1965 (3) TMI 10 - HC - Income Tax

Whether proceedings for imposition of penalty could be taken only under the repealed Act and that the proceedings taken under the new Act were incompetent - assessee s petition dismissed

Summary

Issues Involved:
1. Legality of penalty proceedings under section 271 of the Indian Income-tax Act, 1961.
2. Applicability of section 297 of the Indian Income-tax Act, 1961.
3. Applicability of Article 20(1) of the Constitution of India concerning greater penalty and prosecution.

Issue-Wise Detailed Analysis:

1. Legality of Penalty Proceedings under Section 271 of the Indian Income-tax Act, 1961:
The petitioner challenged the imposition of a penalty under section 271 of the Indian Income-tax Act, 1961, arguing that the proceedings should have been initiated under the repealed 1922 Act. The court held that the assessment for the year 1954-55, completed after April 1962, falls under the purview of the 1961 Act as per section 297(2)(g). The court concluded that "the proceedings for the imposition of penalty under section 271 of the Act are not open to attack."

2. Applicability of Section 297 of the Indian Income-tax Act, 1961:
The petitioner argued that under section 297(2)(d), proceedings for penalties should be initiated under the repealed 1922 Act. The court interpreted section 297(2)(g), which allows penalty proceedings under the 1961 Act for assessments completed on or after April 1, 1962, even if they pertain to earlier years. The court found that "the proceeding for imposition of penalty under the Act was perfectly competent."

3. Applicability of Article 20(1) of the Constitution of India:
The petitioner contended that the imposition of a penalty under the 1961 Act, which prescribes a minimum penalty, subjects her to a greater penalty than under the 1922 Act, violating Article 20(1) of the Constitution. The court noted that no prosecution had been initiated against the petitioner and that Article 20(1) applies only to penalties imposed as punishment for an offence. The court stated that "penalty is nothing but compensation for damages collected by the State for attempting to evade the provisions of the Act." The court further clarified that the imposition of a penalty under tax laws is a civil sanction, not a criminal one, and thus does not attract Article 20(1). The court concluded that "even assuming that the penalty has been enhanced under the Act, that would not attract the constitutional inhibition of article 20(1)."

Conclusion:
The writ petition was dismissed, with the court finding no merit in the petitioner's contentions. The court upheld the legality of the penalty proceedings under the 1961 Act and determined that Article 20(1) of the Constitution was not applicable in this case. The petition was dismissed with no order as to costs.