1970 (10) TMI 19 - HC - Income Tax

Summary

Issues:
1. Interpretation of section 297(2)(k) of the Income-tax Act, 1961 regarding the validity of a notice issued under the corresponding provision of the 1922 Act.
2. Validity of penalty proceedings under sections 271 and 274 of the Income-tax Act, 1961 initiated after the completion of assessment proceedings.

Analysis:

The case involved the interpretation of section 297(2)(k) of the Income-tax Act, 1961, and the validity of penalty proceedings initiated under the new Act after the completion of assessment proceedings. The assessee, a Hindu undivided family engaged in timber trade, received a notice under section 22(2) of the Indian Income-tax Act, 1922, for the assessment year 1958-59. Despite extensions, the return was filed late. Subsequently, a notice under section 28(3) of the 1922 Act was issued in 1959, followed by another notice under sections 274 and 271 of the 1961 Act in 1963. The issue was whether the penalty proceedings were validly initiated under the new Act.

The Tribunal held that the penalty proceedings initiated after the completion of assessment were not sustainable under the new Act. However, the High Court analyzed the provisions of section 297(2)(g) and (k) in conjunction with the recent Supreme Court ruling in Iain Brothers v. Union of India. The Court emphasized that for penalties related to assessments completed after April 1, 1962, proceedings should be in accordance with the new Act. It was acknowledged that the assessment year being prior to April 1, 1962, attracted section 297(2)(g), making the penalty provisions of the new Act applicable.

Regarding the interpretation of section 297(2)(k), the Court held that a notice issued under section 28(3) of the old Act could be deemed valid under the new Act. The Court referred to the wide language of section 297(2)(k) and a Rajasthan Division Bench judgment supporting the continuity of notices issued under the old Act. The Court found substantial identity between the penalty provisions of the old and new Acts, dismissing arguments of inconsistency. The Court rejected the contention that a notice under section 28(3) did not fall within the scope of section 297(2)(k), emphasizing the broad language used in the provision.

In conclusion, the Court answered the first question in the negative, favoring the revenue. As a result, the second question was deemed redundant and not addressed. The judgment was delivered jointly by the judges PREM CHAND PANDIT and S. S. SANDHAWALIA, with the latter providing the detailed analysis and reasoning.