1989 (8) TMI 71 - SC - Income Tax

Whether penalty as provided in section 464 of the Act could be imposed by the terminal tax authority or it could not be imposed unless the appellant is convicted and found guilty by a competent Magistrate as contemplated in section 463 of the Act? Held that - It is no doubt true that, as regards the offences, a specific provision has been made in section 469 for appointment of a municipal Magistrate but, in respect of penalties, there is no specific provision authorising any officer or authority to exercise jurisdiction under the section where, for evasion of tax, penalty could be levied, like section 464 but it could not be doubted that section 59 gives a very wide power to the Municipal Commissioner either to exercise these powers himself or to delegate them. It is not in dispute that, in exercise of powers under section 59, the Municipal Commissioner had the authority and exercising the powers under section 491 of the Act by notification dated September 17, 1973, he delegated the functions under section 464 to the taxing authorities and it is the conclusion that the taxing authorities were competent under the scheme of this Act to impose the penalty to the tune of ten times of the tax which is payable. The contention advanced by learned counsel for he appellant that the penalty under section 464 could not be imposed without a conviction by a criminal court is not sustainable in law. Appeal dismissed.

Summary

Issues:
1. Whether penalty under section 464 of the Act could be imposed by the terminal tax authority without a conviction by a competent Magistrate as required under section 463?

Analysis:
The appellant, a transporter, was alleged to have brought goods into Delhi without paying terminal tax. The High Court of Delhi dismissed the writ petition challenging the penalty imposed by the Delhi Municipal Corporation under section 464 of the Act. The appellant contended that the penalty could only be imposed after a proper trial and conviction by a magistrate, as per the scheme of the Act. However, the respondent argued that section 464 deals with penalties, not criminal offences, and does not require a conviction before imposing the penalty. The High Court upheld the authority of the tax authority to impose the penalty based on delegated powers under section 59 of the Act.

The key contention was whether the penalty under section 464 could be imposed without a conviction by a competent Magistrate, as mandated in section 463. Section 463 deals with criminal offences related to terminal tax, requiring conviction for punishment, while section 464 pertains to penalties for tax evasion, allowing for fines up to ten times the tax amount without the need for a conviction. The distinction between the two sections lies in the nature of the provisions, with section 463 requiring a criminal trial and conviction, whereas section 464 focuses on revenue provisions for penalty imposition.

The appellant argued that the penalty under section 464 should only be imposed by a judicial authority after a trial, emphasizing the discretionary nature of the penalty provision. However, the respondent contended that the scheme of the Act differentiates between offences and penalties, allowing the tax authority to impose penalties directly without a criminal conviction. The delegation of powers under section 59 empowered the tax authority to levy penalties under section 464, as supported by the notification delegating such functions.

The Supreme Court analyzed the language and intent of sections 463 and 464, emphasizing the distinct treatment of criminal offences and penalties within the Act. The court noted that while section 463 requires a conviction by a criminal court for punishment, section 464 provides for penalties without the necessity of a conviction. The wide powers granted to the Municipal Commissioner under section 59, including the authority to delegate functions, supported the tax authority's competence to impose penalties under section 464. Consequently, the court dismissed the appeal, affirming that the penalty under section 464 could be imposed by the terminal tax authority without a prior conviction by a Magistrate.