S.M.F. Ali, C.J.
1. These are two income-tax references. In fact the office has wrongly registered four references, when actually there are only two, made by the Income-tax Appellate Tribunal (hereinafter to be referred to as 'the Tribunal') to this court, one arising out of the case of Bakshi Mohd. Yusuf and the other arising out of the case of Bakshi Mohd. Shan. We propose to deal with both the references by one common judgment.
2. Bakshi Mohd. Yusuf was a working partner in the firm, Messrs. Fairdeal Motors, Indore. While submitting his return for the assessment year 1962-63, the assessee showed a salary of Rs, 500, which he was receiving from the firm but did not show the share of profits received by him, although the particulars of the income from his share in the said firm were furnished by the assessee to the department later. It appears that the Income-tax Officer concerned issued on March 27, 1967, a notice to the assessee to show cause why an order imposing penalty be not made against him. After hearing the assessee he referred the case to the Inspecting Assistant Commissioner who levied a penalty of Rs. 3,550 on March 10, 1969. The order of the Inspecting Assistant Commissioner is filed as annexure 'A'. The assessee preferred an appeal before the Tribunal against the decision of the Inspecting Assistant Commissioner (for the sake of brevity, hereinafter to be referred to as 'the IAC') but the Tribunal confirmed the order of the IAC imposing penalty. The order of the Tribunal is filed as annexure 'B'. The Tribunal was of the opinion that although there was no concealment because the Income-tax Officer knew about the income which was not shown by the assessee, yet the assessee was guilty of deliberately furnishing inaccurate particulars of his income which was sufficient to attract the penalty imposed on the assessee. The Tribunal appears to have been swayed by the fact that, in view of the amendment to the relevant provision of the Income-tax Act, the intention of the legislature was that the provision should be strictly construed and penalty should be imposed whenever there was a lapse on the part of the assessee. On these findings the Tribunal rejected the contention of the assessee and confirmed the order of penalty. Thereafter, the assessee filed an application before the Tribunal for making a reference to this court. The Tribunal has accordingly made a reference to this court and has referred the following questions for our opinion :
'(i) Whether, on the facts and in the circumstances of the case the assessee had deliberately furnished inaccurate particulars of his income when he did not show the share income from M/s. Fairdeal Motors, Indore, in the return so as to attract the provision of Section 271(1)(c) ?
(ii) Whether the procedure for the levy of penalty was legally complied with when the Inspecting Assistant Commissioner did not issue a notice under Section 274 before the completion of the assessment?'
3. These are the facts of the case of Bakshi Mohd. Yusuf.
4. As regards the case of the assessee, Bakshi Mohd. Shan, the facts are similar. His case also pertains to the assessment year 1962-63. This assessee was not only a partner in the firm of M/s. Fairdeal Motors, Indore, but also in the firm of J. K. Timbers Traders, Srinagar. The assessee did not show any share of profit in any of these firms in the return of Income which he submitted to the income-tax department and accordingly the Inspecting Assistant Commissioner levied a penalty of Rs. 11,750 on March 10, 1969. An appeal against the order of the Inspecting Assistant Commissioner to the Tribunal failed inasmuch as the order of penalty was confirmed by the Tribunal. Thereafter, the assessee applied to the Tribunal for a reference to this court, and accordingly the Tribunal has referred the following questions for our opinion :
'1. Whether, on the facts and in the circumstances of the case, the assessee had deliberately furnished inaccurate particulars of his income when he did not show the share income from M/s. Fairdeal Motors, Indore, and J. K. Timber Traders in the return so as to attract the provisions of Section 271(1)(c)?
2. Whether, on the facts and in the circumstances of the case, the procedure for the levy of penalty was legally complied with when the Inspecting Assistant Commissioner did not issue a notice under Section 274 before the completion of the assessment ?'
5. We might mention at the very inception that out of the two questionsreferred by the Tribunal, question No. 2 in both the cases (supra) relatingto the point as to whether or not the procedure for levy of penalty waslegally complied with has been specifically withdrawn, and the learnedcounsel has made a statement that no opinion need be given on thisquestion, which he did not press. Our order, therefore, will be confinedonly to question No. 1, referred to by the Tribunal in both these cases, andwhich is as to whether or not the assessee had deliberately furnishedinaccurate particulars of his income so as to fall within the ambit of Section 271(1)(c) of the Income-tax Act. Before answering the references,it may be necessary to mention a few admitted facts as adverted to by theTribunal in its order of reference.
(1) That both the assessees were partners of a particular firm or firms.
(2) That in one case the assessee showed his salary but not the share of his profit in the firm, while in the other case the assessee did not show his income from the share in the firm of which he was a partner,
(3) That the assessees after having filed their returns produced copies of accounts in the books of the said firms which clearly show the profits which they had obtained and, therefore, the Income-tux Officer was aware of the income which is said to have been left out in the returns.
(4) That all the returns were filed by the assessees after being duly signed and verified by them.
6. On these admitted facts it is to be seen whether the assessees can be held to be guilty of deliberately furnishing inaccurate particulars to the income-tax department. We might further mention that Section 271(1)(c) of the Income-tax Act was amended by the Finance Act of 1964 by whichthe word 'deliberately' was deleted and this amendment took place on April 1, 1964, that is to say a year after the assessments in question. It is, therefore, manifest that the cases of the assessees would have to be governed not by Section 271 as amended by the Act of 1964, but as they stood prior to 1964. Section 271(1)(c) of the Income-tax Act, before the amendment, ran as follows:
'Has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income.'
7. A perusal of this Section clearly shows that the legislature had intentionally used the word 'deliberately' before the word 'furnished inaccurate particulars of such income' and thereby intended that every furnishing of inaccurate particulars would not attract levy of penalty unless the conduct of the assessee is deliberate and wilful. In a recent Division Bench decision of this court in I. T. Reference No. 4 of 1972, Additional Commissioner of Income-tax v. Sadiq Ali & Bros, [1973] 92 I.T.R. 276, 279, 700 : [1971]288 (J. & K.). we construed Section 271(1)(c) and observed as follows :
'In the instant case the assessee's conduct falls within the second part of Section 271(1)(c) and not the first part, that is to say, the assessee is alleged to have deliberately furnished inaccurate particulars of his income. As the assessee had filed its income-tax return and had already shown these amounts in his books of account, it cannot be said that the assessee had concealed the particulars of its income so as to bring its case' within the four corners of the first part of Section 271(1)(c). Similarly, the word 'satisfied' appearing in Section 271(1) which qualifies both the Clauses of Section 271 is a very strong term and suggests that the satisfaction must be based on cogent and proper materials ....
Although this decision was given with respect to the interpretation of Section 28 of the old Act, yet the provisions 'of Section 271 of the Act are exactly the same as those of Section 28 of the old Act.
In view of the observations of the Supreme Court it is clear to us that unless there are sufficient materials to raise an inference of deliberate concealment or culpable negligence on the part of the assessee, he cannot be liable to penalty.'
8. In this case we relied on a decision of the Supreme Court in Commissioner of Income-tax v. Anwar Ali, [1970] 76 I.T.R. 696, 1 S.C.R. 446 (S.C.).
9. The facts of the present case appear to be on all fours with the facts of the case before the Division Bench and unless the department was able to point out any circumstances from which wilful or culpable negligence on the part of the assessee can be proved, penalty under Section 271(1)(c) would not be exigible.
10. In the instant cases we find that the assessees merely committed the error of not showing their share of profits in the firms. Nevertheless, the returns were duly signed and verified by the assessees. It also appears that the assessees had produced all the books of account before the Income-tax Officer who detected the default committed by the assessees. The learned Tribunal appears to have been carried away by two important circumstances. In the first place they thought that by virtue of the amendment of Section 271 of the Income-tax Act which replaced the old Section 28, the statute had to be construed more strictly and differently. This reasoning of the Tribunal is not at all supported by the language of Section 28 of the previous Act or Section 271(1)(c) of the present Act. By virtue of the amendment only the numbers of the sections have been changed but the contents remain the same. Therefore, we do not see any reason why the principles enunciated by the authorities on the interpretation of Section 28 of the old Act would cease to apply to Section 271(1)(c) of the amended Act. It is true that the legislature did amend Section 271(1)(c) specifically by dropping the word 'deliberately' but that was long after the assessment of the assessees was over and the assessees could not be governed by that provision. As to what is the effect of the deletion of the word 'deliberately' by the Finance Act of 1964, we express no opinion, because that is not relevant for our purpose in the two cases.
11. The second ground taken by the Tribunal is that since the assessees had duly verified and signed the returns, they must be deemed to have deliberately furnished inaccurate particulars. We are, however, unable to agree with this line of reasoning. When the legislature framed the relevant provision, it was fully aware of the other provisions of the Income-tax Act by which a return had to be fully verified and signed by the assessee. In these circumstances if the reasoning of the learned Tribunal is accepted, there would be no case at all under the Income-tax Act wherein the furnishing of particulars would not be deliberate because there would be no case where the return is not verified and signed by the assessee. Thus, the interpretation put by the Tribunal would set at naught the intention of the legislature and render the provisions of Section 271(1)(c) nugatory. It seems to us that the legislature did contemplate cases wherein, in spite of the fact that the returns are duly verified and signed by the assessees, they may contain certain errors and omissions due to neligence, oversight, forget-fulness and such other reasons and it was to meet such a situation that the word 'deliberately' was inserted in Section 271(1)(c) of the new Act and Section 28 of the old Act. It is well-settled that a fiscal statute must be strictly construed to give every benefit of doubt to the subject. When, therefore, the legislature intended that no penalty should be imposed on the assessee unless his omission is deliberate, the court must carry out theobject and the intention of the legislature. For these reasons we think that the reasoning given by the learned Tribunal is legally erroneous and cannot be sustained. In the instant cases, as already stated, there is hardly any circumstance which goes to prove culpable negligence or wilful omission on the part of the assessees so as to suggest that their conduct in not giving correct particulars in their returns was deliberate. The Income-tax Officer could himself have detected the omission, which in fact he did, but the assessees could not be saddled with penalty unless the omission was deliberate.
12. For the reasons given above, our answer to question No. 1 in both the cases on the facts and circumstances is that penalty under Section 271(1)(c) of the Income-tax Act is not exigible and must be deleted. The references are answered accordingly. In the circumstance there will be no order as to costs.
Jaswant Singh, J.
13. I agree.