1979 (2) TMI 41 - HC - Income Tax

Summary

Issues Involved:
1. Validity and justification of penalty under section 271(1)(c) of the I.T. Act, 1961, for assessment years 1954-55 to 1960-61.
2. Applicability of the Indian I.T. Act, 1922, versus the I.T. Act, 1961, for penalty proceedings.

Issue-Wise Detailed Analysis:

1. Validity and Justification of Penalty under Section 271(1)(c) of the I.T. Act, 1961:
The core issue is whether the penalty imposed under section 271(1)(c) for the assessment years 1954-55 to 1960-61 is valid and justified. The Tribunal held that since the reassessment proceedings were completed after April 1, 1962, the penalty proceedings were rightly initiated under the I.T. Act, 1961, as per section 297(2)(g). The Tribunal rejected the assessee's plea that section 297(2)(f) should apply, noting that the concealment was detected during the reassessment proceedings, making the date of reassessment the material date.

2. Applicability of the Indian I.T. Act, 1922, versus the I.T. Act, 1961:
The assessee contended that the penalty proceedings should be governed by the Indian I.T. Act, 1922, as the original assessments were completed before April 1, 1962. Conversely, the revenue argued that since the reassessments were completed after April 1, 1962, the I.T. Act, 1961, should apply.

The court examined various precedents, including CGT v. C. Muthukumaraswamy Mudaliar [1975] 98 ITR 540, which upheld the principle that the law as on the date of contravention should apply unless the subsequent law is expressly retrospective. However, the court noted that section 297(2)(g) of the I.T. Act, 1961, specifically provides that for assessments completed after April 1, 1962, penalties should be imposed under the 1961 Act, regardless of when the contravention occurred.

The court also referenced the Supreme Court's decisions in Jain Brothers v. Union of India [1970] 77 ITR 107 and CIT v. Singh Engineering Works P. Ltd. [1970] 78 ITR 90, which clarified that section 297(2)(g) mandates the application of the 1961 Act for penalties related to assessments completed after April 1, 1962.

Conclusion:
The court concluded that the imposition of penalty under section 271(1)(c) of the I.T. Act, 1961, was valid and justified, as the reassessments were completed after April 1, 1962, making section 297(2)(g) applicable. The court dismissed the assessee's argument that the 1922 Act should apply, emphasizing that the statutory provisions of section 297(2)(g) must be followed. The court also noted that considerations of hardship could not alter the clear language of the statute. The reference was answered in the affirmative and against the assessee, with costs awarded to the revenue.

The court acknowledged the assessee's petition for settlement before the Central Board of Direct Taxes and endorsed the Tribunal's hope for sympathetic consideration by the department.