1972 (5) TMI 16 - HC - Income Tax

Delay in filing returns - Income-tax Officer applying the provisions of section 271(1)(a) of the new Act calculated the penalty leviable at 2 per cent. of the tax for each month of default - Return was filed after penalty notice was issued under the old Act held that further notice under the new Act for penalty could be validly issued - Tribunal was not correct in holding that the proceedings were not commenced in accordance with the law.

Summary

Issues:
Penalty under section 271(1)(a) of the Income-tax Act, 1961 for delayed filing of return; Validity of penalty proceedings under section 275 of the new Act; Commencement of penalty proceedings under old Act and new Act; Interpretation of notices under section 28(3) and section 274; Application of penalty provisions under the new Act for defaults under the old Act.

Analysis:
The case involved a penalty of Rs. 1,21,112.70 levied on a registered firm for delayed filing of the return for the assessment year 1958-59. The Income-tax Officer calculated the penalty under section 271(1)(a) of the new Act, restricting it to 50% of the tax due to exceedance of the 50% threshold. The Appellate Assistant Commissioner upheld the penalty, stating that proceedings were validly initiated under the old Act before the new Act came into force.

On second appeal, the Tribunal found that the penalty proceedings were not commenced in accordance with section 275 of the new Act. Despite a notice under the old Act, the penalty was not levied based on those proceedings. The Income-tax Officer issued a fresh notice under the new Act after completing the assessment, which the Tribunal deemed invalid for not following the proper commencement procedure.

The Tribunal rejected the argument that the notice under the new Act was a continuation of the old Act notice, stating the old Act notice lost its validity. Referring to various court decisions, including those by the Punjab and Haryana High Court and the High Court of Allahabad, the Tribunal quashed the penalty order as legally flawed.

The legal representatives argued over the interpretation of the notices issued and the applicability of penalty provisions under the new Act for defaults under the old Act. The counsel for the Commissioner of Income-tax contended that the penalty proceedings were valid under section 297(2)(j) of the new Act, while the counsel for the assessee claimed there was no default in filing the return.

Ultimately, the court ruled in favor of the revenue, upholding the penalty and ordering the assessee to pay costs. The decision emphasized the importance of following proper commencement procedures for penalty proceedings and interpreting penalty provisions in conjunction with the relevant sections of the Acts involved.