BRIJ MOHAN vs. COMMISSIONER OF INCOME TAX, NEW DELHI

TAX REFERENCE CASE No. 15/1975Supreme Court[1980] 1 S.C.R. 19903 August 1979Bench: 2 JudgesAuthor: P.N. BHAGWATI, R.S. PATHAK6 pages
AI SummaryDismissed

What did the Supreme Court hold?

The Supreme Court held that the amended Section 271(1)(c)(iii) of the Income Tax Act, 1961, as introduced by the Finance Act, 1968, governs the case. The Court reasoned that assessment of income and computation of tax liability are governed by the law prevailing during the assessment year. However, penalty proceedings are for a wrongful act, and the law operating on the date of the wrongful act (concealment) is relevant. The act of concealment occurred when the assessee filed the return on April 24, 1968, which was after the amendment. Therefore, the amended provision applies. The Court also rejected the argument that accepting a late return deemed it filed within the original time limit, stating that Section 139 allows extensions but does not equate an extended filing with original timely filing, evidenced by interest provisions for delayed returns. The penalty imposed under the amended provision was upheld.

What were the facts?

The assessee, Brij Mohan, filed his income tax return for assessment year 1964-65 on April 24, 1968. He disclosed income from one firm but concealed income from another. The Income Tax Officer, finding concealed income, initiated penalty proceedings. The Inspecting Assistant Commissioner imposed a penalty under Section 271(1)(c)(iii) of the Income Tax Act, 1961, as amended by the Finance Act, 1968. The assessee argued that the penalty should be governed by the law prevailing during the assessment year 1964-65. The Income Tax Appellate Tribunal reduced the penalty but upheld its applicability. The case was referred to the Supreme Court.

What were the issues?

1. Whether the penalty imposed on the assessee for concealment of income is governed by Section 271(1)(c)(iii) of the Income Tax Act, 1961, as it stood during the assessment year 1964-65, or as amended by the Finance Act, 1968, which came into effect from April 1, 1968. Assessee's arguments: (i) Assessment proceedings for determining total income and tax liability should be based on the law prevailing during the assessment year. Since concealment relates to income for that year, the penalty should also be governed by the law of that year. (ii) Under Section 139 as it stood in 1964-65, the return was due by September 1964. As the return filed on April 24, 1968, was accepted by the Income Tax Officer, it should be deemed filed within time, making the original Section 271(1)(c)(iii) applicable. Revenue's arguments: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)(iii),Section 139

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• • • ',/ . • • " 199 BRIJ MOHAN v. COMMISSIONER OF INCOME TAX, NEW DELHI August 3, 1979 [P. N. BHAGWATI AND R. S. PATHAK, JJ.] lncon1e Tax Act, 1961, Section 271 (1) (c) (iU) as a1nended -by Finance Act 1968-Scope of.

Section 271(1)(c)(iii) provided that where the Income Tax Officer had reason to believe that the assessee had concealed particulars of his income or furnished inaccurate particulars of such income he may impose a penalty of a sum in addition to any tax payable by the assesSee \Vhich shall not be less than twenty per cent but \Vhich shall not exceed. one and a half times the amount of the tax.

The Finance Act 1968, '""hich came into effect from April 1, 1968, enhanced the penalty- to a sum which shall not be less than, but which shall not exceed twice, the amount of income in respect of which the particulars have been concealed ·or inaccurate particulars have been furnished.

The assessee filed a return of his total income for the assessment year 1964·65 on 24th April, 1968. In the course of assessment proceedings, the Income Tax Officer found that the assessee had concealed the income earried from one of his two firms.

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