S.P. Sinha J.

1. The Patna Bench of the Income Tax Appellate Tribunal has referred the undermentioned question u/s 256(1) of the I.T. Act, 1961 (hereinafter referred to as " the Act "), for the opinion of this court:

" Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the penalty imposed u/s 271(1)(c) of the Act "

2. The assessee is a registered firm. For the assessment year 1963-64, a penalty of Rs. 22,600 was imposed on it by the IAC acting u/s 274(2) of the Act on the ground that it had concealed the particulars of its income for the said assessment year to the tune of Rs. 50,000. This amount had been added to the assessees income in a reassessment proceeding, u/s 147(b) of the Act.

3. The reassessment proceedings had been started on the 5th of January, 1966, and the assessment had been completed some time in the year 1967. On completion of the said reassessment, proceedings for levy of penalty in terms of Section 271(1)(c) of the Act was initiated on the 3rd October, 1968, and the penalty was levied by order dated the 1st of March, 1969.

4. The assessee carried the matter in appeal to the Income Tax Appellate Tribunal, Patna Range, Patna, which relying upon several decisions of various High Courts, held that a proceeding for levy of penalty for concealment of income being a penal proceeding, the onus lay on the department to establish the assessees guilt. The Tribunal then observed that-

" merely because the addition was maintained in the assessment proceedings, the assessee cannot be held to have concealed the particulars of his income or furnished inaccurate particulars of such income..."

5. The penalty was, accordingly, deleted.

6. The Tribunal having thus deleted the penalty, the reference in question has been made to this court at the instance of the CIT.

7. The short argument made on behalf of the department is that the Tribunal, while deleting the penalty, had lost sight of the Explanation to Section 271(1) of the Act which had been introduced into the Act by the Finance Act, 1964, and took effect from the 1st of April, 1964. By this Explanation, it was submitted, where the total income returned fell short of 80% of the income assessed, the onus lay upon the assessee to prove that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on its part.

8. In the instant case, it was submitted, that the said Explanation to Section 271(1) was clearly attracted and, therefore, the Tribunal erred in deleting the penalty by wrongly throwing the onus of proving the guilt of concealment on the department.

9. Mr. Jain appearing for the assessee, firstly, questioned the competence of the reference on the ground that no question of law arose out of the Tribunals order. The Tribunal, according to Mr. Jain, had arrived at a finding of fact that the assessee had not concealed the particulars of its income, which finding could not give rise to any question of law.

10. His next submission was that, in any event, the Explanation to Section 271(1) of the Act had no application to the case in question, because on the date when the default was committed by the assessee, the said Explanation did not exist.

11. On these grounds, it was submitted that this court should refuse to answer the question referred or should answer it in favour of the assessee.

12. I think there is no merit in either of the two contentions raised on behalf of the assessee.

13. The first contention is clearly based upon a misappreciation of the Tribunals order. On a plain reading of the said order it is clear that the appeal had been decided in favour of the assessee not on facts, but on the solitary ground that the onus lay upon the department to establish that the assessee had concealed the particulars of its income, which onus the department had failed to discharge. The Tribunal had not gone into the factual aspect of the matter, but had deleted the penalty on the ground that the department had failed to discharge its onus. The finding of the Tribunal that "...the assessee cannot be held to have concealed the particulars of his income or furnished inaccurate particulars of such income..." is not a finding of fact but of law, the observation being based upon the departments failure to discharge its onus of proving the assessees guilt. The first submission has, therefore, to be rejected.

14. I now pass on to consider the question as to whether or not the Explanation to Section 271(1) of the Act was applicable to the case in question. The said Explanation is in the following terms :

" 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 u/s 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."

15. This provision came into force from the 1st of April, 1964, shifting the burden of proof on the assessee in case its total income, as returned, was less than 80% of the total income assessed, as 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 had been disallowed as deduction.

16. There is no dispute that if this provision applies, the Tribunals order is wrong. The argument on behalf of the assessee, however, is that this provision has no application to the penalty proceeding in question because the concealment had been made before the Explanation had come into force. According to learned counsel for the assessee, the question as to whether or not the Explanation would be applicable to a case would depend upon the date on which the default was committed, namely, when the return was filed in which the concealment was made.

17. According to learned counsel for the department, however, the material date for the purpose of determining the applicability or otherwise of the Explanation to a case was the date on which the ITO or the AAC got the satisfaction that the assessee had concealed the particulars of its income or had furnished inaccurate particulars of such income. Such satisfaction would be available only on completion of the assessment or during the course of hearing an appeal from that assessment. Thus, in either case, the determinative factor would not be the date of the filing of the return of income in which the concealment is made, but the date on which the assessment was made on the basis of which the ITO or the AAC felt satisfied of concealment having been made by the assessee.

18. The question which arises on which the basis of the rival contentions is, whether the applicability of the Explanation to Section 271(1) of the Act depends upon the date on which the return of income is filed concealing the particulars of income or furnishing inaccurate particulars thereof, as has been urged on behalf of the assessee, or would depend upon the date on which the required satisfaction for initiating proceedings for levy of penalty is received by the relevant authority, as has been urged on behalf of the department.

19. The argument made on behalf of the assessee is not sound. Carried to its logical conclusion, in effect, it means that the procedure for trial of an offender must be the one as was in force when the offence was committed by him.

20. 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.

21. Learned counsel for the assessee has cited a number of decisions which, according to him, by implication hold that if the return of income is filed prior to April 1, 1964, namely, prior to the date on which the Explanation came into force, the Explanation will not apply to the case. The decisions cited are:

HAJEE K. ASSAINAR Vs. COMMISSIONER OF Income Tax, KERALA., , Commissioner of Income Tax Vs. K. Ahamed, , Commissioner of Income Tax Vs. Bhan Singh Boota Singh, , Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, , Commissioner of Income Tax Vs. Data Ram Satpal, and Continental Commercial Corporation Vs. Income Tax Officer and Another, .

22. Except the last mentioned decision, in the case of Continental Commercial Corporation Vs. Income Tax Officer and Another, , none of the other decisions support the contention on behalf of the assessee that the law applicable for the purpose of levying penalty would be the one which was in force at the time of the commission of the offence.

23. HAJEE K. ASSAINAR Vs. COMMISSIONER OF Income Tax, KERALA., has no bearing on the question raised, because in that case the penalty proceedings had ended up to the last appellate stage much before the Explanation came into force. The department, however, in the course of its contentions before the High Court, sought to support the levy of penalty by reference to the Explanation to Section 271(1), which had come into the Act by that time. The High Court rejected the plea, and I may respectfully add, that it was rightly repelled.

24. In Commissioner of Income Tax Vs. K. Ahamed, , the ratio laid down is that the Explanation cannot be used for the purpose of determining the nature of the offence, because that has to be determined with reference to the law in force at the time of commission of the act or omission. Determining the nature of the offence is wholly different from determining the procedure for dealing with the offender.

25. So far as the other three decisions are concerned, Commissioner of Income Tax Vs. Bhan Singh Boota Singh, , Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and Commissioner of Income Tax Vs. Data Ram Satpal, , the ratio laid down by them is that if the return is filed after the coming into force of the Explanation, the case would attract the Explanation.

26. Now with regard to the view expressed by the Madras High Court in Continental Commercial Corporation Vs. Income Tax Officer and Another, , I think, with all respect, the view is incorrect being directly against the view expressed by the Supreme Court in the case of Jain Bros. and Others Vs. The Union of India (UOI) and Others, , the relevant observations in which are (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. "

27. Further

" 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."

28. Thus, none of the above cited decisions help the assessee. On the contrary, the decisions in the cases of Commissioner of Income Tax Vs. Bhan Singh Boota Singh, , Rajputana Stores Vs. Inspecting Assistant Commissioner of Income Tax and Others, and Commissioner of Income Tax Vs. Data Ram Satpal, , go against its cause, because according to the decisions, the Explanation to Section 271(1) would get attracted, if irrespective of the assessment year in question, the return of income has been filed after the coming into force of the Explanation.

29. In the instant case, admittedly, the return of income has been filed on the 8th February, 1966, after the coming into force of the Explanation.

30. Learned counsel for the assessee, however, submitted that the return of income related to the reassessment proceeding. Another regular return of income had been filed much before the coming into force of the Explanation. The same income had been returned in both of them. The levy of penalty should, therefore, be referable to that return of income in which the concealment of income was first made. And if this be so, the Explanation would not be applicable.

31. In the context of the provisions contained in Section 271(1)(c) of the Act, this argument is untenable.

32. The relevant provision is :

" If the Income Tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under this Act, is satisfied that any person-

(a) has without reasonable cause failed to furnish the return of his total income which he was required to furnish under Sub-section (1) of Section 139 or by notice given under Sub-section (2) of Section 139 or Section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by Sub-section (1) of Section 139 or by such notice, as the case may be, or

(b) has without reasonable cause failed to comply with a notice under Sub-section (1) of Section 142 or Sub-section (2) Section 143, or

(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--..."

33. 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 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 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.

34. Learned standing counsel for the department has cited the following decisions in support of his contention : Commissioner of Income Tax Vs. K.C. Behera and Others, and Commissioner of Income Tax Vs. Puranmal Prabhudayal, .

35. These decisions do support his point of view.

36. In view of the above discussion, it must be held that the Tribunal erred in deleting the penalty imposed on the assessee by wrongly placing the burden of proof on the department. The question referred is accordingly answered in the negative and against the assessee. There will be no order as to costs. Since the Tribunal has not dealt with the merits of the assessees appeal, it may now do so.

S. Sarwar Ali J.

37. I agree.