwar Ali's case, [1970] 76 ITR 696.

37. Mr. B.P Rajgarhia has relied on the case of Maya Rani Punj (Smt) v. Commissioner Of Income Tax, Delhi, [1986] 157 ITR 330 (SC). This was a decision under section 271(1)(a) read with section 297(2)(f) and (g) of the Act which affirmed the decision in Jain Brothers v. Union of India, [1970] 77 ITR 107 (SC), which is also a decision under section 271(1)(a), and reversed the decision in Commissioner Of Wealth Tax, Amritsar v. Suresh Seth , [1981] 129 ITR 328 (SC), on the ground that the offence under section 271(1)(a) is a continuing offence and penalty has to be imposed on a month to month basis till the return is filed or till assessment is made. It does not lay down that the law on the date of satisfaction will apply. This decision will not be applicable in the case of penalty under section 271(1)(c) and this is why the decision in Brij Mohan v. CIT, [1979] 120 ITR 1 (SC) discussed on page 296 of my judgment has not been overruled. I, therefore, hold that the offence under section 271(1)(a) is different from the offence under section 271(1)(c) and as long as the decision of their Lordships of the Supreme Court in Brij Mohan v. CIT, [1979] 120 ITR 1 is not overruled, it is binding.

38. In view of my findings above, I hold that the Tribunal was right in cancelling the penalty of Rs. 15,000 imposed under section 271(1)(c) of the Act by the Inspecting Assistant Commissioner. The question referred to us is, therefore, answered in the affirmative and in favour of the assessee and against the Revenue. However, in the peculiar circumstances of the case, the parties will bear their own costs.

Uday Sinha, J.:— I have had the benefit of going through the judgment of N. Ahmad J. I regret my inability to agree with the conclusions in his judgment. The facts have been over succinctly brought out in his judgment. I shall, therefore, refrain from stating the facts once again. Suffice it to observe that the assessee was assessed for the assessment year 1958-59 on February 19, 1959 at a loss of Rs. 33,608. Subsequently, it was detected that there were certain cash credits in the accounts of the assessee which had escaped assessment. Notice was, therefore, issued in October, 1967, under section 148 of the Act. The assessee once again filed a return showing loss of Rs. 30,519 as in the original return. The Income-tax Officer ultimately found total credits to the tune of Rs. 89,000 which the assessee had failed to explain. These were, therefore, taken as income of the assessee in terms of section 68 of the Act. The assessee agitated the matter in the quantum appeal. That matter fell for consideration before us in Tax Cases Nos. 203 and 204 of 1976 which were disposed of by us on February 5, 1986 (CIT v. Bihar Cotton Mills Ltd., [1986] 160 ITR 275 (Pat)). Those cases were disposed of with the findings (a) that the initiation of the proceeding under section 147(a) was legal and valid, and (b) the cash credits of Rs. 89,000 were not genuine and thus they were income of the assessee from undisclosed sources during the relevant assessment year. A difference of 20% between the returned income and the assessed income having been found, proceedings for levy of penalty under section 271(1)(c) were initiated by the Income-tax Officer with the approval of the Inspecting Assistant Commissioner.

39. The Inspecting Assistant Commissioner rejected the contentions urged on behalf of the assessee. He held that the assessee was guilty of concealment of income within the meaning of the Explanation to section 271. He found as a fact that the discrepancy was on account of negligence and carelessness. According to him, the amount of income-tax sought to be evaded amounted to Rs. 29,120. He, however, imposed a penalty of Rs. 15,000 under section 271(1)(c) of the Act. I am not going into the question whether the calculation of figures was correct or not. All that need be said is that he imposed penalty on the finding that there had been concealment of income.

40. The Tribunal on appeal set aside the order levying penalty. It was of the view that the matter relating to discrepancy between the assessed figure and the returned figure would be governed by the law as it existed when the original return was filed. On that date, the Explanation to section 271(I)(c) did not exist. The question of concealment, therefore, would have to be considered not in the light of the Explanation but in the light of the decision of the Supreme Court in Anwar Ali v. CIT, [1970] 76 ITR 696. As a logical extension of that conclusion, the Tribunal held that the Department had not produced any extra materials to discharge the onus upon it for proving that there had been concealment of income by the assessee. In their view, since no fresh material had been brought on record, the Department had failed to discharge its onus. That made the Department ask for a reference to this court. The application under section 256(1) not having found favour with the Tribunal, this court called for the reference under section 256(2) of the Act.

41. The first question which has to be answered in this reference is whether the question of levy of penalty will be decided upon the law as it existed on March 17, 1971, when the assessment under section 147 was completed and the satisfaction of the assessing officer was arrived at that there was a case for penalty. If the matter has to be determined on the basis of the law as it existed on March 17, 1971, the Explanation to section 271(1)(c) enacted in 1964 will become relevant and the case of Anwar Ali, [1970] 76 ITR 696 will become irrelevant. If, however, the matter has to be determined in terms of the law as it stood when the assessee filed his incorrect return in which he originally showed a loss of Rs. 30,519. In that backdrop will become relevant another question, whether the penalty has to be levied upon the original delinquency, i.e, when the first return was filed or upon the subsequent delinquency when the incorrect figures of income were returned in 1968 in answer to the notice under section 148 of the Act. The question fell for consideration for the first time before this court in CIT v. Parmanand Advani, [1979] 119 ITR 464. In that case also, there was an original return and a subsequent return in answer to the notice under section 148 of the Income-tax Act. S.P Sinha J., with whom S. Sarwar Ali J. agreed, observed as follows (p. 469):

“It is no doubt true that the offence of concealment of income is committed when the particulars thereof are kept out of the return of income, but it is Wrong to say that the procedure to punish the offender must be in accordance with the law as was in force at the time of commission of the offence, notwithstanding such procedure having Undergone a change thereafter. Procedural laws, unless otherwise indicated, are retrospective in their application, applying to all proceedings pending on the date of their enforcement. The Explanation to section 271(1) of the Act only prescribes a rule of evidence relating to burden of proof. It is purely procedural in nature. Naturally, therefore, irrespective of the date on which the offence was committed, it would be attracted if the proceeding for punishing the offender was pending on the date when it came into force.”

42. Later, at page 471, his Lordship observed:

“The material part is thus not the filing of the return, but the satisfaction about income having been concealed. If such satisfaction would have come on processing the first return, the argument (on behalf of the assessee) would have been valid, but that is not so. The satisfaction required has come only on processing the revised return. Therefore, it is with reference to that return that the proceeding for penalty has to be initiated. The revised return, as stated, has been filed after the coming into force of the Explanation. The Explanation would, therefore, apply.”

43. The above decision of this court was based upon a decision of the Supreme Court in Jain Brothers v. Union of India, [1970] 77 ITR 107. It will be useful to once again to quote here the law laid down by the Supreme Court in this case. It observed (p. 116):

“There can be no manner of doubt that penalty has to be calculated and imposed according to the tax assessed. It follows that imposition of penalty can take place only after assessment has been completed. For this reason there was every justification for providing in clauses (f) and (g) (of section 297(2)) that the date of the completion of the assessment would be determinative of the enactment under which the proceedings for penalty were to be held.”

44. And further (at p. 116):

“It is obvious that for the imposition of penalty it is not the assessment year or the date of the filing of the return which is important but it is the satisfaction of the income-tax authorities that a default has been committed by the assessee which would attract the provisions relating to penalty. Whatever the stage at which the satisfaction is reached, the scheme of sections 274(1) and 275 of the Act of 1961, is that the order imposing penalty must be made after the completion of the assessment. The crucial date, therefore, for purposes of penalty, is the date of such completion.”.

45. There could be no clearer exposition of law than that laid down by a Bench of five judges of the Supreme Court. The Supreme Court once again in Maya Rani Punj (Smt) v. Commissioner Of Income Tax, Delhi, [1986] 157 ITR 330 at page 337 followed the decision in Jain Brothers' case, [1970] 77 ITR 107 in the following terms:

“On the ratio of Jain Brothers' case, [1970] 77 ITR 107 (SC), the following conclusions are reached:

(a) Though the default occurred in September 1961, the date relevant for the purpose of initiating proceedings for imposition of penalty is when, following the assessment made, the Income-tax Officer decided to initiate penalty proceedings.”

46. Conclusion (b) is not relevant for our purpose. The matter should now be considered beyond controversy that the date of satisfaction of the Income-tax Officer that there has been concealment of income and the date of initiation of penalty proceeding should govern the law which is to be applied in the matter of penalty proceedings. In the instant case, the satisfaction that there had been concealment of income was arrived at on March 17, 1971. The question of levy of penalty on the assessee should, therefore, be considered in the light of the law prevalent on March 17, 1971.

47. Mr. K.N Jain, learned counsel for the assessee, however, waged a dogged battle for the view that the date of filing of the orginal return is the relevant date for determining the law to be applied in regard to imposition of penalty. He relied upon the decision of the Supreme Court in Brij Mohan v. CIT, [1979] 120 ITR 1. I have some difficulty in this behalf. The case of Brijmohan does seem to support Mr. Jain. In this case, the assessee had filed return for assessment year 1964-65 on April 24, 1968. He disclosed his share of profits from one source, but did not disclose the income from his share from another source. The Income-tax Officer made a best judgment assessment on a sum higher than what was returned. The Income-tax Officer initiated penalty proceedings and applied clause (iii) of sub-section (1) of section 271 of the Act as it stood after amendment by the Finance Act, 1968. Penalty was imposed by the Inspecting Assistant Commissioner. The stand of the assessee in that case was that the amended provision in clause (iii) of sub-section (1) of section 271 of the Act could not be invoked and what would be operative would be the law as it stood in the assessment year 1964-65. The Tribunal rejected the contention. The Tribunal made a direct reference to the Supreme Court. The question referred to the Supreme Court was:

“Whether, the Tribunal was, in law, right in sustaining the penalty of Rs. 2,955 by applying the provisions of section 271(1)(c)(iii.) of the Income-tax Act, 1961, as amended with effect from 1-4-1968?”

48. Dealing with the above question, the Supreme Court observed in paragraph 6 as follows (p. 4):

“The case of the assessee is that an assessment proceeding for the determination of the total income and the computation of the tax liability must ordinarily be made on the basis of the law prevailing during the assessment year, and inasmuch as concealment of income is concerned with the income relevant for assessment during the assessment year, any penalty imposed in respect of concealment of such income must also be governed by the law pertaining to that assessment year. We are unable to accept the contention. In our opinion, the assessment of the total income and the computation of tax liability is a proceeding which, for that purpose, is governed by entirely different considerations from a proceeding for penalty imposed for concealment of income. And this is so notwithstanding the fact that the income concealed is the income assessed to tax. In the case of the assessment of income and the determination of the consequent tax liability, the relevant law is the law which rules during the assessment year in respect of which the total income is assessed and the tax liability determined. The rate of tax is determined by the relevant Finance Act. In the case of a penalty, however, we must remember that a penalty is imposed on account of the commission of a wrongful act, and plainly it is the law operating on the date on which the wrongful act is committed which determines the penalty. Where penalty is imposed for concealment of particulars of income, it is the law ruling on the date when the act of concealment takes place which is relevant. It is wholly immaterial that the income concealed was to be assessed in relation to an assessment year in the past.”

49. The decision in Brij Mohan's case, [1979] 120 ITR 1 (SC), does seem to support Mr. K.N Jain, but it did not take into consideration the decision of the Supreme Court in Jain Brothers' case, [1970] 77 ITR 107. The decision in Jain Brothers' case being a decision of five judges and the decision in Brij Mohan's case, [1979] 120 ITR 1 (SC), being a decision of two judges, I am bound to follow Jain Brothers' case which has been reinforced by the decision of the Supreme Court in Maya Rani Punj's case, [1986] 157 ITR 330. In the face of these authoritative pronouncements of the Supreme Court, there can be no escape from the conclusion that the penalty must be imposed in terms of the law which prevailed on the date when the satisfaction of the taxing officer was arrived at. All the decisions which have taken a contrary view on this aspect of the matter must be held to have been wrongly decided.

50. In the view which I have taken above, the question whether the case would be governed by section 297(2)(g) of the 1961 Act or not becomes irrelevant. The penalty proceedings having been initiated in 1971, the question whether there had been any concealment of income or not for the imposition of penalty would have to be considered taking the presumption in the Explanation to section 271(1)(c) into account. This case would, therefore, not be governed by the case of Anwar Alt, [1970] 76 ITR 696 (SC). The returned income was less than 80% of the assessed income. The onus was, therefore, upon the assessee to prove that failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part. If he failed to show that the failure was not due to any fraud or gross or wilful neglect, the assessee must be held to have failed to discharge the onus placed upon him by law. The assessee must in that situation be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purpose of clause (c) of section 271(1). In this case, in the penalty proceeding, the assessee produced no material or circumstance to discharge the onus placed upon him. I am not for a moment suggesting that it was essential for the assessee to discharge the onus placed upon him by law by producing fresh materials. He could rely upon materials already on the record. But what was there on the record in favour of the assessee? Nothing whatsoever. In that view of the matter and the presumption being against the assessee, there was no escape from the conclusion in the instant case that the assessee had concealed his income. I do not consider it essential to spell out the figures which had been concealed and the penalty leviable thereon. But, on application of the law, it is inescapable that the assessee had concealed his income and was liable to pay penalty in terms of section 271(1)(c).

51. Assuming that the advantage of the Explanation to section 271(1)(c) was not available to the Revenue in that case, the instant case would be governed by the law laid down in CIT v. Anwar Alt, [1970] 76 ITR 696 (SC). That being the beacon light, the onus to establish that there had been concealment by the assessee would be upon the Department. That is to say, the Department must prove that the receipt of the amount in dispute constitutes income of the assessee. Their Lordships laid down that if there was no evidence on the record except the explanation given by the assessee which explanation had been found to be false, it did not follow that the receipt constituted his taxable income. All that it means is that the Revenue does not have the advantage of section 68 and the Explanation to section 271(1)(c) of the Act. The question is, must the Department produce some extra or fresh material to show that there has been concealment. If the entire facts collected during the assessment proceedings speak out loudly that there had been concealment of income, could the assessee get away from the penalty because the Revenue had not produced any new material de hors the assessment proceedings. If the facts collected and disclosed during the assessment proceedings lead to only one conclusion, namely, that the assessee had acted fraudulently and deliberately filed inaccurate returns, would it not be sufficient in the penalty proceeding to hold that there had been concealment of income by the assessee? Even if a penalty proceeding in tax jurisprudence is equated with a criminal proceeding, will it not be enough for the Revenue to show that the facts collected or revealed during the assessment proceeding lead to one and only one conclusion, namely, that the assessee had concealed the particulars of his income or deliberately furnished inaccurate particulars of his income? Would it be not sufficient for the Revenue to say that it had established concealment of income by the assessee? In my view, if the facts cry hoarse of concealment, the absence of any new material in penalty proceeding cannot defeat the Revenue in the matter of concealment of income. It cannot be disputed that the mere rejection of an explanation of the assessee is not sufficient to hold that there has been concealment of income, but just as the assessee can rely upon materials already on the record and show that there had been no concealment, so can the Revenue rely upon the materials already on record to show that there had been concealment by the assessee.

52. Even by the standards laid down in Anwar Ali's case, [1970] 76 ITR 696 (SC), the facts in the instant case show clearly that the assessee had concealed the particulars of his income or deliberately furnished inaccurate particulars of his income. Here was a case where the assessee had shown cash credits in his books to the tune of Rs. 89,000. The Department had come by tangible materials to show that there was a professional name-lender at Calcutta-who was helping the assessee in creating fake cash credits. The assessee was called upon in reassessment proceeding to establish the cash credits. The assessee asserted that the cash credits were genuine and the creditors were genuine persons. The Revenue has brought materials on record to show that the so-called creditors were fake persons. A prudent person would expect the assessee to produce those individuals before the revenue authority. The registered letters sent by the Revenue came back unserved. It was thus obvious that the cash credits were fake cash credits. Thereafter, what was expected of the Revenue to show was that there had been concealment of income? Was the Department expected to get a confession from the assessee in order to establish that there had been concealment of income? Can it be said that nothing short of a confession by the assessee would do for the Revenue? I regret, that was not expected of the Revenue. The Department could not do anything more in the circumstances of the case.

53. To conclude on this aspect of the matter, I am definitely of the view that the case must be decided on the basis of the Explanation to section 271(1)(c) of the Act. The assessee failed to discharge the onus placed upon him by law. Upon the facts, even by the standards laid down in Anwar Ali's case, [1970] 76 ITR 696 (SC), the conclusion was irresistible that the assessee had concealed his income.

54. In the view that I have taken in regard to the applicability of the law, the question whether penalty has to be levied on the basis of the first (original) return or on the basis of the return in answer to notice under section 148 becomes academic and need not be considered.

55. To sum up, my conclusions are that the date of satisfaction is the relevant date for application of the law. In terms thereof, the law applicable on March 17, 1971, would govern the penalty proceeding. The question of applicability of section 297(2)(g) is irrelevant. The assessee has failed to discharge the onus placed upon him of showing that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part. Even by the standards set down in the case of Anwar Ali, [1970] 76 ITR 696 (SC), the Revenue had established that there had been concealment of income by the assessee.

56. For the reasons stated above, I am of the view that the Tribunal was not correct in cancelling the penalty of Rs. 15,000 imposed upon the assessee under section 271(1)(c) of the Income-tax Act. I would, therefore, answer the question in favour of the Revenue and against the assessee with costs. Hearing fee Rs. 500 payable by the assessee.

Ashwini Kumar Sinha, J.:— This court under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), directed the Income-tax Appellate Tribunal, “B” Bench, Patna (hereinafter referred to as the “Tribunal”), to state a case and refer the following question for the decision of this court.

“Whether, on the facts and in the circumstances of the case, the Tribunal was right in cancelling the penalty of Rs. 15,000 imposed under section 271(1)(c) of the Income-tax Act?”

57. The case was heard by the learned judges of a Division Bench. One of the learned judges, Nazir Ahmad J., answered the question in the affirmative and in favour of the assessee and against the Revenue; whereas, the other learned judge, Uday Sinha J., answered the question in the negative and in favour of the Revenue and against the assessee.

58. In order to answer the question, the vital question involved in the instant case is whether the penalty proceeding has to be disposed of on the basis of law as it existed on March 17, 1971, when the reassessment was completed and the satisfaction of the assessing officer was arrived at that there was a case for penalty or it has to be determined in terms of the law as it stood on February 19, 1959 (under the old Act) when the original assessment was completed: in other words, whether for disposing of a penalty proceeding it is the law as is on the date when the satisfaction of the assessing officer is arrived at that there is a case for penalty which is applicable or it is the law as is on the date of the original assessment (under the old Act) is completed, which governs the penalty proceeding?

59. Though the facts, in detail, have been succinctly stated in both the judgments of my learned brothers, yet in order to appreciate the submission advanced in the instant case, I would very briefly state the relevant facts.

60. The assessment year involved is 1958-59. The assessee returned a loss of Rs. 30,519. The Income-tax Officer completed the assessment (under the old Act) on February 19, 1959, and the Income-tax Officer calculated the loss at Rs. 33,608.

61. Subsequently, it was detected that there were certain cash credits in the accounts of the assessee which had escaped assessment. Hence the Income-tax Officer issued a notice dated October 9, 1967, under section 148 of the Act and in pursuance of the notice under section 148 of the Act, the assessee once again filed the return on February 26, 1968, declaring once again the total loss at Rs. 30,519 (as was shown in the original return). The Income-tax Officer ultimately found total credits to the tune of Rs. 89,000 which the assessee failed to explain. These were, therefore, taken as income of the assessee in terms of section 68 of the Act. This reassessment was made on March 17, 1971.

62. Thereafter, the assessee agitated the matter in the quantum appeal and ultimately the matter fell for consideration in this court in CIT v. Bihar Cotton Mills Ltd., [1986] 160 ITR 275 (Tax Cases Nos. 203 and 204 of 1976) which were disposed of on February 5, 1986. The question for the assessment year 1958-59, relating to the reassessment proceeding, was raised in these two tax cases (just referred to above) and the questions were as follows:

“(i) Whether, on the facts and in the circumstances of the case, the proceedings initiated under section 147(a) were legal and right?

(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was: justified in coming to the conclusion that Rs. 89,000 was to be added as the assessee's income from undisclosed sources?”

63. It would be, in my opinion, relevant to state that the aforesaid taxation cases (Nos. 203 and 204 of 1976—CIT v. Bihar Cotton Mills Ltd., [1986] 160 ITR 275) were disposed of by a Bench consisting of the same two learned judges who have differed in their opinion in the instant case and it would again be very very pertinent to state that my learned brother Nazir Ahmad J., in agreement with the conclusion arrived at by my other learned brother Uday Sinha, held that the cash credits of Rs. 89,000 were not genuine and thus the addition as income from undisclosed sources in the assessment year 1958-59 was upheld. In other words, my learned brother Nazir Ahmad J, also held that the cash credits of Rs. 89,000 were the income of the assessee from undisclosed sources during the relevant assessment year.

64. It was further held in the aforesaid two tax cases that the reassessment proceeding under section 147(a) of the Act was legal and right.

65. Difference of 20% between the returned income and the assessed income having been found, proceedings for levy of penalty under section 271(1)(c) of the Act were initiated by the Income-tax Officer with the approval of the Inspecting Assistant Commissioner.

66. The Inspecting Assistant Commissioner did not accept the submission advanced on behalf of the assessee and held that the assessee was guilty of concealment of income within the meaning of the Explanation to section 271 of the Act. He also held that the discrepancy was on account of negligence and carelessness. He held that the amount of income-tax sought to be evaded was Rs. 29,120. However, he imposed a penalty of Rs. 15,000 under section 271(1)(c) of the Act.

67. On appeal, the Tribunal set aside the order levying penalty. It held that the matter relating to discrepancy between the assessed figure and the returned figure would be governed by the law as it existed when the original return was filed, (the original assessment having been made on February 19, 1959), and it further held that on that date (when the original return was filed) as the Explanation to section 271(1)(c) was not there, the question of concealment was not to be considered in the light of the Explanation but in the light of the decision of the Supreme Court in the case of Commissioner Of Income Tax, West Bengal v. Anwar Ali , [1970] 76 ITR 696; in other words, the Tribunal held that the Department had not brought any fresh/extra material on record to discharge the onus upon it for proving that there had been concealment of income by the assessee and here was a case in which the question of concealment was to be considered in the light of the decision in Anwar Alt's case, [1970] 76 ITR 696 (SC) and not in the light of the Explanation to section 271(1)(c) of the Act.

68. The Department asked for a reference under section 256(1) of the Act which did not find favour with the Tribunal. Thereafter, this court called for the reference under section 256(2) of the Act.

69. I have already indicated in para 2 (p. 317 supra) of my judgment that my learned brothers (Uday Sinha J. and Nazir Ahmad J.) have differed in their opinion.

70. In view of the aforesaid difference of opinion between the two learned judges, it became necessary to obtain the opinion of a third judge and that is how the matter has now come up before me.

71. Nobody has appeared before me on behalf of the assessee.

72. I have indicated the vital question involved in the instant case in para 3 (page 317 supra) above.

73. My learned brother Nazir Ahmad J., relying upon the Supreme Court case in Brij Mohan v. CIT, [1979] 120 ITR 1, upon two cases of the Delhi High Court in CIT v. S. Sucha Singh Anand, [1984] 149 ITR 143 and Addl. Commissioner Of Income-Tax…Applicant v. Ltshri Joginder Singh…, [1985] 151 ITR 93, upon another case of the Madras High Court in CIT v. S.S.K.G Arthanariswamy Chettiar, [1982] 136 ITR 145, upon a decision of the Allahabad High Court in Commissioner Of Income-Tax, Lucknow v. Ram Achal Ram Sewak., [1977] 106 ITR 144, upon a Full Bench case of the Punjab and Haryana High Court in CIT v. Ram Singh Harmohan Singh, [1980] 121 ITR 381 and yet upon another Full Bench case of the Kerala High Court Commissioner Of Income-Tax v. C.P Antony, [1985] 155 ITR 467, held that the penalty proceeding, in the present case, was to be governed by the old Act as the return was filed before the original assessment was made on February 19, 1959, and not on the basis of the Explanation to section 271(1)(c) of the Act, and, thus, held that, in the present case, the penalty proceeding was governed by the decision in the case of Commissioner Of Income Tax, West Bengal v. Anwar Ali , [1970] 76 ITR 696 (SC).

74. My learned brother Nazir Ahmad J. further held that the Patna High Court judgment in the case of CIT v. Parmanand Advani, [1979] 119 ITR 464 did not lay down the correct law and was wrong.

75. On the other hand, my learned brother Uday Sinha J., relying upon the judgment of the Supreme Court in the case of Jain Brothers v. Union of India, [1970] 77 ITR 107 (judgment by five Hon'ble Judges) and also relying upon another Supreme Court judgment in the case of Maya Rani Punj (Smt) v. Commissioner Of Income Tax, Delhi, [1986] 157 ITR 330, held that in the facts of the present case, it was the date of satisfaction which was the relevant date for application of the law and not that the penalty proceeding was governed on the basis of the first (original) return, i.e, under the old Act.

76. My learned brother Uday Sinha J. further held that, in the facts of the present case, the penalty proceeding was not governed by Anwar Alt's case, [1970] 76 ITR 696 (SC).

77. He further held that the case of CIT v. Parmanand Advani, [1979] 119 ITR 464, decided by the Patna High Court, laid down the correct law as it was based upon the Supreme Court judgment in the case of Jain Brothers v. Union of India, [1970] 77 ITR 107 (judgment of five Hon'ble Judges). He further held that in the latest judgment of the Supreme Court in case of Maya Rani Punj (Smt) v. Commissioner Of Income Tax, Delhi, [1986] 157 ITR 330, the principle as laid down in the case of Jain Brothers' case, [1975] 77 ITR 107 has been followed and thus my learned brother Uday Sinha J. followed not only the latest judgment of the Supreme Court but also the earlier judgment of the Supreme Court by five Hon'ble Judges and held that the penalty proceeding having been initiated in 1971, it was the date of satisfiction which was the relevant date for application of law in the present case. In other words, it was the law as applicable on March 17, 1971, which governed the penalty proceedings in the present case.

78. My learned brother Uday Sinha J., while dealing with the Supreme Court case of Brij Mohan v. CIT, [1979] 120 ITR 1, observed that in this case the earlier judgment of the Supreme Court by five hon'ble judges (Jain Brothers v. Union of India, [1970] 77 ITR 107) was not considered as, probably, not cited on behalf of either of the parties in that case.

79. I have very carefully perused the separate judgments of my learned brothers Uday Sinha J. and Nazir Ahmad J. In my opinion, a perusal of the judgment of my learned brother Nazir Ahmad J. shows (as it appears from para 36A—page 309 supra) that he has founded his conclusion mainly on the basis of the Supreme Court judgment in the case of Brij Mohan v. CIT, [1979] 126 ITR 1, whereas, my learned brother Uday Sinha J. has founded his conclusion on the basis of two Supreme Court judgments—Jain Brothers' case, [1970] 77 ITR 107 (judgment of five Hon'ble Judges) and Smt. Maya Rani Punj's case, [1986] 157 ITR 330 in which the principles laid down in Jain Brothers' case, [1970] 77 ITR 107 have been followed.

80. The question thus arises on the facts of the present case, as to which of the three Supreme Court cases (just referred to in the earlier paragraph) governs the present case.

81. Learned counsel for the Department has contended that it is the date of satisfaction of the Income-tax Officer which is the starting point for initiating the penalty proceedings and it is the law as it existed on that date which is applicable to the penalty proceedings. He further contended that as, in the present case, the penalty proceedings started in respect of the return filed on February 26, 1968, the penalty proceedings were to be governed in respect of the return filed in the reassessment proceedings. Learned counsel further submitted that the Explanation to section 271(1)(c) (added on April 1, 1964) was purely procedural in nature prescribing a rule of evidence relating to burden of proof and hence irrespective of the date on which the offence is committed, the Explanation was attracted if the proceeding for punishing the offender was pending on the date when it came into force. It is submitted that the Explanation (just referred to above) being a procedural law was retrospective in its application and it applied to all proceedings pending on the date of its enforcement.

82. Learned counsel for the Department, in support of his submissions, relied upon a Supreme Court judgment in the case of Jain Brothers, [1970] 77 ITR 107 (judgment of five hon'ble judges) followed in Smt Maya Rani Punj's case, [1986] 157 ITR 330 and also in three cases decided by the Patna High Court reported in CIT v. Parmanand, [1979] 119 ITR 464, Commissioner Of Income-Tax, Bihar v. A. Rahman, [1979] 119 ITR 475 and Commissioner Of Income-Tax, Bihar v. Lalji Ram Bhagat., [1984] 147 ITR 645. Learned counsel for the Department also relied upon a case decided by the High Court of Madhya Pradesh Addl. CIT v. Balwantsingh Sulakhanmal, [1981] 127 ITR 597.

83. As I have stated earlier in para 9 (at page 321 supra), my learned brother Nazir Ahmad J. has mainly founded his conclusion upon one Supreme Court judgment Brij Mohan v. CIT, [1979] 120 ITR 1. He deals with it in para 11—on page 296 (supra) of his judgment and ultimately in para 36A—on page 309 (supra) he sums up as follows:

“As long as the decision of their. Lordships of the Supreme Court in Brij Mohan v. CIT, [1979] 120 ITR at page 1 is not overruled, it is binding.”

84. If I could say so with respect, the facts of this case, Brij Mohan v. CIT, [1979] 120 ITR 1 (SC), are quite distinguishable and hence, in my opinion, reliance upon this case, for the purpose of deciding the point involved in the instant case, is under some misconception. In this case, there was only one return filed by the assessee. The assessment year in question was 1964-65 and the assessee filed his return of income on April 24, 1968 (when not only the substituted clause (iii) to section 271(1) had come into force but the Explanation to section 271(1)(c) also had come into force). This was not a case in which the assessee had filed two returns—one under the old Act and the other (revised) filed after the Explanation-had come into force. Thus, in fact, in my opinion, the vital question involved in the instant case (as indicated in para 3—page 317 (supra) of my judgment) was not under consideration at all.

85. On the facts of that case it was held that (p. 4 of 120 ITR): “we must remember that a penalty is imposed on account of the commission of a wrongful act, and plainly it is the law operating on the date on which the wrongful act is committed which determines the penalty. Where penalty is imposed for concealment of particulars of income, it is the law ruling on the date when the act of concealment takes place which is relevant. It is wholly immaterial that the income concealed was to be assessed in relation to an assessment year in the past…. The concealment of the particulars of his income was effected by the assessee when he filed a return of total income on April 24, 1968. Accordingly, it is the substituted clause (iii), brought in by the Finance Act, 1968, which governs the case. That clause came into effect from April 1, 1968.”

86. Though my learned brother Nazir Ahmad J. mentions about the lines which I have underlined* above for emphasis, yet with all respect to my learned brother, he has just missed to appreciate the impact of that observation in Brij Mohan's case, [1979] 120 ITR 1. I would, at the cost of repetition, quote those lines again (at page 4):

“It is wholly immaterial that the income concealed was to be assessed in relation to an assessment year in the past.”

87. Thus, speaking for myself, I feel that the case reported in Brij Mohan, [1979] 120 ITR 1 supports the department's stand and not the stand of the assessee.

88. My learned brother Nazir Ahmad J. has taken notice of the three Patna cases in CIT v. Parmanand Advani, [1979] 119 ITR 464, another case in Commissioner Of Income-Tax, Bihar v. A. Rahman, [1979] 119 ITR 475 and the third case in Commissioner Of Income-Tax, Bihar v. Lalji Ram Bhagat., [1984] 147 ITR 645 and he deals with them in paras 12, 13 and 23—on pages 296, 297 (supra) of his judgment. In view of the Supreme Court judgment in Brij Mohan's case, [1979] 120 ITR 1, he holds Parmanand's case, [1979] 119 ITR 464 (Pat) to have been wrongly decided. In my opinion, my learned brother Nazir Ahmad J. is not correct in saying that the aforesaid Patna case [1979] 119 ITR 464 did not lay down the correct law. In fact, this Patna case is based upon the Supreme Court judgment in Jain Brothers' case, [1970] 77 ITR 107 (judgment of five hon'ble judges) and it does lay down the correct law.

89. So far as the other Patna case—Rahman's case, [1979] 119 ITR 475 —is concerned, again, my learned brother Nazir Ahmad J., under misconception, has observed that it helps the assessee. In fact, this case does not deal with the point which is at issue in the instant case. The assessee in this case had filed two separate returns—one for the year 1965-66 and the other for 1966-67. Both these returns for the respective assessment years in question were filed on March 1, 1967. In 1969, a notice under section 148 was served on him in respect of those years and on the basis of the returns submitted, assessment was completed and penalty proceedings were initiated. Considering the circumstance that the assessee cooperated with the Department, the Tribunal imposed a minimum penalty for each of the two assessment years in question by applying section 271 as it stood prior to April 1, 1968. The High Court held that the Tribunal was correct in its decision to impose a minimum penalty for each of the two assessment years in question by applying the law which was in force at the time when the assessee filed his original returns.

90. Here, too, the Explanation to section 271(1)(c) had already come into force when the original returns were filed and it was just because of the co-operation that the assessee gave to the Department that a compassionate view was taken and the minimum penalty was imposed by applying section 271 as it stood prior to April 1, 1968.

91. This case does not deal with the two returns for the same assessment years by the assessee and thus it does not deal with the point at issue in the instant case and is thus clearly distinguishable.

92. Then with regard to the other Patna case, Commissioner Of Income-Tax, Bihar v. Lalji Ram Bhagat., [1984] 147 ITR 645, my learned brother Nazir Ahmad J. does not say that it has been wrongly decided. Dealing with the Patna cases (referred to above), he just observes that the Patna High Court decisions have taken three different views. In my opinion, it is not so. I have already dealt with the two Patna cases earlier and Lalji Ram Bhagat's case, [1984] 147 ITR 645 is directly on the point involved in the instant case. Facts are absolutely similar and the Patna High Court in Lalji Ram Bhagat's case, [1984] 147 ITR 645 held that the relevant date for the purpose of determining the quantum of penalty would be the date on which the delinquency was committed, namely, when the return or revised return was filed and since the revised return was filed on July 12, 1969, the quantum of penalty would be governed by the provision of law which was in force from April, 1, 1968.

93. The Supreme Court judgment in the case of Jain Brothers, [1970] 77 ITR 107 (judgment by five hon'ble judges) has been dealt with by my learned brother Nazir Ahmad J., in paragraph 26 (p. 304 supra) of his judgment. With all respect to my learned brother, I would say that the distinction tried to be made out is artificial.

94. In my opinion, the Supreme Court in Jain Brothers' case, [1970] 77 ITR 107 directly deals with the point involved in the instant case and it would be merely futile to quote the relevant paragraph of that judgment as it has already been quoted by my learned brother Uday Sinha J., in para 42—on page 312 (supra) of his judgment. This, in my opinion, settles the point at issue in the instant case.

95. Then the latest judgment of the Supreme Court, in the case of Smt. Maya Rani Punj, [1986] 157 ITR 330, has followed the principles already laid down in Jain Brothers' case, [1970] 77 ITR 107 (judgment of five hon'ble judges).

96. The case of Smt. Maya Rani Punj, [1986] 157 ITR 330 has been dealt with by my learned brother Nazir Ahmad J., in para 36A—on page 309 (supra) of his judgment and he distinguishes it by observing as follows:

“It does not lay down that the law on the date of satisfaction will apply. This decision will not be applicable in the case of penalty under section 271(1)(c).”

97. In my opinion, the distinction tried to be made is again artificial. The ratio of this case, Smt. Maya Rani Punj, [1986] 157 ITR 330 (SC), has been quoted by my learned brother Uday Sinha J. in paragraph 43 (at p. 312 supra) of his judgment. I feel it to be pertinent to requote it:

“On the basis of Jain Brothers' case, [1970] 77 ITR 107 (SC), the following conclusions are reached:

(a) Though the default occurred in September, 1961, the date relevant for the purpose of initiating proceedings for imposition of penalty is when, following the assessment made, the Income-tax Officer decided to initiate penalty proceedings.”

98. Conclusion (b) is not relevant for the purpose of the instant case.

99. Thus, in my opinion, the aforesaid two Supreme Court judgments, i.e, Jain Brothers' case in [1970] 77 ITR 107 (judgment of five hon'ble judges) and Smt. Maya Rani Punj's case, [1986] 157 ITR 330 (SC), settle the point at issue involved in the instant case and I agree with the view taken by my learned brother Uday Sinha J.

100. In view of the two Supreme Court judgments (just mentioned above), i.e, Jain Brothers' case reported in [1970] 77 ITR 107 (judgment of five hon'ble judges) and Smt. Maya Rani Punj's case, [1986] 157 ITR 330, in which the principles laid down in Jain Brothers' case, [1970] 77 ITR 107 have been followed, all the decisions which have taken a contrary view on the point involved in the instant case must be held to have been wrongly decided.

101. My learned brother Uday Sinha J. has gone further and has held that even assuming that Anwar Ali's case, [1970] 76 ITR 696 applied in the instant case, the Department has discharged its onus. He has assigned reasons for that on page 315 (supra) of his judgment and I agree with-those reasons as well. It would be futile to repeat them as they are referred to in those paragraphs, i.e, paragraphs 46 and 47 (p. 315 supra). In the result, I agree with the conclusion arrived at by my learned brother Uday Sinha J., that the date of satisfaction is the relevant date for the application of the law and in the instant case, it was the law as applicable on March 17, 1971, which governed the penalty proceedings. I further agree with the conclusion arrived at by my learned brother Uday Sinha J. that, in the instant case, the assessee failed to discharge the onus placed upon him of showing that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part. I further agree with the view of my learned brother Uday Sinha J. that even by the standard set down in the case of Anwar Ali, [1970] 76 ITR 696 (SC), the Revenue had, in the instant case, established that there had been concealment of income by the assessee and for the reasons given in my judgment, I do not agree with the view taken by my learned brother Nazir Ahmad J.

102. For the aforesaid reasons, I am of the view that the Tribunal was not correct in cancelling the penalty of Rs. 15,000 imposed upon the assessee under section 271(1)(c) of the Act. I, therefore, answer the question in favour of the Revenue and against the assessee with costs. Hearing fee Rs. 500 payable by the assessee.