1966 (8) TMI 7 - HC - Income Tax

Whether Tribunal acted rightly in upholding the application of section 297(2)(g) read with sections 271(1)(a) of the Income-tax Act, 1961, for the delay in the submission of returns - If, yes, whether on the facts here, and on a proper interpretation of section 271(1), the penalty levied has been properly computed

Issues Involved:
1. Application of Section 297(2)(g) read with Section 271(1)(a) of the Income-tax Act, 1961, for delayed submission of returns.
2. Proper computation of penalty under Section 271(1) if the first issue is affirmed.

Detailed Analysis:

Issue 1: Application of Section 297(2)(g) read with Section 271(1)(a) of the Income-tax Act, 1961

The Tribunal upheld the Income-tax Officer's imposition of penalties on the assessee for failing to file returns within the stipulated time under Section 22(1) of the Indian Income-tax Act, 1922. The two assessment years in question were 1960-61 and 1961-62. The returns were filed on 20th March 1962 and 31st March 1962, respectively, before the commencement of the Income-tax Act, 1961, on 1st April 1962. The Tribunal's decision to apply Section 297(2)(g) read with Section 271(1)(a) of the 1961 Act was challenged.

The relevant clauses of Section 297(2) of the 1961 Act state:
- Section 297(2)(a): "where a return of income has been filed before the commencement of this Act by any person for any assessment year, proceedings for the assessment of that person for that year may be taken and continued as if this Act had not been passed."
- Section 297(2)(g): "any proceeding for the imposition of a penalty in respect of any assessment for the year ending on the 31st day of March, 1962, or any earlier year, which is completed on or after the 1st day of April, 1962, may be initiated and any such penalty may be imposed under this Act."

The court noted that the returns were filed before the commencement of the 1961 Act, making Section 297(2)(a) applicable. However, the assessments were completed after 1st April 1962, invoking Section 297(2)(g), which allows for the imposition of penalties under the 1961 Act for assessments completed after its commencement.

The court rejected the assessee's argument that Section 297(2)(g) is merely a machinery provision and not a charging provision. The language of Section 297(2)(g) explicitly states that penalties may be imposed under the 1961 Act. The court emphasized that the expression "any such penalty may be imposed under this Act" in Section 297(2)(g) is clear and unambiguous, indicating that both the initiation and imposition of penalties should be under the 1961 Act.

The court also compared Section 297(2)(g) with Section 297(2)(f), which states that penalties for assessments completed before 1st April 1962 should be imposed as if the 1961 Act had not been passed. This comparison reinforced the interpretation that Section 297(2)(g) allows for penalties to be imposed under the 1961 Act.

The court concluded that the defaults for which penalties are imposed under Section 28(1) of the 1922 Act and Section 271(1) of the 1961 Act are of the same nature. Therefore, Section 271(1) must be read in harmony with Section 297(2)(g), allowing for the imposition of penalties under the 1961 Act for defaults occurring before 1st April 1962.

Issue 2: Proper Computation of Penalty under Section 271(1)

The second issue concerned the computation of the penalty under Section 271(1) if the first issue was affirmed. The controversy centered around the interpretation of the expression "the period during which the default continued" in Section 271(1)(i). The assessee argued that this clause applied only to defaults occurring after 1st April 1962. However, the Tribunal held that if Section 271(1) applied to defaults before 1st April 1962, the period of default would include the time before this date.

The court agreed with the Tribunal's view, stating that the expression "the period during which the default continued" must necessarily include the period before 1st April 1962 when the assessee became a defaulter and ended when the default ceased. This interpretation ensures that Section 297(2)(g) is not rendered meaningless or redundant.

Therefore, the court concluded that the penalty imposed on the assessee under Section 271(1)(i) for failing to submit returns in time was proper, and the computation of the penalty was correctly done.

Conclusion:
Both questions were answered in the affirmative, affirming the Tribunal's decision to impose penalties under Section 271(1) of the 1961 Act for defaults occurring before 1st April 1962. The assessee was ordered to pay the costs of the reference, with counsel's fee fixed at Rs. 600.

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