COMMISSIONER OF INCOME TAX, LUCKNOW versus ONKAR SARAN AND SONS

Citation: [1992] 2 S.C.R. 187 · Decided: 13-03-1992 · Supreme Court of India · Bench: S. RANGANATHAN · Disposal: Dismissed

Judgment (excerpt)

COMMISSIONER OF INCOME TAX, LUCKNOW 
A 
v. 
~ 
ONKAR SARAN AND SONS 
MARCH 13, 1992 
[S.RANGANATHAN, V. RAMASWAMI AND A. S. ANAND, JJ.] 
B 
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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 
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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. 
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_._ 
The I.T.O determined the income for the assessment years at Rs. 
52,185 and Rs. 44,017 respectively, which was reduced on further appeals 
to Rs. 41,923 and Rs. 34,547 respectively for the two assessment years. 
F 
The I.T.O. after making the re-assessment also initiated proceedings 
u/s. 271(1)(c) of the Act, for the failure on the part on the assessee to return 
.l 
the income from sale of lands. Originally he was of the opinion that the 
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income from the lands constituted "business income" , but later it was held G 
that it was assessable as "Capital Gains". 
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The assessee-respondents filed appeals before the Income-tax Appel-
late Tribunal, which reduced the penalty to 20 per cent of the tax payable 
on the amounts of "Capital Gains" included in the assessments and not 
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disclosed in the returns. It held that since the penalty proceedings related H 
1 
187 
188 
SUPREME .EOURT REPORTS 
[1992] 2 S.C.R. 
A to the assessment years 1961-62 and 1962-63, the provisions of the Income· 
tax Act as they stood respectively on 1.4.1961 and 1.4.1962 would be 
applicable to determine the penalty and not the amended provisions which 
..,_. 
came into force w.e.f. 1.4.1968. 
When the matter was referred to the High Court, it upheld the 
B 
conclusion of the Tribunal, taking the view that the law applicable in 
regard to the imposition of penalty would be not the law as on the 1st April 
of the relevant assessment year but the law prevailing on the dates when 
the original returns were filed. 
C 
On the refusal of the High Court to grant a certificate of fitness to 
appeal to this Court, the Revenue filed these appeals by special leave. 
The appellant·Revenue contended that the penalty proceedings were 
initiated in the course of reassessment proceedings initiated u/s. 148 of the 
Act; that the 1-eturns were filed after 1.4.1968, by the assessee, in response 
D 
to notices u/s. 148, which were to be treated as the original returns of 
income filed u/s. 139(2); that the assessee had failed to disclose in these 
returns the income from the sale of lands, which was taxable under 
"Capital Gains" head; that the relevant returns, having been filed after 
1.4.1968, the provisions of section 271(1)(c) as amended in 1968 were 
attracted. 
E 
The respondent·assessee submitted that in a case where a return 
filed u/s. 148 involved an element of concealment, the law applicable for 
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imposition of penalty would be the law as in force at the time of the original 
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return filed for the assessment yeai' and not the law as it stood on the date 
F 
on which the return in response to the notice u/s. 148 was filed. 
Dismissing the appeals of the Revenue, this Court, 
HELD : 1.01. In a case multiple returns, the law applicable to the 
penalty proceedings should be taken to be the law in force on the date of 
G the original return, if any. [194F] 
H 
1.02. In the course of re·assessment proceedings, a penalty could be 
imposed with reference to the. concealment in the original assessment 
proceedings. [19SC] 
1.03. Though, technically speaking, the original assessment proceed· 
C.I.T. v. ONKAR SARAN 
189 
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ings have been finalised and reassessment proceedings initiated to assess A 
escaped income, it is only the determination of the correct 

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