1985 (12) TMI 1 - SC - Income Tax

Delay in Filing Return - When the return to be filed under 1922 Act is filed under 1961 Act and the assessment is also made under the I.T. Act 1961 - Tribunal was not justified in holding that penalty was leviable under the 1961 Act - High Court answered the reference in favour of the Revenue and against the assessee - order of HC is justified - Penalty is to be levied under 1961 Act

Issues Involved:
1. Applicability of the Income-tax Act, 1961 versus the Indian Income-tax Act, 1922 for penalty imposition.
2. Quantum of penalty and its reduction.
3. Interpretation of "continuing offence" under section 271(1)(a) of the Income-tax Act, 1961.
4. Constitutionality of penalty imposition under Article 20(1) of the Constitution.

Issue-wise Detailed Analysis:

1. Applicability of the Income-tax Act, 1961 versus the Indian Income-tax Act, 1922 for penalty imposition:
The assessee filed the return on May 3, 1962, beyond the due date of September 28, 1961. The Income-tax Act of 1961 came into force on April 1, 1962. The Income-tax Officer imposed a penalty under section 271(1)(a) of the 1961 Act. The Tribunal reduced the penalty based on the provisions of section 28 of the 1922 Act. The High Court held that the Tribunal was not competent to reduce the penalty below the statutory rate prescribed in the 1961 Act. The Supreme Court affirmed that the relevant provision for penalty imposition was section 271(1)(a) of the 1961 Act, as the assessment was completed after April 1, 1962. The court emphasized that the crucial date for penalty imposition is the date of assessment completion and the satisfaction of the authority to initiate penalty proceedings.

2. Quantum of penalty and its reduction:
The Income-tax Officer imposed a penalty of Rs. 4,060 at the rate of 2% per month of the assessed tax for the default period. The Tribunal reduced the penalty to Rs. 400, considering the assessee's illness. The High Court ruled that the penalty must be imposed at the statutory rate of 2% per month as prescribed by the 1961 Act. The Supreme Court upheld this view, stating that once the Income-tax Officer decides to levy a penalty, it must be at the prescribed rate, and the Tribunal had no jurisdiction to reduce it below the statutory minimum.

3. Interpretation of "continuing offence" under section 271(1)(a) of the Income-tax Act, 1961:
The court examined whether the default of non-filing the return within the stipulated time is a continuing offence. The Supreme Court referred to the decision in Jain Brothers v. Union of India, which held that the imposition of penalty arises only after the assessment of tax is made. The court concluded that the default in filing the return is a continuing offence, as the non-compliance continues until the return is filed. The penalty is calculated on a monthly basis for each month the default continues, indicating a legislative intention of a continuing wrong.

4. Constitutionality of penalty imposition under Article 20(1) of the Constitution:
The appellant argued that imposing a penalty under the 1961 Act violated Article 20(1) of the Constitution, which prohibits ex post facto laws. The Supreme Court rejected this argument, citing the Constitution Bench decision in K. Satwant Singh v. State of Punjab, which held that a law providing for a minimum sentence of fine does not impose a greater penalty than that which might have been inflicted under the law in force at the time of the offence. The court held that the penalty under section 271(1)(a) of the 1961 Act did not violate Article 20(1), as the total penalty could have been imposed under the 1922 Act as well.

Conclusion:
The Supreme Court dismissed the appeal, affirming the High Court's decision that the penalty must be imposed at the statutory rate prescribed by the 1961 Act. The court held that the default in filing the return is a continuing offence, and the penalty provisions of the 1961 Act are applicable. The imposition of penalty did not violate Article 20(1) of the Constitution. The parties were directed to bear their own costs.

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