1980 (12) TMI 19 - HC - Income Tax

Summary

Issues Involved:
1. Justification of the penalty levied under Section 271(1)(c) of the Income-tax Act, 1961.
2. Applicability of Section 297(2)(f) and (g) of the Income-tax Act, 1961.
3. Whether the penalty should be levied under the 1922 Act or the 1961 Act.
4. The interpretation of "assessment completed" in Section 297(2)(f) and (g).
5. The distinction between procedural and substantive provisions of the 1961 Act.
6. The relevance of the petition under Section 271(4A) of the Income-tax Act, 1961.

Detailed Analysis:

1. Justification of the penalty levied under Section 271(1)(c) of the Income-tax Act, 1961:
The court analyzed whether the Appellate Tribunal was justified in upholding the penalties for the assessment years 1954-55 to 1961-62. The penalties were levied due to concealment of income in the original returns, which came to light during reassessment proceedings. The court held that the penalty was justified under the 1961 Act as the reassessments were completed after April 1, 1962.

2. Applicability of Section 297(2)(f) and (g) of the Income-tax Act, 1961:
The court examined the provisions of Section 297(2)(f) and (g) to determine the applicable law for penalty imposition. It was noted that if the assessment was completed before April 1, 1962, the penalty would be imposed under the 1922 Act. However, if the assessment was completed on or after April 1, 1962, the penalty would be imposed under the 1961 Act. Since the reassessments in this case were completed on September 17, 1969, the 1961 Act applied.

3. Whether the penalty should be levied under the 1922 Act or the 1961 Act:
The court reiterated that the relevant date for determining the applicable law for penalty imposition is the date of assessment completion. As the reassessments were completed after April 1, 1962, the penalties were correctly levied under the 1961 Act.

4. The interpretation of "assessment completed" in Section 297(2)(f) and (g):
The court rejected the argument that "assessment completed" should be interpreted as the completion of any stage in the assessment process. It clarified that the term refers to the final completion of the assessment process. Consequently, the penalties were correctly imposed under the 1961 Act as the reassessments were completed after April 1, 1962.

5. The distinction between procedural and substantive provisions of the 1961 Act:
The court addressed the contention that only the procedural provisions of the 1961 Act should apply, not the substantive provisions fixing the minimum penalty. The court held that Section 271 could not be split into procedural and substantive parts, and the entire provision, including the minimum penalty, applied to the case.

6. The relevance of the petition under Section 271(4A) of the Income-tax Act, 1961:
The court noted that the assessee had filed a petition under Section 271(4A), agreeing to pay a penalty of 5% of the tax. However, the Commissioner did not act on this provision and instead recommended a 5% penalty, while the IAC levied 20%. The court observed that the penalty order was based on a provision not in force at the time of levy, but chose not to disturb the order as it would prejudice the assessee.

Conclusion:
The court concluded that the penalties were correctly levied under the 1961 Act, as the reassessments were completed after April 1, 1962. The interpretation of "assessment completed" was clarified to mean the final completion of the assessment process. The court also held that Section 271 could not be split into procedural and substantive parts, and the entire provision applied. The question referred was answered in the affirmative and in favor of the revenue. The court also highlighted an anomaly regarding the penalty order but chose not to disturb it to avoid prejudicing the assessee. The revenue was awarded costs.