COMMISSIONER OF INCOME TAX, LUCKNOW vs. ONKAR SARAN AND SONS

CIVIL APPEAL No. 678/1977Supreme Court[1992] 2 S.C.R. 18713 March 1992Bench: 3 JudgesAuthor: S. RANGANATHAN, V. RAMASWAMI, A.S. ANAND OF10 pages
AI SummaryDismissed

What did the Supreme Court hold?

The Supreme Court dismissed the appeals, upholding the High Court's decision. The Court held that in cases involving multiple returns, the law applicable to penalty proceedings should be the law in force on the date of the original return. The Court reasoned that while reassessment proceedings technically re-open the assessment for an escaped income, the core is the determination of the correct total income for the assessment year. If the original return formed the basis for determining the quantum of penalty in reassessment, it should also form the basis for determining the date of concealment. The Court noted that accepting the Revenue's contention could lead to anomalous results where assessees might escape penalty entirely if no return was filed in response to a Section 148 notice. The Court also observed that the current stance of the parties regarding the measure of penalty might reverse with subsequent amendments to the law.

What were the facts?

The assessee, a Hindu Undivided Family, filed returns for assessment years 1961-62 and 1962-63. The Income Tax Officer (ITO) later discovered undisclosed income from land sales and issued notices under Section 148 on March 9, 1965. The assessee filed revised returns on February 27, 1969, disclosing the same income as originally filed. The ITO reassessed the income, which was subsequently reduced on appeal. The ITO initiated penalty proceedings under Section 271(1)(c) for failure to disclose income from land sales, initially considering it business income but later classifying it as capital gains. The Income-tax Appellate Tribunal reduced the penalty and held that the law applicable was as it stood on the dates of the original returns (April 1, 1961, and April 1, 1962), not the amended provisions effective April 1, 1968. The High Court upheld this view, and the Revenue appealed to the Supreme Court.

What were the issues?

1. Whether, in penalty proceedings initiated under Section 271(1)(c) pursuant to reassessment notices under Section 148, the law applicable is the one in force on the date of the original return or the law in force on the date of the return filed in response to the Section 148 notice? The Revenue contended that the penalty proceedings were initiated in the course of reassessment proceedings under Section 148, and since the returns were filed after April 1, 1968, the amended provisions of Section 271(1)(c) were attracted. The assessee argued that in cases of concealment in a return filed under Section 148, the law applicable for penalty imposition is the law in force at the time of the original return for the assessment year, not the law on the date of the Section 148 return.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 148,Section 139(2)

AI-generated summary — verify with the full judgment below

COMMISSIONER OF INCOME TAX, LUCKNOW A v. ~ ONKAR SARAN AND SONS MARCH 13, 1992 [S.RANGANATHAN, V. RAMASWAMI AND A. S. ANAND, JJ.] B - Income-tax Act, 1961-Sections. 271(1)(c), 148, 139(2}-lmposition of ,.. penalty of concealment of income in the return-Whether the law as it stands on the date of filing of the original return applicable or the law as it stands on the date of filing of return in response to notice u/s. 148 applicable. c -.~ The respondent- Hindu Undivided Family filed returns for the as- sessment years 1961-62 and 1962-63 showing the income of Rs. 13, 935 and Rs. 24,943 respectiyely. The Income Tax Officer determined the income of the respondent of Rs. 28,513 and Rs. 28,463 respectively for the assessment D years.

Subsequently, when the Income Tax Officer came to know that the assessee respondent had not disclosed certain income from the sale of lands in its returns, he issued notice u/s. 148 of the Income-tax Act, 1961 for the assessment years on 9.3.1965. On 27.2.1969, the assessee filed its E returns disclosing the same income as in . the original returns, viz. Rs. 18,935 and Rs. 24,943 respectively for the two assessment years. -_ _._ T

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