1966 (11) TMI 10 - HC - Income Tax

Assessee was liable for penalty under s. 22(2) and 22(4) and s. 18A(9) on the IT Act, 1922 for which the officer levied a consolidated penalty - whether it is legal to levy a composite penalty for more than one offence u/s 28 - held, yes

Summary

Issues:
1. Legality of levying a composite penalty for more than one offense under section 28 of the Indian Income-tax Act, 1922.

Detailed Analysis:
The case involved a Hindu undivided family for the assessment year 1959-60, where the assessee failed to comply with notices under sections 22(2) and 22(4) of the Act, leading to an assessment and demand of Rs. 13,778. Additionally, the assessee did not deposit advance tax as required under section 18A(1) and filed an incorrect income estimate, rendering them liable for penalties under sections 28(1)(a) and 18A(9) of the Act, respectively. The Income-tax Officer imposed a composite penalty of Rs. 6,889 for both defaults, which was later reduced to Rs. 5,889 on appeal. The Tribunal, for the first time, addressed the objection to the composite penalty, stating that separate penalties would have been more prejudicial to the assessee. The Tribunal found no legal basis prohibiting the levy of a composite penalty for multiple offenses under the law.

The judgment referred to precedents highlighting that penalties are part of the assessment proceedings and are imposed based on the conduct of the assessee. The Supreme Court's decision in C. A. Abraham v. Income-tax Officer emphasized that penalties are imposed as part of the machinery for tax assessment, and the discretion lies with taxing authorities. The court further cited Mareddy Krishma Reddi v. Income-tax Officer, stating that penalties under section 28 facilitate the proper assessment of taxable income. The Madras High Court in A. V. Thomas & Co. (India) Ltd. v. Commissioner of Income-tax supported the view that penalties are additional taxes imposed for contumacious conduct, not criminal in nature.

The judgment addressed the debate on whether penalty proceedings are quasi-judicial and the standard of proof required for penalty imposition, noting the conflict among High Courts on this matter. It emphasized that even if penalty proceedings are quasi-criminal, the Criminal Procedure Code's provisions on separate trials do not apply to Income-tax Act proceedings. The court concluded that penalty proceedings for different defaults can be considered together, and a composite penalty can be levied, as long as natural justice principles are upheld. In this case, the imposition of a composite penalty was deemed non-prejudicial to the assessee, and no violation of natural justice principles was found.

In conclusion, the court answered the question on the legality of levying a composite penalty in the affirmative, stating that no prejudice was caused to the assessee in this case. The parties were left to bear their own costs, and the reference was answered accordingly.