The judgment of the court was delivered by

VENKATARAMAIAH J.--Because a common question of law arises for consideration in these two cases they are disposed of by this common judgment.

The assessees in these two cases are different persons. M/s. C. G. Bagalkoti & Sons, a registered firm of Dharwar, is the assessee in ITRC No. 31 of 1974. In respect of assessment year 1965-66, the assessee filed a return on July 31, 1968. In the Course of the said assessment proceedings, the Income-tax Officer felt satisfied that the assessee had concealed the particulars of certain income derived by it during the previous year in question and, therefore, initiated proceedings under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as " the Act"). Since he was of the opinion that the minimum penalty imposable was more than rupees one thousand, he referred the matter to the Inspecting Assistant Commissioner of Income-tax. After hearing the assessee, the Inspecting Assistant Commissioner was of the opinion that penalty was leviable in accordance with the provisions of the Act as amended by the Finance Act of 1968 which came into force on April 1, 1968, and levied a penalty of Rs. 6,000 by his order dated November 18, 1971. The assessee took up the matter in appeal before the Income-tax Appellate Tribunal. The Tribunal upheld the plea of the assessee that the penalty leviable in the instant case was the penalty which could have been imposed according to the provisions in force at the commencement of the assessment year and the provisions of the Act as amended by the Finance Act, 1968, were inapplicable to the case. Accordingly, it reduced the quantum of penalty payable by the assessee. At the instance of the Additional Commissioner of Income-tax, the Tribunal has referred the following question of law under section 256(1) of the Act for the opinion of this court :

" Whether, on the facts and in the circumstances of the case, the amendment to section 271(1)(c), which is effective from April 1, 1968, is applicable in this case for assessment year 1965-66 by virtue of the fact that the return of income was filed after April 1, 1968 ? "

In ITRC No. 73 of 1974, the assessee is S. Channaiah (since deceased) represented by his legal representative, Smt. Pramila. The assessment year in question is 1962-63. A return was filed in respect of the said assessment year by the assessee on July 10, 1968. In the course of the assessment proceedings, the Income-tax Officer was satisfied that there was concealment of income by the assessee and he, therefore, after initiating the proceedings under section 271(1)(c)of the Act, referred the matter to the Inspecting Assistant Commissioner of Income-tax, as the minimum penalty imposable exceeded rupees one thousand. After hearing the assessee, the Inspecting Assistant Commissioner passed an order on July 24, 1970, imposing a penalty of Rs. 3,51,682 in accordance with the provisions of the Act as amended by the Finance Act, 1968. The assessee filed an appeal before the Income-tax Appellate Tribunal in ITA No. 383/Bang/1970-71. The Tribunal came to the conclusion that the quantum of penalty had to be determined in accordance with the law prevailing at the commencement of the relevant assessment year and not in accordance with the Act as amended by the Finance Act of 1968 even though the return had been filed subsequent to April 1, 1968. Accordingly, it allowed the appeal of the assessee in part and directed the penalty to be levied in accordance with the law in force at the commencement of the relevant assessment year, i.e., 1962-63. The Tribunal, however, did not go into the question as to the amount of income concealed by the assessee since the determination thereof was according to it unnecessary in view of its decision on the question of applicability of the provisions of the Act which were in force on the date of the return. At the instance of the Additional Commissioner of Income-tax, Mysore, Bangalore, the Tribunal has referred the following question of law which in substance is similar to the question referred in ITRC No. 31 of 1974 :

" Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the amendment to section 271(1)(c) with effect from April 1, 1968, applies to the assessment years 1968-69 onwards and not to earlier assessment years irrespective of the date of filing of the return ? "

It is necessary at this stage to give a brief history of the law relating to imposition of penalty in the law of income-tax in India. The relevant part of section 28 of the Indian Income-tax Act, 1922, corresponding to section 271 of the Act, immediately prior to the coming into force of the Act, read as follows :

" 28. Penalty for concealment of income or improper distribution of Profits.--(1) If the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal, in the course of any proceedings under this Act, is satisfied that any person-- ............

(c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income,

he or it may direct that such person shall pay by way of penalty, in the case referred to in clause (a), in addition to the amount of the income-tax and super-tax, if any, payable by him, a sum not exceeding one and half times that amount, and in the cases referred to in clauses (b) and (c), in addition to any tax payable by him, a sum not exceeding one and half times the amount of the 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 ..............."

The relevant part of section 271 of the Act, which came into force on April 1, 1962, at the commencement of the Act read as follows :

" 271. Failure to furnish returns, comply with notices, concealment of income, etc.--(1) If the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person-- ............

(c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income,

he may direct that such person shall pay by way of penalty -- .........

(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 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 ..............."

By the Finance Act of 1964, which came into force on April 1, 1964, the word "deliberately " in clause (c) of section 271(1) was omitted and an Explanation was inserted at the end of section 271(1), which read as follows :

" 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."

The above provision was again amended by the Finance Act of 1968, which came into force on 1st April, 1968, by substituting sub-clause (iii) by the following new sub-clause (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, but which shall not exceed twice, the amount of the income in respect of which the particulars have been concealed or inaccurate particulars have been furnished."

Although the amendments made till the year 1968 are sufficient for the purpose of disposal of these cases, in order to make the picture complete we propose to set out the further amendment made to the above provision of law by the Taxation Laws (Amendment) Act, 1975, which came into force on 1st April, 1976. After the above amendment, sub-clause (iii) reads :

" (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, but which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income ..........."

(The rest of the amendment made to clause (iii) is unnecessary).

Section 297(2)(f) and (g) of the Act, however, provided that :

" (2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 (XI of 1922) (hereinafter referred as the repealed Act) ........

(f) any proceeding for the imposition of a penalty in respect of any assessment completed before the 1st day of April, 1962, may be initiated and any such penalty may be imposed as if this Act had not been passed ;

(g) any proceeding for the imposition of a 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. "

The question which arises for consideration in this case relates to two principal points. If a person is found to have concealed his income or has furnished inaccurate particulars giving rise to an action under section 271(1)(c) of the Act then--

(1) what should be the date on which he should be considered as having committed the act of concealment ; and

(2) whether the penalty imposable on him is governed by--

(i) the law in force at the commencement of the relevant year of assessment in respect of which the return is filed; or

(ii) the law in force on the date on which the return is filed; or

(iii) the law in force on the date on which the Income-tax Officer is satisfied that the assessee has concealed his income; or

(iv) the law in force on the date on which the order imposing penalty is passed.

Whereas it is the contention urged by Sri Rajendra Babu, learned counsel for the department, that an act which attracts penalty under section 271(1)(c) should be deemed to have been committed on the day on which the return is filed suppressing information regarding certain income attracting the liability to tax under the Act and that the penalty imposable should be determined in accordance with the law in force on the date on which the said act is committed, it is contended by Sri K. Srinivasan and G. Sarangan, learned counsel for the assessees, that when an act which attracts the imposition of penalty under section 271(1)(c) is committed, penalty can be imposed only in accordance with the law in force at the commencement of the assessment year to which the return relates irrespective of the date of the return.

A large number of decisions have been cited before us by the learned counsel for the parties. Before proceeding to consider them, we consider it proper to keep before us the warning administered by Lord Halsbury in Quinn v. Leathem [1901] AC 495 at page 506. In that decision, the learned Lord observed :

........... there are two observations of a general character which I wish to make, and one is to repeat what I have very often said before, that every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. The other is that a case is only an authority for what it actually decides. I entirely deny that it can be quoted for a proposition that may seem to follow logically from it. Such a mode of reasoning assumes that the law is necessarily a logical code, whereas every lawyer must acknowledge that the law is not always logical at all." The principle underlying the above observations is best illustrated by the two cases cited before us by the learned counsel : (1) C. A. Abraham v. Income-tax Officer [1961] 41 ITR 425 (SC) and (2) Jain Brothers v. Union of India [1970] 77 ITR 107 (SC).

It is contended by the learned counsel for the assessee on the basis of the decision in the case of C. A. Abraham [1961] 41 ITR 425 (SC) that the expression " assessment " found in the Indian Income-tax Act, 1922, and also used in the Act should be considered as including within its scope proceedings relating to penalty also and that since the penalty imposable under the income-tax law is merely an additional tax the logical conclusion should be that whenever penalty is levied, it should be done in accordance with the law in force at the commencement of the relevant assessment year to which the return relates. In support of this contention, the following observations made by the Supreme Court in C. A. Abraham's case [1961] 41 ITR 425 are cited :

" By section 28, the liability to pay additional tax which is designated penalty is imposed in view of the dishonest contumacious conduct of the assessee. This liability arises only if the Income-tax Officer is satisfied about the existence of the conditions which give him jurisdiction and the quantum thereof depends upon the circumstances of the case. The penalty is not uniform and its imposition depends upon the exercise of discretion by the taxing authorities ; but it is imposed as a part of the machinery for assessment of tax liability. "

The Supreme Court had occasion to deal with the above case in Commissioner of Income-tax v. Anwar Ali [1970] 76 ITR 696 and in the course of its decision it explained the above observations as follows :

" The first point which falls for determination is whether the imposition of penalty is in the nature of a penal provision. The determination of the question of burden of proof will depend largely on the penalty proceedings being penal in nature or being merely meant for imposition of an additional tax, the liability to pay such tax having been designated as penalty under section 28. One line of argument which has prevailed particularly with the Allahabad High Court in Lal Chand Gopal Das's case [1963] 48 ITR 324 is that there was no essential difference between tax and penalty because the liability for payment of Loth was imposed as a part of the machinery of assessment and the penalty was merely an additional tax imposed in certain circumstances on account of the assessee's conduct. The justification of this view was founded on certain observations in C. A. Abraham v. Income-tax Officer [1961] 41 ITR 425 (SC). It is true that penalty proceedings under section 28 are included in the expression " assessment " and the true nature of penalty has been held to be additional tax. But one of the principal objects in enacting section 28 is to provide a deterrent against recurrence of default on the part of the assessee. The section is penal in the sense that its consequences are intended to be an effective deterrent which will put a stop to practices which the legislature considers to be against the public interest. It is significant that in C. A. Abraham's case [1961] 41 ITR 425 (SC) this court was not called upon to determine whether penalty proceedings were penal or of quasi-penal nature and the observations made with regard to penalty being an additional tax were made in a different context and for a different purpose. It appears to have been taken as settled by now in the sales tax law that an order imposing penalty is the result of quasi-criminal proceedings [Hindustan Steel Ltd. v. State of Orissa [1970] 25 STC 211 ; [1972] 83 ITR 26 (SC)]. In England also it has never been doubted that such proceedings are penal in character : Fattorini (Thomas) (Lancashire) Ltd. v. Inland Revenue Commissioners [1943] 11 ITR (Supp) 50 (HL). "

Similarly, it has to be borne in mind that the observations made in the case of Jain Brothers v. Union of India [1970] 77 ITR 107 (SC) were made with special reference to the facts of that case. The relevant assessment year in that case was 1960-61 and the power to impose penalty under the Act which came into force on 1st April, 1962, was derived by the special provisions contained in clause (g) of sub-section (2) of section 297 of the Act. In that case, the Supreme Court observed that in the matter of imposition of penalty in respect of the assessment year preceding April 1, 1962, the crucial date was the date on which the assessment proceedings were completed. The Supreme Court has not laid down in that case in respect of cases not governed by the special provisions contained in clause (g) of section 297(2) of the Act, the crucial date would be the date of completion of the assessment proceedings. We have, therefore, to examine the case before us, independently of the observations made in the case of C. A. Abraham [1961] 41 ITR 425 (SC) and in the case of Jain Brothers [1970] 77 ITR 107 (SC).

It is now well settled that the proceedings under section 271 (1)(c) are penal in character. It is the basic concept of law that an act would be an offence attracting a penalty only when the law in force when the act is committed declares that such an act would be an offence and that, ordinarily, the penalty imposable for committing such an act would be in accordance with the law in force on the date of its commission. The offence of concealment of particulars of income or furnishing of inaccurate particulars of such income is committed when a return is filed. The mere non-filing of a return may not be considered either concealment of income which is liable to tax or furnishing inaccurate particulars regarding it. (Vide S. Santhosa Nadar v. First Addl. Income-tax Officer [1962] 46 ITR 411 (Mad)). It has to be noted here that the observations made in the case of Commissioner of Income-tax v. Gokuldas Harivallabhdas [1958] 34 ITR 98 (Bom) have been quoted with approval by the Supreme Court in Commissioner of Income-tax v. Anwar Ali [1970] 76 ITR 696, as follows :

" As has been rightly observed by Chagla C.J. in Commissioner of Income-tax v. Gokuldas Harivallabhdas [1958] 34 ITR 98 (Bom) 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, therefore, the department must establish that the receipt of the amount in dispute constitutes income of the assesses." The relevant date for purposes of determining whether a person has committed an act which attracts penalty under section 271(1)(c) is the date on which a return in which information regarding his income liable to tax is withheld is filed or the date when inaccurate particulars are given by him and the year of assessment in respect of which the return is filed or inaccurate particulars are furnished would have no relevance.

The next question is that if an act which attracts the imposition of penalty under section 271(1)(c) is committed, whether penalty should be imposed in accordance with the law prevailing at the time when such act is committed or in accordance with the law prevailing at the commencement of the assessment year in relation to which the return is filed or inaccurate particulars are furnished or in accordance with the law in force on the date of satisfaction of the assessing authority that the act of concealment has been committed or the date on which the order imposing penalty is passed. The law in force either on the date of satisfaction of the assessing authority that an act of concealment has been committed or on the date on which the order imposing penalty is passed, is irrelevant. The following observations made by the Supreme Court in Jain Brother's case [1970] 77 ITR 107:

" 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 " are applicable only to a case to which section 297(2)(g) of the Act is attracted and not to others. These cases are not governed by the principle enunciated in Jain Brothers' case [1970] 77 ITR 107 (SC).

In Commissioner of Income-tax v. Bhan Singh Boota Singh [1974] 95 ITR 562, the High Court of Punjab and Haryana held that where the assessee had filed return for the assessment year 1963-64 on April 9, 1964, in which he had concealed some income which was liable to income-tax, penalty was leviable in accordance with the provisions contained in the Explanation which was added by the Finance Act, 1964, which came into force on April 1, 1964, as the return had been filed subsequent to the coming into force of the Explanation.

In Commissioner of Income-tax v. K. Ahamed [1974] 95 ITR 599, a Full Bench of the Kerala High Court held that to a case of concealment made in the return filed on September 8, 1966, in respect of the assessment year 1963-64, the Explanation introduced with effect from April 1, 1964, was attracted.

In Rajputana Stores v. Inspecting Assistant Commissioner of Income-tax [1975] 99 ITR 499, the Gauhati High Court held that on its plain wording the Explanation applied to any income returned by the assessee after it came into force irrespective of whether the income related to a period prior to 1964 or thereafter. To the same effect is the view expressed by the Gauhati High Court in F. C. Agarwal v. Commissioner of Income-tax [1976] 102 ITR 408.

In Commissioner of Income-tax v. Dataram Satpal [1975] 99 ITR 507, the Allahabad High Court held that in the case of concealment or of furnishing inaccurate particulars, the date of such a default would be the date on which the return was filed irrespective of the assessment year to which it related and on a plain reading of the amended provisions of section 271, it was clear that anyone who filed an incorrect return after April 1, 1964, was liable to be dealt with according to the amended provisions regardless of the year to which the return related. In that case, the assessment year was 1963-64 and a return was filed on October 13, 1964. It was held that the Explanation which came into force on April 1, 1964, was applicable to the case. The same High Court in Commissioner of Income-tax v. Ram Achal Ram Sewak [1977] 106 ITR 144 (All) held that the crucial date for determining the applicability of the Explanation was the date of filing of the return and as the return had been filed before the Explanation came into force, the case had to be dealt with without reference to the Explanation. The above principle is followed by the High Court of Allahabad in Addl. Commissioner of Income-tax v. Krishna Subh Karan [1977] 108 ITR 271 and in Addl. Commissioner of Income-tax v. Jiwan Lal Shah [1977] 109 ITR 474.

In Commissioner of Income-tax v. India Sea Foods [1977] 109 ITR 596, the High Court of Kerala, where the question for consideration was similar to the question before us, held that the Appellate Tribunal was not right in holding that the penalty imposable under section 271(1)(c) of the Act for the concealment of income was to be computed in accordance with the law as it stood on the first day of April of the assessment year to which the return related.

In Addl. Commssioner of Income-tax v. Medisetty Ramarao [1977] 108 ITR 318, the Andhra Pradesh High Court held that the law applicable to the mode or manner of levying penalty was the law which was in force as on the date of commission of offence or contravention of a particular provision of the statute and not as it stood as on the date of detection. The concealment of income under the Act should be deemed to have been committed on the date when the return was filed by the assessee concealing a particular income and that the law applicable for levy of penalty for concealment of income under section 271(1)(c) was the law as it stood when the return was filed by the assessee, and the date of satisfaction of the Income-tax Officer or the Appellate Assistant Commissioner as to the concealment of income had no relevance for the levy of penalty.

In Addl. Commissioner of Income-tax v. Dr. Khaja Khutabuddinkhan [1978] 114 ITR 905, the High Court of Andhra Pradesh held that penalty had to be levied in the light of the law that existed at the time at which the offence came to be committed. Accordingly, where the assessee had filed the original return on November 28, 1968, it was held that the offence which attracted penalty was committed on November 28, 1968, and that penalty should be levied as per the provisions of section 271 (1)(c) as was in force from April 1, 1968, even though the assessment year was 1967-68.

In Commissioner of Income-tax v. Ramchand Kundanlal Saraf [1975] 98 ITR 474, the High Court of Madhya Pradesh held that where the return had been filed before April 1, 1968, and it had been found that in the return the assessee had concealed certain income, the penalty for such concealment of income would be leviable in accordance with the provisions of section 271 of the Act as they stood prior to the amendment and not after the amendment, even where the penalty proceedings had been initiated after the amendment came into force.

Two principles emerge from the foregoing decisions : (1) the act of concealment which attracts provisions of section 271(1)(c) is committed on the date on which the return is filed; and (2) that the quantum of penalty imposable is governed by the law in force on the date on which the act of concealment takes place. It is also seen in some of the decisions referred to above that the case of C. A. Abraham [1961] 41 ITR 425 (SC) and the case of Jain Bros. [1970] 77 ITR 107 (SC) have been distinguished and are held to be not relevant for the purpose of determining the questions in issue.

We have to notice at this stage a decision of the Orissa High Court in Commissioner of Income-tax v. K. C. Behera [1976] 103 ITR 479. The assessment year in that case was 1960-61. The assessee filed his return on August 23, 1965. The Income-tax Officer who made the assessment found that there was an undisclosed income of Rs. 20,000 and initiated penalty proceedings under section 271 (1)(c) of the Act. The question for consideration before the court was whether the Explanation which was added to section 271(1) by the Finance Act, 1964, governed the determination of the liability of the assessee. The High Court of Orissa held, following the decision in the case of Jain Bros. [1970] 77 ITR 107 (SC), that the assessment order had been made on December 20, 1965, and the Income-tax Officer could have satisfied himself that the amount constituted concealed income only by that date, the relevant law governing the imposition of penalty was the law in force as on December 20, 1965, and, therefore, the Explanation was attracted. The decision in this case apparently proceeds on the basis of the decision in the case of Jain Bros. [1970] 77 ITR 107 (SC), which, in our opinion, for the reasons already given, is not applicable to the case on hand.

On a consideration of the submissions made before us and the decisions referred to above, we are of the view that a concealment of income which attracts section 271(1)(c), in the absence of any other statutory provision compelling the court to take a contrary view, takes place when the return is filed and that the quantum of penalty imposable in respect of such concealment would be the quantum of penalty imposable under the relevant provisions of law as in force on the date on which the act of concealment is committed. It follows that the view taken by the Tribunal that the quantum of penalty imposable under section 271(1)(c) would be the penalty which is imposable under the law in force at the commencement of the relevant assessment year to which the return related is erroneous.

In these two cases, the returns are actually filed after April 1, 1968. The penalty that is leviable should, therefore, be in accordance with the law in force on the date on which the returns were filed, i.e., the Act as amended by the Finance Act, 1968. The questions referred to us are answered accordingly.

In I.T.R.C. No. 73 of 1974, Sri Srinivasan submitted that the Tribunal, in view of the decision rendered by it, had not gone into the question of the extent of concealment. This question has to be gone into by the Tribunal hereafter.