JUDGMENT
Jagdish Sharan Verma, C.J.
1. This order shall dispose of all the above nine references which relate to the same assessee. In References Nos. 2 of 1980 to 9 of 1980 made by the Tribunal under Sub-section (1) of Section 256 of the Income-tax Act, 1961 a set of common questions of law arising out of the Tribunal’s common order relating to assessment years 1955-56 to 1961-62 and 1964-65 have been referred on the basis of a common statement of case drawn up by the Tribunal. I.T. Reference No. 38 of 1986 is also,in respect of the same assessee and relates to the very same assessment years but is a result of direction of this Court under Sub-section (2) of Section 256 of the Act to refer a common question of law said to arise out of the same order of the Tribunal which is treated as not covered by the questions already referred by the Tribunal under Section 256(1) of the Act. This question also had to be answered on the same facts.
2. The common question of law in I.T. References Nos. 2/80 to 9/80 referred by the Tribunal at the instance of the assessee under Section 256(1) of the Act for all these assessment years are the following, namely:
[1] Whether, on the facts and in the circumstances of the case, in respect of the assessment year 1955-56, 1956-57, 1957-58, 1958-59, 1959-60, 1960-61, 1961-62 & 1964-65, legally any penalty under the provisions of Section 271(1)(c) of the Act could be levied?
[2] Whether, on the facts and in the circumstances of the case, the Inspecting Assistant Commissioner had legally taken action under Section 271(1)(c) of the Income Tax Act, 1961, when the first assessment was made under Section 23(3) of the Act, 1922?
[3] Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the quantum of penalty for concealment of income in the return submitted prior to 1-4-1962 could be determined by applying the law as stood after 1-4-1962 and not before that date?
[4] Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that Explanation to Section 271(1)(c) as stood on the date of levy of penalty could be invoked?
[5] Whether, on the facts and in the circumstances of the.case, the Income Tax Officer was satisfied during the course of assessment proceedings in respect of all the years under consideration that the assessee had concealed its income of furnished inaccurate particulars of its income within the meaning of Section 271(1)(c) of the Income Tax Act, 1961?
The common question of law in respect of the very same assessment years which has been referred as a result of direction under Section 256(2) of the Act, in I.T. Reference No. 38 of 1986 is the following:
Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur was justified in imposing minimum penalty upon the assessee under Section 271(1)(c) of the Income Tax Act, 1961 merely on the basis of the admission made by the assessee in his letter dated June 11, 1969 to the Commissioner of Income Tax for purposes of settlement during re-assessment proceedings?
3 The ITRs. Nos. 2/80 to 9/80 may be divided into three categories for the purpose of decision of these questions as suggested by learned Counsel for The assessee These references relate to A.Ys. 1955-561 to 1961-62 & 1964-65 I. T Reference No. 8 of 1980 relates to the assessment year 1964-65 for which the original return was filed by the assessee on 26-9-64; the original assessment was made on 25-3-1969 and the re-assessment was made on 26 9 1969. This reference is a separate category and even according to the arguments advanced on behalf of the assessee ,i is governed by Section 271(1)(c) together with the Explanation thereto inserted with effect from 1-4-1964 in the Income Tax 1964-65 Accordingly, the view taken by the Tribunal against the assessee on all the common questions referred therein including that on the common question in IT Reference No. 38 of 1986 pertaining to the assessment year 1964-65 must be held to be justified.
4. For the assessment years 1955-56 to 1961-62 original return was filed on different dates prior to coming into force of the 1961 Act on 1-4-1962 and the original assessment also in respect of the assessment years 1955-56 to 1959-60 was made prior to 1-4-1962 even though the reassessment was made in all these cases on 26-9-1969. IT References Nos. 9/80, 4/80, 7/80, 3/80 and 5/80 elate to assessment years 1955-56, 1956-57, 1957-58 and 1958-59 respectively and fall in one category. The last category comprises of IT References Nos 6 of 1980 and 2 of 1980 relating to the assessment years 1960-61 and 1961-62 respectively for which the return was filed prior to coming into force of the 1961 Act on 1-4-1962 and the original assessment was completed there after cm different dates prior to 1-4-1964 when the Explanation was inserted in Section 271(1)(c) of the Act. The reassessment in these cases also “as made on the same date, namely, 26-9-1969.
5 We are making this division at the behest of the learned Counsel for the assessee who has advanced his arguments on this basis. The effect, if any! of such a division for the purpose of considering the arguments shall be considered later.
6. Material facts are these: As earlier stated the assessment years covered by these nine references are-1955-56, 1956-57, 1957-58, 1958-59, 1959- 60, 1960- 61 1961-62 and 1964-65. The accounting year of the assessee M/s. Rasool ji Buxji Kathawala, Udaipur, ended on 30th June every year. The assessee claimed to have borrowed a specified sum of money of Hundis. These loans were shown every year upto the assessment year 1962-63 on Hundi basis. The assessee filed original return for the assessment years 1955-56,to 1961-62 on 26-9-?957, 27-4-1958, 24-7-1959, 8-4-1960, 11-11-1960 and 20-11-1961 retrospectively; and the original assessment, was made in respect and 20-11-1961 respect very, and the original assessment was made in respect of these years on 31-8-1959, 17-9-1960, 25- 11-1960, 9-10 I96l. 31-7-1963 and 28-8-1963 respectively. As earlier staged for the assessment year 1964-65 the original return was filed on 26-9-1964 and the original assessment was made on 25-3-1969. For these assessment years the assessee showed income in the original return at Rs. 1,55,319, Rs.. 1,44,300/-, Rs. 1,94,303/-, Rs. 1,33,725/-, Rs. 1,33,179/ Rs. 33,454/, Rs. 1,49,890 and Rs. 1,46,767/- respectively. The original assessment were completed at Rs. 2,36,618/-, Rs. 2,13,522/-, Rs. 2,47,582, Rs. 1,75,225, Rs. 2,55,526, 2,48,818/-, Rs. 2,44940/-and Rs. 3,07’290/- respectively. In the original returns the assessee alleged having taken the Hundi loans. The Income-tax Officer at the time of completing original assessment did not question genuineness of the alleged Hundi loans and therefore no, enquiry regarding their genuineness was made. Later, the income tax officer respondent the assessments for all these years under Section 147(a) read with Section 148 of the Income -*Tax Act. 1961 on the ground that alleged Hundi loans were not genuine and they represented income of the assessee from un-disclosed sources. After the notices were duly served upon the assessee the Income-tax Officer also wrote a detailed letter on 9-4-1965 to the assessee requiring it to furnish all the particulars of the Hundi loans and documentary evidence, if any. The assessee then requested the Income-tax Officer to grant some time to enable it to approach the Commissioner of Income-tax. On 28-5-1965 the assessee wrote a letter to the Commissioner of Income-tax. The cumulative peak of the Hundi loans was Rs. 14,15,000/- spread over during the accounting periods corresponding to the assessment years 1956-57 to 1962-63. The assessee requested that the cumulative peak of the Hundi loans amounting to Rs. 14,15,000/-may be assessed as income in the hands of the assessee. It was also said in the application that the assessee was desirous of making a settlement under Section 271(4-A) of the Act. A prayer was made to the Commissioner of Income-tax for a direction to the Income-tax Officer to complete the reassessment proceedings initiated against the assessee in respect of the Hundi transactions in this manner. This application of the assessee firm was rejected by the Commissioner of Income-tax vide his letter dated 28-7-1965. The assessee then wrote again to the Commissioner on 22-8-1955 and also moved an application dated 24-8-1965/7-9-1965 to the Chairman, Central Board of Direct Taxes, New Delhi. A grievance was made by the assessee in the application to the Central Board of Direct Taxes against the rejection of its application by the Commissioner. It appears that the Central Board of Direct Taxes directed the Commissioner to consider the assessee’s application for settlement. Consequently, the assessee moved a fresh application on 25-4-1969 to the Commissioner. It was specifically stated in this application of assessee that the assessee agreed that Rs. 12:29,133/- may be additionally assessed in the hands of the assessee for the assessment years 1955-56 to 1963-64, the split up of which was given therein. It was further specifically stated that the assessee agreed that in respect of these additions the minimum penalty of 20% of the difference in tax between the income returned and income assessed may be levied under the provisions of Section 271(1)(c) of the. Income-tax Act, 1961. The assessee again wrote a letter on 11-6-1969 to the Commissioner of Income-tax in which the same prayer was reiterated. The assessee reiterated the consent for levy of penalty under Section 271(1)(c) of the Income-tax Act, 1961 at the minimum rate of 20% of difference of tax between the income originally returned and finally reassessed for all these assessment years adding further that there will be no dispute regarding the quantum of penalty so imposed. The letter of the assessee firm was signed by all its partners. It may be mentioned that on 17 6-1969 the assessee firm also debited a sum of Rs. 12,75,000/- standing under the head of Hundi loans and credited this amount in the name of all the partners in their profit sharing ratio. Accordingly, in the books of account the amount of the Hundi loans which was treaded as concealed income was credited in the name of all the partners and spread over in their profit sharing ratio.
7. The Commissioner of Income-tax accepted the settlement and passed the order under Section 271(4-A) of the Act. Penalty was also imposed under Section 271(1)(c) of the Income-tax Act,.1961, according to the request and consent of the assessee. In the revised returns filed by the assessee for these years it was stated that the surrendered amount may be taxed as income of the assessee in the respective years.
8. The assessee later contested imposition of the penalty but the assessee’s contentions have been rejected be the Tribunal. Hence these references made at the instance (r)f the assessee to decide the above quoted common questions of law said to arise out of the Tribunal’s common order.
9. The contentions of the learned Counsel for the assesses are the following, namely:
[1] It is Clause (f) and not Clause (g) of Sub-section (2) of Section 297 of the Income-tax Act, 1961 which applies in respect of assessment years 1955-56 to 1959-60 and, therefore, imposition of penalty in respect of these years is governed by the provisions of Income-tax Act, 1922 and not Income-tax Act, 1961;
[2] Even if Section 297(2)(g) of the 1961 Act applies, it is Section 271(1)(c) as initially enacted when the 1961 Act came into force on 1-4-1962 which applies and not the Explanation inserted therein with effect from 1-4-1964;
[3] For the assessment years 1960-61 and 1961-62 in respect of which, the original assessment was completed after’ 1-4-1962 but prior to 1-4-1964 it is Section 271(1)(c) as initially enacted on 1-4-1964 when the 1961 Act came into force which applies by virtue of Section 297(2)(g) and not also the Explanation inserted in Section –271(1)(c). with effect from 1-4-1964.
[4] It is the date of filing the original return which is determinative of the law to be applied and since the original return was filed for the assessment years 1955-56 to 1961-62 prior to the coming into force of the 1961 Act on 1-4-1962,the provisions, of the 1961 Act cannot be applied.
[5] The question of penalty has to be (decided according to the principles enunciated in Commissioner of-Income-tax v. Anwar Ali without the aid of the Explanation inserted with effect from 1-4-1964 in Section 271(1)(c) of the 1961 Act.
In reply the learned Counsel for the; Revenue contends-that the imposition of penalty was clearly on the admission and at the invitation’ of-the assessee and, therefore, there is no occasion to differ from the view taken by the Tribunal.
10. It may be, mentioned at this stage only that for the assessment year 1964-65 (IT. Reference No., 8/80) there is no basis to differ from the Tribunal’s view because no argument has been advanced on behalf of the assessee to assail the conclusion for that year. For the assessment year 1964-65 the original return also was filed on 26-9-1964 after insertion of the Explanation in Section 271(1)(c) of the 1961 Act. The original assessment was made on 25-3-1969 and there-assessment was made on 26-9-1969. Accordingly, there is no escape from he conclusion that atleast the question of imposition of penalty for the; assessment, year 1964-65’is governed by Section 271(1)(c) together with the Explanation(there-to which was inserted with effect from 1-4-1964. Learned counsel for the assessee rightly made no attempt to challenge this position. The, further consequence is that I.T. Reference No. 38 of 1986 also in so far as it relates t6 the assessment year 1964-65 has to be answered in favour of the revenue and, against the assessee for the same reason.
11. We may first dispose of the assessee’s contention regarding applicability of Clause (f)’ instead of Clause (g) of Sub-section (2) of Section 297 of the Income-tax Act, 1961. The relevant part of Section 297 is as under:
297(1). The Indian Income-tax Act, 1922 (Xt) of 1922), is here by repealed:
(2) Not with standing the repeal of the Indian Income-tax Act, 1922 (XI of 1922) here in after referred to as the repealed Act):
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(f) any proceedings for the imposition of penalty in respect of any assessment completed before 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 penalty in respect of any assessment for the year ending on 31st day of March, 1962, or any earlier year, which is completed on or after 1st day of April, 1962, may be initiated and any such penalty may be imposed under this Act.
A plain reading of the two clauses (f) and (g) shows that applicability of the 1922 Act according to Clause (f) and of I961 according to. Clause (g) depends on-the fact of completion of the assessment prior, to, 1,-41962 or subsequent to it. In other words, imposition of penalty is governed by the 1922 Act according to.clause (f) the assessment is completed before 1-4-1962 and by the 1961 Act if the assessment though,, for the year ending on 31-3-1962 or any earlier year, is completed on or after l-4-1962. The contention of learned Counsel for the assessee is that the word ‘assessment in these “two clauses must be construed as the original assessment and not the final or the re-assessment for any year. On this basis he argues that for the assessment year 1955-56 to 1959-60 the original assessment was completed prior to 1-4-1962 and, therefore, according to Clause (f) the penalty proceedings, must be governed by the 1922 Act not with standing the fact that the re-assessment for all these there was completed on 26-9-1969 as a result of re-opening of the assessments.
12. We are.unable to accept this Contention of the learned Counsel for the assessee for the obvious reason that it is contrary to the meaning of the word “assessment” as defined in Section 2(8) of the income-tax Act, 1961. Section 2(8) defines ‘”assessment” to include, re-assessment. This definition has to be applied unless the context requires otherwise. We do not find anything otherwise-in the context in Which clauses (f) and (g) of Sub-section (2) of Section 297 have to be construed to indicate… that the ordinary meaning of the word “assessment” given in the definition should not be applied. It is, therefore, obvious that where the assessment which, also includes are assessment was completed on or, after. 1 4-1962 for the year ending on,31-3-1962 or any earlier year, it. is Clause (g) which applies and the imposition of penalty is governed by, the Income-tax Act, 1961 and not the 1922 Act. This contention of the learned Counsel for the assessee is therefore rejected;
13. The next contention of learned Counsel for the assessee is that it is date of filing the original return in which there has been concealment which determines the law applicable and since the original return was filed for the assessment years 1955-56 to 1961-62 prior to coming into force of the 1961 Act on 1-4-1962. the provisions of the 1961 Act cannot be applied. This argument also has to be rejected apart from other reasons on the above ground based on Section 297(2)(g)of the 1961 Act which we have already considered. That apart the argument runs to the Supreme Court decision in Jain Brothers and Ors. v. Union of India and Ors. which has been reiterated in Maya Rani Punj v. CIT .
14. In Jain Brother’s case while dealing with the question of the validity of Section 297(2)(g) of the Income-tax Act 1961 the Supreme Court pointed out clearly that-for imposition of penalty it is not the assessment year or the date of 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. It was indicated that the crucial date, therefore, for purposes of penalty is the date of completion of assessment when satisfaction of the income-tax authorities is reached that a case for imposition of penalty arises. The same view was reiterated with reference to Jain Brothers’ case in Maya Rani Punj v. CIT (supra) and it was held that “the crucial date, therefore, for purposes of penalty is the date of completion of assessment and the satisfaction of the authority that proceeding for levy of penalty be initiated”. The matter has been placed beyond any possible doubt in Maya Rani Punjs’ case (supra) by stating one of the conclusions as follows:
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.
The assessee was required to file the return in Maya Rani’s case by September 1961 and, therefore, the default occurred then but for the purpose of imposition of penalty it was pointed out that the crucial date was that ‘when following the assessment made the Income-tax Officer decided to initiate penalty proceedings.
15. Applying the settled test indicated by these decisions of the Supreme Court the crucial date for imposition of penalty in respect of all these assessment years 1955-56 to 1961-62 and 1964-65 is really 26-9-1969 when as a result of reassessment, concealment of income was found and it was decided to initiate penalty proceedings. It has not been doubted even by the learned Counsel for the assessee that on this conclusion the penalty proceedings for all these years are to be governed only by the provisions of the Income-tax Act, 1961 and consequently by Section 271(1)(c) together with the Explanation inserted there in with effect from 1-4-1964.
16. In our opinion, these decisions of the Supreme Court are alone sufficient to repeal the several arguments advanced on behalf of the assessee which are based essentially on the date of filing the original return and not completion of the assessment as result of reassessment made on 26 9-1969.
17. As result of. this conclusion the division made by learned Counsel for the assessee of these references in three categories is inconsequential because the division is based only on the date of original return or original assessment and not the reassessment which alone is the crucial date. Completion of assessment by reassessment is the same, namely, 26-9-1969 for all these years.
18. We are of the opinion that it is unnecessary to refer and consider at any length the several decisions cited by the learned Counsel for the assessee in view of the clear authority of the Supreme Court on the point. We may observe that no case was cited by the learned Counsel for the asssessee in which the above Supreme Court decisions have been construed differently. This is obviously for the reason that the clear enunciation of the principle in the above cases admits of no ambiguity and in the case of these decisions there is no reasonable basis to hold that the crucial date for the purpose of imposition of penalty can be any date prior to the date “when following the assessment made the Income Tax Officer decided to initiate penalty proceedings”. The decision to initiate penalty proceedings is reached only when the assessment/reassessment showing concealment of income is made even though it is with reference to the return filed earlier by the assessee.
19. We may, however, refer to a Full Bench decision of Madras High Court in R. Kuppuswamy Chetty v. Commissioner of Income Tax, Madras (1982) 135 ITR 235, were following the Supreme Court decision in Jain Brothers case (supra) the same conclusion was reached on. similar facts. The Patna High Court in Commissioner of Income Tax, Bihar v. Parmanand Advani ; and the Orissa High Court in Commissioner of Income Tax, Orissa v. K.C. Behara and Ors. ; also take the same view. Learned counsel for the assessee relied on Hajee K. Assainar v. Commissioner of Income Tax, Kerala . In our opinion this decision has to be read along with the Supreme Court decision in Jain Brother’s case (supra), and so read ‘the facts thereof indicate that the Kerala decision does not take contrary view.. In the Kerala case the reassessment was completed prior to 1-4-1964 revealing concealment and in this situation it was held that the Explanation inserted in Section 271(1)(c) with effect from 1-4-1964 after completion of the reassessment proceedings giving rise to the penalty proceedings did not apply.
20. On the above conclusion reached by us nothing significant remains for consideration. The argument of the learned Counsel for the assessee based on Anwar Ali’s case (supra) is also of no practical significance in the facts of the present case. In Anwar Ali’s case (supra) it was held as follows:
It cannot be said that the finding given in the assessment proceedings for determining or computing the tax is conclusive. How ever, it is good evidence. 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 other words, according to Anwar Ali’s case (supra) where Explanation to Section 271(1)(c) does not apply the mere addition to the income in the assessment proceedings is not conclusive for imposition of penalty and there must be some further material together with which the circumstances lead to the conclusion that the disputed amount represented income which had been consciously concealed etc.
21. Even if this test were to be applied in the present case the conclusion cannot be different. The assessee voluntarily admitted on initiation of the re-assessment proceedings that the income initially not shown and claimed to be Hundi loans was in fact assessee’s income. The entire conduct of the assessee is to that effect and the assessee insisted that the Department should act on that basis not only for computation of income but also for imposition of penalty at the minimum rate of 20%. It is difficult to visualise what further material was required or contemplated in such a situation for acting on the request made by the assessee even for imposition of penalty. Admittedly, the penalty imposed is the very amount i.e. the minimum penalty which the assessee had solicited. The assessee apart from making such specific request had made corresponding entries also in the account books by debiting the amount of Hundi loans and crediting that amount in the names of all the partners by distributing the same between them in their profit sharing ratio. Even if the Explanation to Section 271(1)(c) is not relied on and Anwar Ali’s case (supra) is applied, the conclusion cannot be different from the one reached by the Tribunal. No further question remains for consideration in these references.
22. Consequently, all these references are answered in the affirmative against the assessee and in favour of the Revenue by holding that the Tribunal’s view on all the questions referred is justified. No costs.