I concealed income in my original return, and repeated the same figures in the return I filed after a section 148 notice. Which year's penalty law applies - the old one or the one in force when the later return went in?
The law in force when the original return was filed. The Supreme Court dismissed the Revenue's appeals and held that where multiple returns are filed for a year, the law applicable to penalty proceedings is that in force on the date of the original return, if any. It is settled since Brij Mohan that penalty is governed by the law on the date of the offending return; the question was which return is the offending one. Since a penalty on reassessment can be quantified by reference to the income originally returned, the same return must also fix the date of the concealment.
Decided by the Supreme Court (Supreme Court of India, Civil Appellate Jurisdiction; S. Ranganathan, V. Ramaswami and A.S. Anand, JJ (judgment by Ranganathan, J)) on 1992-03-13, reported as (1992) 195 ITR 1; 1992 AIR 1139; 1992 (2) SCC 514; 1992 SCR (2) 185; (1992) 2 JT 567 (SC); (1992) 62 Taxman 440. It bears on section 271(1)(c), section 148, section 139(2) of the Income Tax Act 1961, in Penalty and Reassessment & Reopening matters.
This is the Supreme Court's answer to a question that had divided the High Courts, and it fixes the date by which every concealment penalty in a reassessment is to be tested. The rule is neutral rather than pro-assessee, and the Court said so: the 1968 amendment measured penalty by the income concealed instead of the tax sought to be evaded, which favoured assessees whose original returns predated it, but from 1 April 1976 the measure reverted to the tax sought to be evaded, and from then the same rule works the other way. The reasoning is worth knowing for two further points. First, Malbary and Bros. establishes that a penalty can be imposed in reassessment proceedings by reference to the concealment in the original return, and that an earlier penalty order should then be recalled and substituted. Second, the Court tested the Revenue's construction against two situations it could not survive - an assessee who discloses the escaped income honestly in his section 148 return, and one who files no return at all in response to the notice - each of whom would escape penalty entirely.
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The assessee, a Hindu undivided family, filed returns for assessment years 1961-62 and 1962-63 showing Rs.18,935 and Rs.24,943; the exact dates of those returns were not on record, but the assessments were made on 30 March 1962 and 28 November 1963 at Rs.28,513 and Rs.28,463. The Income Tax Officer later learnt that profits from the sale of certain lands had not been disclosed and issued notices under section 148 for both years on 9 March 1965. The assessee filed returns only on 27 February 1969, repeating the same incomes, and the reassessments were completed on 6 March 1969 at Rs.52,185 and Rs.44,017, reduced on appeal to Rs.41,923 and Rs.34,547. The difference from the original returns was Rs.22,988 and Rs.9,604. The officer initiated penalty proceedings under section 271(1)(c) for the failure to return the income from the sale of lands, income which he first regarded as business income but which was finally held chargeable as capital gains. The Inspecting Assistant Commissioner imposed penalties of Rs.24,000 and Rs.10,000 on 4 March 1971. Section 271(1)(c) as it stood on 1 April 1962 measured penalty by the tax sought to be evaded, at not less than 20 and not more than 150 per cent of it; the Finance Act 1968, from 1 April 1968, changed the measure to the income concealed, with a minimum of 100 and a maximum of 200 per cent. The Tribunal held that the law as on 1 April of the relevant assessment years applied and reduced the penalties to 20 per cent of the tax on the capital gains. The Allahabad High Court upheld that result on the different ground that the law on the dates the original returns were filed applied, following Ram Achal Ram Sewak. The Revenue appealed by special leave.
The appeals were dismissed with no order as to costs; the High Court's view was correct. In a case of multiple returns, the law applicable to the penalty proceedings is to be taken to be the law in force on the date of the original return, if any. The Court noted that a large majority of the High Courts had taken this view - Allahabad, Patna, Madras, Punjab and Haryana in a Full Bench, Delhi, Kerala in a Full Bench, Rajasthan and Bombay - against a contrary line in Madhya Pradesh and one Patna decision, and held the majority view the more acceptable and more practical one. It approved the reasoning of the Madras High Court in S.S.K.G. Arthanariswamy Chettiar and of the Delhi High Court in Joginder Singh, in each of which a member of the Bench had participated, and expressly declined to reiterate it, summarising instead four considerations of its own. Applying the rule, the original returns having been filed in 1962 and 1963, the unamended provision measuring penalty by the tax sought to be evaded governed, and the reduction of the penalties to 20 per cent of that tax stood.
The Court took as settled, after Brij Mohan v. CIT, that the law applicable to a penalty under section 271(1)(a) or (c) is the law in force on the date the offending return was filed. The only question was which of two returns was the offending one, the assessee having concealed the same income in both. The Court accepted that it sounded plausible to say the penalty arose only from the 1969 return, but rejected it for four reasons. First, Malbary and Bros. shows the contrary: there the reassessment return disclosed more than the original estimate, so on the Revenue's logic no penalty could have been imposed at all, yet this Court upheld a penalty measured by reference to the original return, adding that any penalty levied in the original proceedings should be recalled and substituted. Govindarajulu Iyer, approved in that case, establishes the same proposition. Second, on the principle in Jagan Mohan Rao that reopening throws the whole assessment open, what is being done on reassessment is the redetermination of the correct total income for the same year; the assessee filed a return for that year originally and in doing so effected the concealment, and if the original return can fix the quantum of the penalty imposable on reassessment there is no reason why it should not also fix the date on which the concealment was effected. Third, the Revenue's construction produces anomalies it cannot answer: an assessee who conceals in his original return, escapes detection, and then honestly includes the escaped income in his section 148 return could never be penalised, and an assessee who files no return at all in response to the notice would escape entirely. Fourth, the Court warned against deciding the point by reference to which side it currently favours, since from 1 April 1976 the measure of penalty reverted to the tax sought to be evaded and the parties' positions would then be reversed.
even in such a case, the law applicable to the penalty proceedings should be taken to be the law in force on the date of the original return if any.
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Handle my notice → Ask a CA on WhatsAppThe law in force when the original return was filed. The Supreme Court dismissed the Revenue's appeals and held that where multiple returns are filed for a year, the law applicable to penalty proceedings is that in force on the date of the original return, if any. It is settled since Brij Mohan that penalty is governed by the law on the date of the offending return; the question was which return is the offending one. Since a penalty on reassessment can be quantified by reference to the income originally returned, the same return must also fix the date of the concealment. This was decided by the Supreme Court (Supreme Court of India, Civil Appellate Jurisdiction; S. Ranganathan, V. Ramaswami and A.S. Anand, JJ (judgment by Ranganathan, J)) and bears on section 271(1)(c), section 148, section 139(2) of the Income Tax Act 1961. It is reported as (1992) 195 ITR 1; 1992 AIR 1139; 1992 (2) SCC 514; 1992 SCR (2) 185; (1992) 2 JT 567 (SC); (1992) 62 Taxman 440. This is the Supreme Court's answer to a question that had divided the High Courts, and it fixes the date by which every concealment penalty in a reassessment is to be tested. The rule is neutral rather than pro-assessee, and the Court said so: the 1968 amendment measured penalty by the income concealed instead of the tax sought to be evaded, which favoured assessees whose original returns predated it, but from 1 April 1976 the measure reverted to the tax sought to be evaded, and from then the same rule works the other way. The reasoning is worth knowing for two further points. First, Malbary and Bros. establishes that a penalty can be imposed in reassessment proceedings by reference to the concealment in the original return, and that an earlier penalty order should then be recalled and substituted. Second, the Court tested the Revenue's construction against two situations it could not survive - an assessee who discloses the escaped income honestly in his section 148 return, and one who files no return at all in response to the notice - each of whom would escape penalty entirely. If it applies to you, the first step is this: Identify the date of the original return for the year, not the date of the return filed after the section 148 notice, and apply the penalty provision in force on that date.
The assessee, a Hindu undivided family, filed returns for assessment years 1961-62 and 1962-63 showing Rs.18,935 and Rs.24,943; the exact dates of those returns were not on record, but the assessments were made on 30 March 1962 and 28 November 1963 at Rs.28,513 and Rs.28,463. The Income Tax Officer later learnt that profits from the sale of certain lands had not been disclosed and issued notices under section 148 for both years on 9 March 1965. The assessee filed returns only on 27 February 1969, repeating the same incomes, and the reassessments were completed on 6 March 1969 at Rs.52,185 and Rs.44,017, reduced on appeal to Rs.41,923 and Rs.34,547. The difference from the original returns was Rs.22,988 and Rs.9,604. The officer initiated penalty proceedings under section 271(1)(c) for the failure to return the income from the sale of lands, income which he first regarded as business income but which was finally held chargeable as capital gains. The Inspecting Assistant Commissioner imposed penalties of Rs.24,000 and Rs.10,000 on 4 March 1971. Section 271(1)(c) as it stood on 1 April 1962 measured penalty by the tax sought to be evaded, at not less than 20 and not more than 150 per cent of it; the Finance Act 1968, from 1 April 1968, changed the measure to the income concealed, with a minimum of 100 and a maximum of 200 per cent. The Tribunal held that the law as on 1 April of the relevant assessment years applied and reduced the penalties to 20 per cent of the tax on the capital gains. The Allahabad High Court upheld that result on the different ground that the law on the dates the original returns were filed applied, following Ram Achal Ram Sewak. The Revenue appealed by special leave. The matter was decided on 1992-03-13 by the Supreme Court (Supreme Court of India, Civil Appellate Jurisdiction; S. Ranganathan, V. Ramaswami and A.S. Anand, JJ (judgment by Ranganathan, J)). On those facts the Supreme Court held as follows. The appeals were dismissed with no order as to costs; the High Court's view was correct. In a case of multiple returns, the law applicable to the penalty proceedings is to be taken to be the law in force on the date of the original return, if any. The Court noted that a large majority of the High Courts had taken this view - Allahabad, Patna, Madras, Punjab and Haryana in a Full Bench, Delhi, Kerala in a Full Bench, Rajasthan and Bombay - against a contrary line in Madhya Pradesh and one Patna decision, and held the majority view the more acceptable and more practical one. It approved the reasoning of the Madras High Court in S.S.K.G. Arthanariswamy Chettiar and of the Delhi High Court in Joginder Singh, in each of which a member of the Bench had participated, and expressly declined to reiterate it, summarising instead four considerations of its own. Applying the rule, the original returns having been filed in 1962 and 1963, the unamended provision measuring penalty by the tax sought to be evaded governed, and the reduction of the penalties to 20 per cent of that tax stood.
The Court took as settled, after Brij Mohan v. CIT, that the law applicable to a penalty under section 271(1)(a) or (c) is the law in force on the date the offending return was filed. The only question was which of two returns was the offending one, the assessee having concealed the same income in both. The Court accepted that it sounded plausible to say the penalty arose only from the 1969 return, but rejected it for four reasons. First, Malbary and Bros. shows the contrary: there the reassessment return disclosed more than the original estimate, so on the Revenue's logic no penalty could have been imposed at all, yet this Court upheld a penalty measured by reference to the original return, adding that any penalty levied in the original proceedings should be recalled and substituted. Govindarajulu Iyer, approved in that case, establishes the same proposition. Second, on the principle in Jagan Mohan Rao that reopening throws the whole assessment open, what is being done on reassessment is the redetermination of the correct total income for the same year; the assessee filed a return for that year originally and in doing so effected the concealment, and if the original return can fix the quantum of the penalty imposable on reassessment there is no reason why it should not also fix the date on which the concealment was effected. Third, the Revenue's construction produces anomalies it cannot answer: an assessee who conceals in his original return, escapes detection, and then honestly includes the escaped income in his section 148 return could never be penalised, and an assessee who files no return at all in response to the notice would escape entirely. Fourth, the Court warned against deciding the point by reference to which side it currently favours, since from 1 April 1976 the measure of penalty reverted to the tax sought to be evaded and the parties' positions would then be reversed. In the words reproduced by the source cited on this page: "even in such a case, the law applicable to the penalty proceedings should be taken to be the law in force on the date of the original return if any."
It was decided by the Supreme Court on 1992-03-13 and is reported as (1992) 195 ITR 1; 1992 AIR 1139; 1992 (2) SCC 514; 1992 SCR (2) 185; (1992) 2 JT 567 (SC); (1992) 62 Taxman 440. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 271(1)(c), section 148, section 139(2), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeals were dismissed with no order as to costs; the High Court's view was correct. In a case of multiple returns, the law applicable to the penalty proceedings is to be taken to be the law in force on the date of the original return, if any. The Court noted that a large majority of the High Courts had taken this view - Allahabad, Patna, Madras, Punjab and Haryana in a Full Bench, Delhi, Kerala in a Full Bench, Rajasthan and Bombay - against a contrary line in Madhya Pradesh and one Patna decision, and held the majority view the more acceptable and more practical one. It approved the reasoning of the Madras High Court in S.S.K.G. Arthanariswamy Chettiar and of the Delhi High Court in Joginder Singh, in each of which a member of the Bench had participated, and expressly declined to reiterate it, summarising instead four considerations of its own. Applying the rule, the original returns having been filed in 1962 and 1963, the unamended provision measuring penalty by the tax sought to be evaded governed, and the reduction of the penalties to 20 per cent of that tax stood. It arises in Penalty and Reassessment & Reopening matters, on section 271(1)(c), section 148, section 139(2) of the Income Tax Act 1961, and was decided by Supreme Court of India, Civil Appellate Jurisdiction; S. Ranganathan, V. Ramaswami and A.S. Anand, JJ (judgment by Ranganathan, J). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Get that date on record early; here the exact dates of the original returns were not available, and the case had to proceed on the assessment order dates. Remember the rule cuts both ways depending on the years involved, so work out the measure of penalty under both versions before deciding whether to take the point. Where a penalty was already levied in the original assessment and another is proposed on reassessment for the same concealment, ask for the earlier order to be recalled and substituted rather than allowing two to stand.
Still good law. A citator search returns 83 later decisions citing the judgment. The Patna High Court in CIT v Girish Kumar Kothari (21 July 1993) applied the rule that the law applicable is the law as it stood when the original return was filed, as did the Rajasthan High Court in Shree Syntex v DCIT (25 January 2002), and it continues to be applied at Tribunal level - Reliance Industries Ltd. v DCIT (ITAT Mumbai, 4 March 2020) and Modi Rubber Ltd. v DCIT (ITAT Delhi, 14 June 2018). Nothing overruling or doubting it was found. The rule fixes the date by which the penalty law is identified rather than the measure of penalty, so it is not spent by changes in the quantum; but section 271(1)(c) has been displaced for later years by section 270A, and how the rule works with that provision has not been established here. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The harvested page carries a reporter's headnote above the judgment; it has been disregarded and this record follows the judgment itself, which differs from the headnote on the income returned for 1961-62 - the judgment gives Rs.18,935, and Rs.18,395 at a second place, against Rs.13,935 in the headnote. The text also prints 1.4.1796 for 1 April 1976 in the fourth consideration. The Court records that the exact dates of the original returns were not available on the record, so the rule was applied by reference to 1962 and 1963 generally rather than to a specific date. The judgment expressly declines to reiterate the reasoning of the decisions it approves in Arthanariswamy Chettiar and Joginder Singh, so the full analysis of the various situations in which multiple returns are filed must be sought there. It also says nothing about whether concealment was rightly found on the merits, that being common ground by the time it reached the Court, and nothing about the treatment of the land profits as capital gains beyond noting the change of view. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeals were dismissed with no order as to costs; the High Court's view was correct. In a case of multiple returns, the law applicable to the penalty proceedings is to be taken to be the law in force on the date of the original return, if any. The Court noted that a large majority of the High Courts had taken this view - Allahabad, Patna, Madras, Punjab and Haryana in a Full Bench, Delhi, Kerala in a Full Bench, Rajasthan and Bombay - against a contrary line in Madhya Pradesh and one Patna decision, and held the majority view the more acceptable and more practical one. It approved the reasoning of the Madras High Court in S.S.K.G. Arthanariswamy Chettiar and of the Delhi High Court in Joginder Singh, in each of which a member of the Bench had participated, and expressly declined to reiterate it, summarising instead four considerations of its own. Applying the rule, the original returns having been filed in 1962 and 1963, the unamended provision measuring penalty by the tax sought to be evaded governed, and the reduction of the penalties to 20 per cent of that tax stood.
TaxSphere, “CIT v Onkar Saran and Sons”, https://taxnotice.vittsphere.com/caselaw/case/cit-v-onkar-saran-and-sons/ (validity last checked 2026-08-29)
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