1986 (1) TMI 96 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal was right in holding that there was no statutory minimum penalty imposable for the assessment year 1975-76.
2. Whether the Tribunal was right in holding that there was no mistake which the Appellate Assistant Commissioner could rectify as a mistake apparent from the record.

Detailed Analysis:

Issue 1: Statutory Minimum Penalty
The primary question was whether the Tribunal was correct in holding that there was no statutory minimum penalty imposable for the assessment year 1975-76 under section 140A of the Income-tax Act, 1961. The firm and the partner both filed returns for the assessment year 1975-76 but failed to pay the tax within thirty days as required by section 140A. The Income-tax Officer imposed penalties, which were later reduced by the Appellate Assistant Commissioner due to the absence of wilful default. The Tribunal confirmed these reductions, stating that the default could not be equated to a default under the amended section 140A, which came into effect on April 1, 1976. The Tribunal held that the amended provision did not apply to defaults that occurred before its enactment, even if those defaults continued after the amendment.

Issue 2: Mistake Apparent from the Record
The second issue was whether the Tribunal was correct in holding that there was no mistake apparent from the record that the Appellate Assistant Commissioner could rectify. The Income-tax Officer had requested rectification of the penalties, arguing that the amended section 140A should apply. The Appellate Assistant Commissioner rejected this request, stating that the mistake pointed out could not be treated as an error apparent on the face of the record. The Tribunal upheld this decision, agreeing that taking a different view on the interpretation of the amended provision did not constitute an error apparent on the face of the record.

Court's Judgment:
The court analyzed the provisions of section 140A before and after its amendment. Before the amendment, section 140A(1) required tax payment within thirty days after filing the return, and section 140A(3) allowed discretionary penalty imposition by the Income-tax Officer. The amended section 140A(1) required tax payment before filing the return, and section 140A(3) imposed a fixed penalty for continuing defaults. The court concluded that the default under the old provision could not be penalized under the new provision, as they were fundamentally different.

The court referred to precedents, including the Full Bench decision in Saidu Muhammad v. Bhanukuttan and the Supreme Court decision in Maya Rani Punj v. CIT, but found them inapplicable to the present case. The court emphasized that the nature of the default under the old and new provisions of section 140A was different, and thus, the amended penalty provisions could not be applied retroactively.

The court also considered the Division Bench decision in CWT v. Smt. V. Pathummabi, which stated that an amendment should not be applied retroactively to penalize actions that occurred before the amendment. The court agreed with this principle, reinforcing that the default under the old section 140A(1) did not attract the penalties under the amended section 140A(3).

Conclusion:
The court answered the first question in the affirmative, in favor of the assessee and against the Revenue, confirming that there was no statutory minimum penalty imposable for the assessment year 1975-76 under the amended section 140A. Consequently, the second question did not arise for decision.