1977 (8) TMI 42 - HC - Income Tax

Summary

Issues:
1. Whether penalty under section 271(1)(a) of the Income-tax Act, 1961, could properly be levied for non-compliance with the notice issued under section 22(2) of the Indian Income-tax Act, 1922.
2. Whether the penalty proceedings had validly been initiated in the present case.

Analysis:

Issue 1:
The assessee was directed to file a return by a notice under section 22(2) of the Indian Income-tax Act, 1922. The penalty proceedings were initiated for belated submission of the return. The Appellate Assistant Commissioner set aside the penalty order as it was barred by time. However, the Tribunal reversed this decision, stating that the penalty order was within the time limit imposed by section 275 of the Income-tax Act, 1961. The Tribunal relied on the decision of the Rajasthan High Court and the Supreme Court in Jain Brothers v. Union of India, confirming that penalty can be imposed under section 271 of the Act of 1961 for assessments ending before its commencement. Therefore, the Tribunal's decision was upheld, and the penalty was deemed validly imposed.

Issue 2:
The contention was raised that the notice issued under section 28(3) of the Indian Income-tax Act, 1922, after the Act of 1961 came into force should have been issued under the latter Act. The Supreme Court precedent in L. Hazari Mal Kuthiala v. Income-tax Officer was cited, emphasizing that the exercise of power should be referable to a jurisdiction conferring validity. The Tribunal held that the notice issued under section 28(3) should be considered as issued under the provisions of the Act of 1961. Consequently, the initiation of proceedings on October 12, 1962, was deemed justified. Therefore, the answer to question 2 was in the affirmative, favoring the revenue.

In conclusion, the Supreme Court decisions guided the determination of both issues, affirming the validity of the penalty under section 271(1)(a) and the initiation of penalty proceedings in compliance with the relevant provisions of the Income-tax Act, 1961. The Tribunal's decision was upheld, and the assessee was directed to pay the costs of the revenue.