1983 (6) TMI 19 - HC - Income Tax

Issues Involved:
1. Calculation of penalty under section 271(1)(a) of the Income-tax Act, 1961.
2. Applicability of amendments to section 271(1)(a) by the Direct Taxes (Amendment) Act, 1974.
3. Retrospective application of penalty provisions.
4. Interpretation of section 297(2)(g) of the Income-tax Act, 1961.
5. Relevance of precedents and case law in determining the applicable law.

Issue-wise Detailed Analysis:

1. Calculation of Penalty under Section 271(1)(a) of the Income-tax Act, 1961
The primary question was whether the penalty under section 271(1)(a) should be calculated with reference to the actual amount of tax due and payable by the assessee on the date of imposition of the penalty. The Tribunal had held that the penalty should be calculated based on the tax payable on the date of imposition, following the decision in CIT v. Vegetable Products Ltd. [1971] 80 ITR 14.

2. Applicability of Amendments to Section 271(1)(a) by the Direct Taxes (Amendment) Act, 1974
The Revenue argued that the meaning of "assessed tax" in section 271(1)(a) had changed due to the amendment by the Direct Taxes (Amendment) Act, 1974. The amendment inserted an Explanation defining "assessed tax" as tax reduced by sums deducted at source or paid in advance. This amendment was deemed to have always been in effect.

3. Retrospective Application of Penalty Provisions
The court referenced the judgment in CIT v. U. C. Kheruka [1977] Tax LR 1277, which held that the Direct Taxes (Amendment) Act, 1974, made section 271(1)(a)(i) retrospective. Therefore, the amendment applied to all cases prior to its incorporation. The court also cited the Supreme Court decision in Jain Brothers v. Union of India [1970] 77 ITR 107, which supported the retrospective application of penalty provisions under the new Act.

4. Interpretation of Section 297(2)(g) of the Income-tax Act, 1961
Section 297(2)(g) authorizes the imposition of penalties under the 1961 Act for assessments completed after April 1, 1962, even if the default occurred under the 1922 Act. The court emphasized that section 297(2)(g) made section 271 applicable to the assessee's case, even though the default was originally under the 1922 Act.

5. Relevance of Precedents and Case Law
The court considered several precedents, including the decisions of the Madras High Court in R. Gopalakrishna & Bros v. CIT [1977] 106 ITR 82, the Delhi High Court in CIT v. Maya Rani Punj [1973] 92 ITR 394, and the Rajasthan High Court in CIT v. Venichand Maganlal [1970] 78 ITR 120. These cases supported the view that penalties for defaults under the 1922 Act could be imposed under the provisions of the 1961 Act. The court also distinguished the case of Brij Mohan v. CIT [1979] 120 ITR 1 (SC), noting that it dealt with concealment of income rather than late filing of returns.

Conclusion
The court concluded that the proceedings for imposition of penalty were rightly initiated and completed under section 271(1)(a) of the Income-tax Act, 1961. The quantum of penalty had to be calculated according to the provisions of the 1961 Act, including the retrospective amendments made by the Direct Taxes (Amendment) Act, 1974. The Tribunal's reliance on CIT v. Vegetable Products Ltd. was no longer applicable due to the legislative changes. Consequently, the question referred was answered in the negative and in favor of the Revenue. Each party was ordered to bear its own costs.

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