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TMI Blog1967 (7) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceeding that the assessee had concealed particulars of his income or deliberately furnished inaccurate particulars of such income and he, therefore, made a note to the following effect at the end of the assessment order: " Issue show cause notice for concealing the particulars of income or deliberately furnishing inaccurate particulars of such income." A notice was then issued by the Income-tax Officer to the assessee under section 274(1) read with section 271(1)(c) of the new Act calling upon him to show cause why penalty should not belevied upon him. The assessee filed his reply and on considering the reply the Income-tax Officer was of the opinion that the minimum penalty liable to be imposed on the assessee was much more than Rs. 1,000 and he, therefore, referred the matter to the Inspecting Assistant Commissioner under section 274(2). The Inspecting Assistant Commissioner issued another notice dated 15th February, 1963, calling upon the assessee to show cause why penalty should not be imposed on him and after considering the objections filed by the assessee, he imposed a penalty of Rs. 7,500 under section 271(1)(c) read with section 274(2). The assessee appealed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or deliberately furnished inaccurate particulars of such income, he or it may direct that such person shall pay by way of penalty, in the case referred to in clause (a), in addition to the amount of the income-tax and super-tax, if any, payable by him, a sum not exceeding one and a half times that amount, and in the cases referred to in clauses (b) and (c), in addition to any tax payable by him, a sum not exceeding one and a half times the amount of the income-tax and super-tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income....." On the coming into force of the new Act, the old Act was repealed by section 297(1) of the new Act but certain saving provisions were enacted in section 297(2). Cases were bound to arise where, at the date of coming into force of the new Act, assessments for the assessment year ending 31st March, 1962, and earlier assessment years might not have been completed in some cases the returns might have been filed and in some others, even the returns might halve remained to be filed. These assessments being for the assessment year ending 31st March, 1962, and earlier assessment years, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of the assessment proceeding the Income-tax Officer was satisfied that the assessee had committed any of the defaults enumerated in clauses (a), (b) and (c) of section 28(1), penalty could be imposed on the assessee under that section by reason of section 297(2)(a). This would appear to be clear on principle and no authority is necessary in support of it but if any authority were needed with a view to fortifying the conclusion, it may be found in the decision of the Mysore High Court in S. C. Magavi, Haveri v. Commissioner of Income-tax. If, therefore, the order of penalty had been made by the Income-tax Officer under section 28(1)(c), it would have been unassailable by reason of section 297(2)(a) read with section 28(1)(c). But the order of penalty is made under section 274(2) read with section 271(1)(c) and it is, therefore, necessary to see whether it could be properly made under section 271(1)(c). Section 271(1) is the section in the new Act which provides for imposition of penalty in certain specified circumstances and the material portion of that section runs as under: "271. Failure to furnish returns, comply with notices, concealment of income, etc.--(1) If the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. Now, in the present case, by reason of section 297(2)(a), the proceeding for assessment of the assessee was, as pointed out above, a proceeding under the old Act and it was in the course of that proceeding that the Income-tax Officer was satisfied that the assessee had concealed the particulars of income or deliberately furnished inaccurate particulars of income. The satisfaction of the Income-tax Officer was, therefore, not arrived in the course of any proceeding under the new Act and the condition precedent to the power of the Income-tax Officer to initiate proceedings for imposition of penalty was not satisfied. The Income-tax Officer had, therefore, no power to refer the case to the Inspecting Assistant Commissioner and the Inspecting Assistant Commissioner was not entitled to impose penalty on the assessee under section 274(2) read with section 271(1)(c). But the revenue relied strongly on section 297(2)(g) and contended that by reason of the provision enacted in section 297(2)(g), the Inspecting Assistant Commissioner, on reference of the case by the Income-tax Officer, was entitled to initiate proceedings for imposition of penalty and to impose penalty on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing under section 297(2)(a), the assessment proceeding is under the old Act, the defaults entailing penalty would ordinarily be defaults enumerated in clauses (a), (b) and (c) of section 28(1) of the old Act, but the penalty for such defaults, it was said, was not liable to be imposed under section 28(1) of the old Act but was liable to be imposed under section 271(1) of the new Act. This argument, though at first blush attractive, is in our opinion not well-founded and our reasons for saying so are as follows : We may point out at the outset that the penalty provided under section 271(1) is in some ways more rigorous and harsh than that provided under section 28(1) of the old Act. Section 271(1) provides that in certain cases, if any penalty is imposed, it should not be less than a certain minimum prescribed in the section whereas no such minimum penalty was prescribed under section 28(1). No prosecution could be instituted under section 28(1) in respect of the same facts on which a penalty was imposed but under the new Act not only can a penalty be imposed but a prosecution can also be launched upon the same facts. Now, the effect of accepting the argument of the revenue would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther case, whether covered by section 297(2)(f) or section 297(2)(g), the case must fall within the relevant provision imposing penalty under the old Act or the new Act, as the case may be, before any penalty can be imposed under such provision. A proceeding for imposition of penalty can, therefore, be initiated and penalty can be imposed on the assessee under the new Act only if the conditions for the applicability of section 271(1) are satisfied. Just as section 297(2)(f) does not dispense with the fulfilment of the conditions requisite for the applicability of section 28(1), section 297(2)(g) does not dispense with the fulfilment of the conditions requisite for the applicability of section 271(1). If the conditions attracting the applicability of section 271(1) are not satisfied in a case falling within section 297(2)(g), no proceeding for imposition of penalty can be initiated and penalty imposed under section 271(1). We cannot accept the contention of the revenue that the liability to penalty is in such a case incurred under section 28(1) by reason of section 297(2)(a) and it is only the initiation of proceeding for imposition of penalty and the ultimate imposition of penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the old Act while the defaults enumerated in clauses (a) and (b) of section 271(1) are defaults in complying with the provisions of the new Act. It is no doubt true that the acts required to be done under the provisions of the old Act referred to in clauses (a) and (b) of section 28(1) are of the same nature as acts required to be done under the sections of the new Act referred to in clauses (a) and (b) of section 271(1) but that does not mean that the defaults under clauses (a) and (b) of section 28(1) are the defaults for which penalty is provided under section 271(1). To use the language of the criminal law, we cannot say that penalty under section 271(1) is provided for the "offence" committed under section 28(1). If section 271(1) had provided a different kind of penalty for the offence "committed under section 28(1), it might perhaps have been possible to read section 297(2)(g) as providing that for the offence under section 28(1), proceeding for imposition of penalty may be taken and penalty may be imposed under section 271 (1). But that is not the position here and we cannot, therefore, take the view that under section 297(2)(g), though the liability to penalty is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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