1977 (10) TMI 33 - HC - Income Tax

1922 Act Default In Payment Excess Profits Tax Income Tax Act Levy Of Penalty Penalty Provisions

Summary

Issues:
1. Whether the penalty imposed under section 46(1) of the Indian Income-tax Act, 1922, read with section 21 of the Excess Profits Tax Act, 1940, is barred by limitation?
2. Whether a penalty can be imposed under section 46(1) of the Indian Income-tax Act, 1922, read with section 21 of the Excess Profits Tax Act, 1940, after the repeal of the Indian Income-tax Act, 1922 by the Income-tax Act, 1961?

Analysis:

Issue 1:
The case involved the imposition of penalties under the Indian Income-tax Act, 1922, and the Excess Profits Tax Act, 1940, on an assessee for unpaid taxes. The main contention was whether the penalties were time-barred under section 46(7) of the Indian Income-tax Act, 1922. The Tribunal rejected the assessee's argument, stating that the penalties were not part of tax recovery proceedings. The counsel for the assessee argued that the penalties were intertwined with tax recovery and cited a Madras High Court case in support. However, the High Court held that penalties and tax recovery were distinct, and penalties were not a mode of tax recovery. The court relied on previous judgments and answered the first issue in the negative, favoring the revenue.

Issue 2:
The second issue revolved around whether penalties could be imposed under the Indian Income-tax Act, 1922, after its repeal by the Income-tax Act, 1961. The revenue contended that the incorporation of provisions from the earlier Act into the later Act meant that the repeal did not affect the later Act's operation. Citing legal precedents, the court agreed with the revenue's argument, stating that the repeal of the earlier Act did not impact the provisions incorporated into the later Act. Therefore, the court answered the second issue in the affirmative, also in favor of the revenue. The judgment was a joint decision by Judges Dipak Kumar Sen and C. K. Banerjee of the High Court of Calcutta.