JUDGMENT S. C. Vyas J. This revision petition is preferred against judgment dated January 2, 2002, passed by XIVth Additional Sessions Judge, Indore, in Criminal Appeal No. 4/96, confirming conviction and sentence recorded by ACJM (Economic Offences), Indore, in Criminal Case No. 21/1986 vide judgment dated December 22, 1995, convicting applicant No. 2 for offences punishable under section 276C read with sections 278 and 277 and sentencing him to undergo six months R.I. and to pay fine of Rs. 3,000 on each count. Applicant No. 1 was found guilty of offence punishable under section 276C and section 277 read with section 278B of Income-tax Act and was sentenced to pay fine of Rs. 3,000 on each count. facts of case which are necessary for disposal of this revision are that applicant No. 1 was partnership firm during relevant period, namely, assessment year 1975-76, and relevant accounting period from Diwali 1973 to Diwali 1974. After this period firm was dissolved. It was constituted by partners, namely, (1) Goverdhanlal, (2) Sobhagchand and (3) Kusumchand, applicant No. 2. Return of income of firm in assessment year 1975-76 was filed on July 30, 1975, which was verified to be correct by applicant No. 2 which is exhibit P-1 in Part III of return. Exhibit P-1 income of Rs. 50,760 was shown as goodwill and it has been stated that reasons for this income not being taxable is that this income has been found as result of difference in balance-sheet credited to accounts of partners. Real income of firm was shown as Rs. 13,908 only. When inquiry was made by concerned Income-tax Officer from applicant, then, it was informed that balance sheet difference was coming from last few years which could only be detected at time of dissolution of firm because no balance sheet was prepared earlier. It has been stated that this difference was coming from assessment years 1971-72 to 1974-75 which was detected in year 1975-76. Ultimately Income-tax Officer held that this amount of Rs. 50,760 was in fact income of firm which has wrongly been shown as goodwill for purpose of tax evasion and, therefore, amount was included in income of firm. Penalty was imposed on firm and assessment order exhibit P-4 was passed on March 28, 1978. applicant preferred appeal before Appellate Assistant Commissioner which was dismissed vide order exhibit P-9. penalty of equal amount of Rs. 50,760 was levied on firm under section 271(1)(c) of Income-tax Act, 1961 (hereinafter referred as Income-tax Act for convenience). penalty so imposed was deleted in appeal being barred by limitation, by Commissioner of Income-tax vide exhibits P-11 and P-12. Thereafter, private complaint under sections 276C and 277 of Act and section 420 read with section 511 of Indian Penal Code, 1860, was filed against firm, applicant No. 1 and its three partners including appellant No. 2 by Income-tax Officer before learned Additional Chief Judicial Magistrate on March 31, 1986. prosecution, against other partners, namely, Goverdhanlal and Sobhagchand, was quashed by order dated July 8, 1994, passed by this court in Criminal Revision No. 716/ 1992. trial court after framing charges against both applicants conducted trial against them and convicted them and passed sentence as stated hereinabove. applicants preferred appeal against judgment of conviction and sentence in appeal finally impugned judgment was passed against which present revision petition has been filed. Learned senior advocate Shri S. C. Bagadiya, appearing for applicants assisted by Shri D. K. Chhabra, advocate, contended that provisions of sections 278B and 276C were not in existence on statutory book on date when return of assessment year 1975-76 for accounting year Diwali 1973 to Diwali 1974 was filed on behalf of applicant No. 1 by applicant No. 2. date of return was July 30, 1975, whereas provisions of section 278B of Income-tax Act were inserted by Taxation Laws (Amendment) Act, 1975, with effect from October 1, 1975. By this provision deeming provision has been inserted to effect that where offence under this Act has been committed by company, every person who, at time offence was committed, was in charge of and was responsible to company for conduct of business of company as well as company shall be deemed to be guilty of offence and shall be liable to be proceeded against and punished accordingly. From October 1, 1975, every person who was in charge of or was responsible to company was made responsible for offence committed by company under provisions of Income-tax Act. Learned senior advocate further argued that prior to October 1, 1975, only company was responsible for criminal acts committed by it as per existing provisions of Act. He has drawn attention of this court towards definition of word person in section 2(31) of Act. As per definition given this section reads as under: Section 2(31) person includes (i) individual, (ii) Hindu undivided family, (iii) company, (iv) firm, (v) association of persons or body of individuals, whether incorporated or not, (vi) local authority, and (vii) every artificial juridical person, not falling within any of preceding sub-clauses; Learned senior advocate further contended that as there was no provision in Act at time of filing of return of income-tax by firm to make partners of partnership firm liable for punishment, therefore, prosecution which was lodged against applicant No. 2 was bad in law and is not sustainable, because subsequent law cannot be made retrospective for purpose of punishing person regarding whom there was no penal provision at time of filing of return for this purpose. Shri Bagadiya, senior advocate, placed reliance upon judgment of Delhi High Court in matter of Parmeet Singh Sawney v. Dinesh Verma [1988] 169 ITR 5. He also relied on judgment of Madras High Court passed in Manian Transports v. S. Krishna Moorthy, ITO reported in [1991] 191 ITR 1. He has also cited judgment of Calcutta High Court in case of Vinar and Co. v. ITO [1992] 193 ITR 300. Shri S. L. Jain, learned senior counsel, appearing for Income-tax Department, supported judgment passed by learned Additional Sessions Judge and submitted that return which was filed by applicant was for assessment year 1975-76 and before assessment could be completed section 278B was brought into existence by amendment of Act and, therefore, trial court and appellate court have committed no mistake in convicting applicant No. 2 also. Section 278B of Act came into existence for first time on October 1, 1975, prior to that there was no provision for making other persons responsible regarding offence committed by company by acts of firm in contravention with provisions of Act. After insertion of section 278B in Act every person who, at time of commission of offence, was in charge of and was responsible to company for conduct of its business has been made liable to be proceeded against for offences committed by company. definition in section 2(31) as reproduced hereinabove makes it very clear that prior to October 1, 1975, as per this definition firm alone was responsible and was alone to be prosecuted for criminal acts. As per provisions of section 278B also, out of partners of firm, only those persons can be deemed guilty of offence committed by firm who, at time of offence was committed, were in charge and were responsible to company for conduct of business of company meaning thereby that sleeping partners and those persons who were not taking any part in day-to- day business of firm were excluded from liability of being prosecuted and only active partners as well as company can be prosecuted. As provisions of section 278B were introduced in Act for first time by insertion by amending Act, therefore, these provisions being penal provisions cannot be construed to be applicable retrospectively. Such penal provisions can always have prospective effect and do not have any retrospective effect and, therefore, provision of section 278B of Act can be said to be operative only from date on which they came into force. Therefore, view taken by Delhi High Court in case of Parmeet Singh Sawney [1988] 169 ITR 5 and Madras High Court in case of Manian Transports [1991] 191 ITR 1 appears to be correct interpretation of law and is being followed in present case also. Accordingly, it is held that provisions of section 278B of Act were not applicable prior to October 1, 1975, and as admittedly return in present case was filed on July 30, 1975, so applicant No. 2 cannot be made liable for any offence committed by firm under provisions of sections 276C and 277 of Act. second contention of learned senior advocate Shri Bagadiya, is that no income of firm was concealed by applicants, and, it is neither case of any wilful attempt to evade tax nor any false statement in verification, because amount of Rs. 50,760 which was traced at time of settlement of accounts between partners as balance sheet difference has been very well shown in return Part III showing it as goodwill of firm and claiming it to be not liable for payment of income-tax as same has been distributed among partners. He has further submitted that balance-sheet difference shown was pertaining to earlier years which could only be detected at time of dissolution of firm and when balance-sheet was prepared. moment it was discovered, amount was immediately shown in return of firm under bona fide belief that this amount is not liable to be included in taxable income of firm as it was not income of current year of firm. Therefore, learned senior advocate argued that it was not case of concealment of any income by applicants or any wilful act to evade payment of tax. Learned senior counsel Shri R. L. Jain, appearing for Income-tax Department, firstly tried to justify conclusion drawn by two courts below but ultimately he stated that as income of Rs. 50,760 was shown as income of firm in Part III of income-tax return as goodwill income, therefore, present case cannot be said to be case of concealment of any income. Return exhibit P-1 which was filed on behalf of firm, applicant No. 1 and was signed and verified by applicant No. 2 shows that goodwill income of Rs. 50,760 has been shown in column of Other sums not included in total income and claimed to be not taxable . There is specific column for showing such sums in income-tax return when amount is shown as sum which has not been included in total income then at time of assessment and computing income of firm Incometax Officer can very well inquire regarding such sums shown in column III and then can take suitable decision for including or excluding such sums from total income. But once when such sums have been shown by applicant in income-tax return and amount was not detected by Income-tax Officer on some secret inquiry or otherwise, then it can very well be said that there was no concealment of any fact by applicant at time of filing of their return of income. It can also be safely inferred that as same was detected at time of preparation of balance- sheet of firm on dissolution of firm then under bona fide belief they thought it not amount which can be included in sums which can be termed as taxable being not income of firm in relevant accounting year. Whatever may be case, as amount has been shown very well by applicant in income-tax return and has not been invented by Income-tax Officer, therefore, it is not case of concealment of income or tax evasion. hon ble Supreme Court in case of Cement Marketing Co. of India Ltd. v. Asst. CST reported in [1980] 124 ITR 15 while considering matter pertaining to Sales Tax Act has observed as under (headnote): return cannot be false unless there is element of deliberateness in it. It is possible that even where incorrectness of return is claimed to be due to want of care on part of assessee and there is no reasonable explanation forthcoming from assessee for such want of care, court may, in given case, infer deliberation and return may be liable to be branded as false return. But where assessee does not include particular item in taxable turnover under bona fide belief that he is not liable so to include it, it would not be right to condemn return as false return inviting imposition of penalty. penal provision of section 43 of Sales Tax Act requires that assessee should have filed false return and return cannot be said to be false unless there is element of deliberateness in it. provisions of section 276C of Act says that if person wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or imposable under this Act, he shall be punished. Therefore wilful act or deliberate act is essential element for offence under section 276C of Act also and so above judgment which was pertaining to Sales Tax Act can also be looked into for assessing wilful act or mens rea in facts of present case. bare reading of return filed by applicants clearly shows that there was no deliberate attempt on part of applicants to conceal any income. On contrary, income which was detected as balance-sheet difference was shown by them, as such, in Part III of return, showing their bona fide intention that information was furnished by them to Income-tax Department for purpose of assessment. assessment of income-tax was done accordingly by Department, and as there was no wilful act to conceal any income so act of applicant does not come under provision of section 276C of Act. It also appears that there is nothing to infer that there was any false statement in return filed by applicants. two courts below have failed to consider effect of introduction of provisions of section 278B with effect from October 1, 1975, and effect of mentioning balance-sheet difference as goodwill income in Part III of return submitted by applicant. As they have not appreciated facts of case and evidence available on record correctly so findings have become erroneous which are liable to be quashed. Consequently, revision succeeds and is allowed. judgments passed by two courts below are set aside and applicants are acquitted from charge of offences punishable under sections 276C and 277 read with section 278B of Income-tax Act. amount of fine if deposited by applicants, be returned to them. *** KUSUMCHAND SHARADCHAND & ANR. v. UNION OF INDIA & ANR.