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TMI Blog1969 (11) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... and by his order dated March 30, 1964, assessed it at a net income of Rs. 82,662. The petitioner appealed. At the time of the hearing of the appeal the Appellate Assistant Commissioner of Income-tax found that there were certain deposits in the petitioner's bank account which had not been properly explained and the partners had not withdrawn any amount from the partnership accounts for their personal expenses. The Appellate Assistant Commissioner of Income-tax after calling for a remand report from the Income-tax Officer came to the conclusion that the petitioner had earned an income of Rs. 1,03,500 from undisclosed sources and finally computed the petitioner's total income at Rs. 1,69,350 by his order dated April 5, 1965. On the same day he issued a notice under section 274 of the Income-tax Act, 1961, calling upon the petitioner to show cause why penalty under section 271(1)(c) should not be imposed upon it for having concealed its income or having furnished inaccurate particulars thereof. By his order dated December 31, 1966, the Appellate Assistant Commissioner of Income-tax imposed a penalty of Rs. 52,500, which was reduced on appeal to Rs. 10,000 by the Income-tax Appellate T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) the finding that there was concealment of income in the assessment proceedings was without jurisdiction and could not form the basis of penalty proceedings ; (2) section 297(2)(g) of the Income-tax Act, 1961, violates article 20(1) of the Constitution : (3) section 297(2)(g) offends against article 14 of the Constitution ; and (4) section 271 of the Act was inapplicable in terms and the penalty order based upon that provision was, therefore, without jurisdiction. As regards the first contention, in our opinion, the petitioner is not entitled to raise the same before us. The petitioner had taken the matter in appeal before the Income-tax Appellate Tribunal and it was open to it to have raised this question before it, and in case the Tribunal decided that question against the petitioner, to have asked the Tribunal to make a reference to this court on any question of law arising out of the order of the Tribunal. The petitioner cannot be permitted to by pass that procedure.. If the petitioner has not sought a reference against the order of the Tribunal on such a question, we cannot permit such a question to be raised before us in a petition under article 226 of the Consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alt with under the old Act or the new Act according as the returns were filed by the assessees before or after April 1, 1962. Where the return had been filed before that date the assessment proceedings as also the subsequent proceedings by way of appeals, etc., were to be taken under the old Act and in cases where the returns were filed after that date such proceedings were to be taken under the new Act. Clauses (f) and (g) relate to penalty proceedings. According to clause (f) the penalty was to be imposed in accordance with the old Act if the assessment giving rise to the penalty came to be made before April 1, 1962, while according to clause (g) the penalty proceedings were to be taken under the new Act if the relevant assessment came to be made after that date. The petitioner has challenged the constitutional validity of clause (g) on the ground that it violates article 20 of the Constitution because by virtue of this clause the penalty provisions of the new Act have been made applicable which are more onerous than the corresponding provisions of the old Act. It is urged that according to the guarantee contained in article 20 of the Constitution, the petitioner could not be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mination is not based upon any reasonable classification. Article 14 of the Constitution guarantees equal protection of the laws. The article itself does not speak of any classification, but it is now well settled that while article 14 prohibits class legislation, it does not prohibit reasonable classification. The classification permissible under article 14 must, however, satisfy the following two conditions : (i) It must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group, and (ii) the differentia must have a rational relation to the objects sought to be achieved by the statute in question. (See Bhudhan Choudhry v. State of Bhihar). Now, looking at clauses (a) and (b) of section 297(2), it becomes immediately apparent that a classification was made amongst the assessees whose cases for the assessment years prior to the year 1962-63 were pending when the new Act came into force repealing the old Act. The classification is based on the date of filing of the returns. Those assessees who had filed their returns prior to 1st April, 1962, were to be dealt with for the purposes of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lected must be for some ration and intelligible consideration. A purely arbitrary or capricious selection of time cannot possibly form the basis of a rational classification. Now, the object of penalty provisions in a taxing statute like the Income-tax Act is to punish and prevent evasion of tax. The measure of penalty depends upon the nature and gravity of the default committed by an assessee. Under both the Acts the quantum of penalty varies according to the tax which is quantified by an assessment order. The imposition of penalty has thus some relation to the assessment of tax, but the time of making the assessment has no bearing whatsoever upon the penalty itself. The default for which the assessee is to be penalised is neither aggravated nor mitigated by the time when the assessment comes to be made. The time for making the assessment is neither an attribute or a quality of the assessees, nor does it have any relation to the nature or gravity of the default for which penalty is to be imposed. In fact, the making of an assessment order is a fortuitous circumstance over which the assessee has no control. It is difficult to understand how the class of assessees otherwise simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act, viz., 31st day of March, 1956, was not a necessary attribute of the class of substantial evaders of income-tax but was merely an accident and a measure of administrantive convenience and was not an element in the formation of the particular class of substantial evaders of income-tax." (Underlining ours). In Jalan Trading Co. (P.) Ltd. v. Mill Mazdoor Sabha the Supreme Court struck down a provision of the Payment of Bonus Act, 1965, as violative of article 14 of the Constitution because as a result of the classification brought about by it similarly situated industrial concerns were subjected to differential treatment depending on the pendency of an industrial dispute between the industrial undertaking and its employees before a particular date. It held at page 708 : "Assuming that the classification is founded on some intelligible differentia, which distinguishes an establishment from other establishments, the differentia has no rational relation to the object sought to be achieved by the statutory provision, viz., of ensuring peaceful relations between capital and labour by making an equitable distribution of the surplus profits of the year." The latest case of the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision for imposing a penalty is concerned, there is no difference between the assessees who have filed returns but in whose cases the assessment was completed prior to April 1, 1962, and assessees who have filed returns but in whose cases assessment was not completed or could not be completed till April 1, 1962." We are in respectful agreement with the observations of the Bombay High Court as extracted above. On behalf of the opposite side reliance was placed on Ramjilal v. Income-tax Officer to support the contention that pending proceedings and fresh proceedings could be the basis of a valid classification. There, however, the basis for the classification was that the pending proceedings should be concluded according to the law applicable at the time when the rights or liabilities accrued and proceedings commenced. Such a classification would indeed be a reasonable classification. In fact, the classification brought about by clause (a) sub-section (2) of section 297 is founded on that basis and we have already observed that such a classification is permissible and valid. But clause (g) makes a departure from that principle inasmuch as unlike clause (f) it seeks to apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout reasonable cause failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143, or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,- (i) in the cases referred to in clause (a) in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the tax ; (ii) in the cases referred to in clause (b), in addition to any tax payable by him, a sum which shall not be less than ten per cent. but which shall not exceed fifty per cent. of the amount of the tax, if any, which would have been avoided if the income returned by such person had been accepted as the correct income ; (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of the income in respect of which the particulars have been concealed or inaccurate particulars have been furnished. Explanation.-Where the total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax, if any, payable by him, pay by way of penalty a sum not exceeding one and a half times the amount of tax which has been avoided, or would have been avoided if the income returned by such partner had been accepted as his correct income ; and no refund or other adjustment shall be claimable by any other partner by reason of such direction. (4A) Notwithstaning anything contained in clause (i) or clause (iii) of sub-section (1), the Commissioner may, in his discretion- (i) reduce or waive the amount of minimum penalty imposable on a person under clause (i) of sub-section (1) for failure, without reasonable cause, to furnish the return of total income which such person was required to furnish under sub-section (1) of section 139, or (ii) reduce or waive the amount of minimum penalty imposable on a person under clause (iii) of sub-section (1), if he is satisfied that such person- (a) in the case referred to in clause (i) of this sub-section has, prior to the issue of notice to him under sub-section (2) of section 139, voluntarily and in good faith, made full disclosure of his income ; and in the case referred to in clause (ii) of this sub-section has, prior to the detect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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: Provided that- (a) no penalty for failure to furnish the return of his total income shall be imposed on an assessee whose total income is less than three thousand five hundred rupees unless he has been served with a notice under sub-section (2) of section 22 ; (b) where a person has failed to comply with a notice under sub-section (2) of section 22 or section 34 and proves that he has no income liable to tax, the penalty imposable under this sub-section shall be a penalty not exceeding twenty-five rupees ; (c) no penalty shall be imposed under this sub-section upon any person assessable under section 42 as the agent of a person not resident in the taxable territories for failure to furnish the return required under section 22 unless a notice under sub-section (2) of that section or under section 34 has been served on him ; (d) when the person liable to penalty is a registered firm or an unregistered firm which has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval of the Inspecting Assistant Commissioner. " On a comparison of the two sets of provisions under the new and the old Acts, it cannot be doubted that they differ materially from each other. Mr. N. A. Palkhivala in the 6th edition of his book on Income Tax has correctly summarised the changes brought about by the new Act in the law relating to penalty and the same may be reproduced with advantage : " (a) Unlike section 28 of the 1922 Act this section does not confer any power on the Appellate Tribunal to impose a penalty. (b) In cases of concealment of income where the minimum penalty imposable exceeds Rs. 1,000, the Inspecting Assistant Commissioner alone is empowered to impose a penalty (section 274(2)), whereas under the 1922 Act the Income-tax Officer had the power to impose a penalty even in such cases. (c) Under the 1922 Act the Income-tax Officer could not impose any penalty without the previous approval of the Inspecting Assistant Commissioner. Under this Act the Income-tax Officer does not have to take the sanction of the Inspecting Assistant Commissioner in any case. (d) This section provides that if any penalty is imposed, it should not be less than th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me in respect of which particulars have been concealed or inaccurate particulars have been furnished, the maximum being twice that amount. This measure of penalty is undoubtedly drastic. It can work great hardship even in petty cases. For example, in a case where the income shown in the return is Rs. 2,000 which is below the taxable limit and the assessment comes to be made at Rs. 10,000, the minimum penalty imposable would be Rs. 8,000, the maximum being Rs. 16,000, even though the tax which the assessee may have tried to evade would be about Rs. 500. Under the old Act the maximum penalty of Rs. 750 could have been imposed in such a case even though the assessee could have been let off with a nominal penalty of Rs. 50 or so, there being no minimum limit. (iii) By the Finance Act of 1964, two significant changes have been made in section 271 : The word " deliberately" has been omitted from clause (c) and an Explanation has been added at the end of clause (iii). The combined result of these two changes is that an assessee would be liable to penalty for furnishing inaccurate particulars of income even if the inaccurate particulars are furnished accidently and not deliberately. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sum of Rs. 5,000 or even less. It is, of course, true that under sub-section (4A) of section 271 added by the Income-tax (Amendment) Act of 1965 the Commissioner has been vested with the power to reduce or waive the amount of minimum penalty imposable in cases falling under clauses (i) and (iii) of sub-section (1) of section 271 on conditions enumerated therein. The conditions themselves are of an onerous nature inasmuch as the assessee has to make a confession of concealment before the concealment is detected by the Income-tax Officer and he has to pay or make arrangement for the payment of the tax for the relevant assessment year. This provision may seem to soften the rigour of the provision requiring the imposition of a minimum penalty, but the small advantage that it seems to confer upon the assessees is more than offset by sub-section (4B) which provides that an order under sub-section (4A) would be final and shall not be called in question before any court of law or any other authority. It is doubtful if an assessee would avail himself of the remedy provided in sub-section (4A), firstly, because the conditions imposed are onerous and, secondly, because once he moves in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould have been avoided if the income as returned by such person had been accepted as the correct income. " The maximum limit is the same as under the old Act, but the condition with regard to the minimum penalty makes this provision more onerous, as we have already shown above. The last major difference between the two sets of provision is that while under the old Act immunity was given to an assessee from prosecution for a default in respect of which a penalty was imposed upon him (section 28(4)) there is no such immunity under the new Act, so that for the same default an assessee may be penalised under Chapter XXI and may also be prosecuted and punished under Chapter XXII. It is true that clause (g) makes only the penal provisions of the new Act applicable and the provisions for prosecution contained in Chapter XXII would not be attracted in pending cases. But in cases governed by clause (g) the provision for prosecution contained in section 52 of the old Act would be attracted by virtue of section 6 of the General Clauses Act as has been held by the Supreme Court in T. S. Baliah v. T.S. Rangachari, Income-tax Officer Central Circle, Madras. The immunity granted by section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pending before him under the new Act. In the circumstances, the initiation of the proceedings under section 274 and the levy of penalty under section 271 of the new Act was without jurisdiction. It was suggested by the learned counsel for the opposite parties that the satisfaction referred to in section 271(1) may be reached by the authority concerned during the course of the proceedings for the imposition of penalty itself and that such proceedings can be initiated by a notice under section 274 of the new Act. This contention is plainly wrong. A bare reading of section 271 shows very clearly that the proceedings referred to in section 271 during the course of which the authority concerned is to be satisfied about an assessee having rendered himself liable to penalty are proceedings other than the penalty proceedings. In fact, the penalty proceedings are taken in consequence of those proceedings. This is borne out by section 275 which says that no order imposing a penalty shall be passed after the expiration of two years from the the date of the completion of the proceedings in the course of which the proceedings for the imposition of penalty have been commenced. A similar phras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Moreover, in the instant case, the contention that the Appellate Assistant Commissioner was satisfied about the default of the assessee in proceedings other than the appellate proceedings pending before him is factually incorrect inasmuch as in paragraph 24 of his appellate order dated April 5, 1965, he recorded his satisfaction thus : " Since the assessee has concealed the particulars of his income and has deliberately furnished inaccurate particulars thereof, a notice under section 274 of the Income-tax Act, 1961, has also been issued to show cause why penalty may not be imposed under section 271(l)(c) of the Act. " This shows very clearly that this satisfaction was reached during the hearing of the appeal and he recorded the same in the appellate order itself. We are also unable to agree with the argument that section 297(2)(g) is a charging section in the sense that penalty can be imposed by its own force. Notwithstanding the use in this provision of the expression " any such penalty may be imposed under this Act ", it is merely an enabling provision. It provides for neither the measure of penalty nor does it contain the defaults in respect of which penalty may be levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to costs. SATISH CHANDRA J.-A Bench of this court referred this writ petition to a Full Bench principally because it involved the constitutional vires of section 297(2)(g) of the Income-tax Act, 1961. The petitioner is a partnership firm. It runs a flour, oil and rice mill at Bareilly. For the assessment year 1959-60 the firm filed a return on 29th December, 1959, showing a net profit of Rs. 22,674. On 1st February, 1962, the firm filed a revised return showing an overall loss of Rs. 3,940. The Income-tax Officer on 30th March, 1964, assessed the petitioner on a total income of Rs. 82,662. The petitioner preferred an appeal. At the hearing of the appeal the Income-tax Officer brought to the notice of the Appellate Assistant Commissioner that there were several discrepancies between the assessee's bank passbooks and the bank account in the khata bahi. The Commissioner asked the Income-tax Officer, inter alia, to check the bank accounts in the assessee's ledger for the financial year 1958-59 with their passbooks and submit a detailed report in regard to the discrepancies if any. The Income-tax Officer submitted a report on 30th December, 1964. The Appellate Assistant Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase. The petittoner felt aggrieved and went up in appeal to the Tribunal. Before the Tribunal it was argued for the assessee that section 297(2)(g) of the Income-tax Act, 1961, violated article 14 of the Constitution. This plea was repelled by the Tribunal on the strength of the Supreme Court decision in K. S. Venkataraman Co. (P.) Ltd. v. State of Madras in which it was held that the authorities created under a statute could not consider questions relating to the constitutional vires of that Act. The Tribunal, therefore, declined to go into this question. On the basis of several decided case of various High Courts, the Tribunal held that the findings reached in assessment proceedings as to the undisclosed income were prima facie sufficient to support a finding on that question in penalty proceedings, though such findings are not conclusive. It then observed that " the assessee has not brought on record any material to show that the finding arrived at in the assessment proceedings was erroneons ". It held that those findings were rightly acted upon in these proceedings. The Tribunal observed that after giving anxious thought to the question of the amount of penalty the ends of ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Tribunal. The Supreme Court in Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd. held that a question of law not raised before the Tribunal and not dealt with by it in its order cannot be said to arise out of its order, even if on the facts of the case stated in the order, the question fairly arises. The same view was taken by the Supreme Court in Ramanathan Chettiar v. Commissioner of Income-tax and T. D. Kumar and Brothers (P.) Ltd. v. Commissioner of Income-tax. When Parliament has enacted that a question of law ought to be raised before the Tribunal before the High Court can give an opinion on it, it will not be right for this court to circumvent the legislative mandate, by exercising the discretionary jurisdiction in favour of an assessee who did not raise the question before the Tribunal, either in the assessments or the penalty proceedings, and who has not in the present petition given any explanation for the omission. This court has held that a litigant is not etnitled to raise question of jurisdiction for the first time in a writ petition unless he satisfactorily explains why he did not raise the plea before the appropriate authority. (See J. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a law in force at the time of the commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence. (2) No person shall be prosecuted and punished for the same offence more than once...... The Supreme Court in Maqbool Hussain v. State of Bombay observed that : " Article 20(2) incorporates within its scope the plea of 'autrefois convict' as known to the British jurisprudence or the plea of double jeopardy as known to the American Constitution, but circumscribes it by providing that there should be not only a prosecution but also a punishment in the first instance in order to operate as a bar to a second prosecution and punishment for the same offence. " It held that the article contemplates proceedings of the nature of criminal proceedings and the prosecution in this context means an initiation of proceedings of a criminal nature. The first part of article 20(1) prohibits a conviction while the second part deals with penalty that may be inflicted on conviction. The word " penalty " has been used to denote the sentence or punishment. Like sub-art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is. The vice of discrimination is hence imported into this provision. The learned counsel relied upon the decision of the Bombay High Court in Shakti Offset Works v. Inspecting Assistant Commissioner of Income-tax, where this submision was accepted. Section 297 of the Income-tax Act of 1961 provides for repeals and savings. Sub-section (1) repeals the Income-tax Act of 1922. Sub-section (2) mentions the saving clauses. Clauses (a), (f) and (g) are relevant. They state : " 2. Notwithstanding the repeal of the Indian Income-tax Act, 1922, (XI of 1922) (hereinafter referred to as ' the repealed Act '),- (a) where a return of income has been filed before the commencement of this Act by any person for any assessment year, proceedings for the assessment of that person for that year may be taken and continued as if this Act had not been passed ;........ (f) any proceeding for the imposition of a penalty in respect of any assessment completed before the 1st day of April, 1962, may be initiated and any such penalty may be imposed as if this Act had not been passed ; (g) any proceeding for the imposition of a penalty in respect of any assessment for the year ending on the 31st day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty imposable has been reduced in cases falling within clauses (a) and (b) of section 271(l). (f) There was no time limit for commencement of penalty proceedings under the 1922 Act. This Act requires penalty proceedings to be commenced before the completion of those proceedings in which the Income-tax Officer or the Appellate Assistant Commissioner is satisfied that the default attracting a penalty has been committed (section 275). (g) There was no time limit in the 1922 Act for the passing of a penalty order, but a time limit is now imposed by section 275. (h) No prosecution could be instituted under the 1922 Act in respect of the same facts on which a penalty was imposed. Under this Act a penalty can be imposed and a prosecution launched on the same facts. " Mr. Gopal Behari, appearing for the department, pointed out that, in addition, it may be stated that the minimum prescribed penalty can be waived or reduced by the Commissioner under the new Act (vide section 271(4A)). Another significant departure relates to appeals. Under the proviso to section 30 of the 1922 Act, no appeal lay against an order imposing a penalty under section 46(l), unless the tax had been pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h provided for prosecution (like section 52) would survive the repeal and would be available for dealing with the liability to prosecution incurred prior to the repeal. It may be said that since, in view of clause (g) of section 297(2) penalty would be imposable on him under the 1961 Act, his case would not be governed by section 28(4) which provides that an assessee will not be liable to prosecution for the same acts or omissions for which a penalty has been imposed " under this section ". In such a case penalty is not imposed under section 28 and, therefore he will be liable to prosecution, though if his assessment had been completed before 1st April, 1962, he would have been immune from prosecution in view of section 28(4). According to this Supreme Court decision the prosecution provisions of the old Act survive the repeal. Section 28(4) provides a condition precedent to the launching of prosecutions. That section would necessarily survive the repeal. The liability to penalty is incurred under section 28 when the default is committed. But, though the liability was incurred under section 28 of the old Act, clause (g) of section 297(2) enables the proceedings to be taken ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s imposed a limit of two years from the date of completion of the assessment for completing penalty proceedings. In this respect Parliament has provided to the assessee a safeguard of great magnitude. Then, if an assessee has crossed through the stages of the Income-tax Officer and the Appellate Assistant Commissioner, he is immunine, because he is in no danger of facing penalty proceedings at the instance of the Appellate Tribunal under the new Act, though he was liable to an action by the Tribunal also under the 1922 Act. This is another concession to the assessee. Again, under the old Act an assessee could not appeal against an order imposing penalty under section 46(l) without paying the tax, while under the new Act he has an unfettered right of appeal against a similar order. Here also, the legislature has relaxed the provisions in favour of an assessee. These substantial safeguards given to an assessee, in my opinion, more than offset the sting of the loss of immunity from an action of penalty being taken by the Income-tax Officer himself in some cases. As seen above, the prescribing of a minimum does not impose a greater burden on the assessee. It may be said that previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, proposition (c)). 4. In order to sustain the presumption of constitutionality the court may take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state of facts which can be conceived (Dalmia's case, proposition (d)). 5. The classification may be founded on different bases, namely, geographical or according to objects or occupations or the like (Dalmia's case, proposition (e)). 6. Permissible classification must satisfy two conditions, namely :- (i) it must be founded on an inteligible differentia which distinguishes persons or things that are grouped together from others left out of the group, and (ii) the differentia must have a rational relation or nexus to the object sought to be achieved by the statute. (Chiranjitlal v. Union of India 4 and Budhan Choudhry v. State of Bihar). 7. If the two tests are satisfied it is not for the courts to see to the wisdom of the basis for the clasification. It may be demonstrated that the scheme is not the best in the circumstances, and the choice of the legislature may be shown to be erroneous, but the classification will not be subject to judicial interf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e default attracting penalty has been committed, is recorded in the assessment order. The event of the completion of the assessment hence crystallises or fixes the liability for drawing up proceedings for penalty. It furnishes a material part of the cause of action for it. The fact that a material part of the cause of action has accrued before or after the commencement of the new Act is a quality or characteristic or differentia which is intelligible for founding the classification of assessees for initiating penalty proceedings under the old or the new Act. This differentia is rationally related to the object of clauses (f) and (g), namely, to apply the Act which was in force when penatly proceedings are normally to commence. In those cases where the proceedings are to be drawn up after the commencement of the new Act, the provisions of the new Act were made applicable. This classification satisfies the twin test and is valid. The view of this court in Income-tax Officer v. Firm Madan Mohan Damma Mal that clauses (f) and (g) do not violate article 14 of the Constitution has been accepted by the Delhi High Court in Jain Brothers v. Union of India and the Madhya Pradesh High Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D. M. Manasvi v. Commissioner of Income-tax but was rejected by this court in Income-tax Officer v. Firm Madan Mohan Damma Mal and by the Madhya Pradesh High Court in Krishanlal v. Commissioner of Income-tax as well as in Gopichand Sarjuprasad v. Union of India. In Gopichand's case the Madhya Pradesh High Court held that after the commencement of the Act of 1961 assessment proceedings initiated under the 1922 Act were allowed to continue under it only by force of section 297(2)(a) of the Act of 1961, and hence they were proceedings under the 1961 Act itself ; consequently, the satisfaction reached by the Income-tax Officer about the concealment of the income on the part of the assessee attracting penalty was in the course of proceedings under the 1961 Act. With respect, this reasoning appeals to me. But the matter may be considered from the alternative view-point that such proceedings are not " under this Act ". Section 297(2)(g) not only auithorises the initiation of proceedings but also expressly empowers the imposition of penalty. It is hence in the nature of a charging provision as well. It makes the penalty provisions operate retrospectively, because it empowers the impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For cases covered by clause (g), the words " under this Act " in section 271 will have to be disregarded. The same kind of thing was said by the Madhya Pradesh High Court in Kishanlal's case while dealing with the argument that clauses (a) and (b) of section 271(1), entitle the imposition of penalty only if there has been a default in relation to sections like 139, 142, 143 and 148 of the 1961 Act, which are expressly mentioned in them. The court observed that the defaults for which penalty can be imposed under the various clauses of section 28 of the 1922 Act are precisely the same for which penalty can be levied under section 271 (1) of the 1961 Act. It was held that : " The substance of the matter is the nature of the acts and omissions of the assessee for which he is liable to penalty and not the particular provisions, whether of the 1922 Act or the 1961 Act, under which the assessee is required to do those acts or is restrained from doing them. " It was then observed that section 271(1) has to be construed in harmony with section 297(2)(g), and not in a manner so as to render clause (g) meaningless or redundant. Be that as it may, this argument cannot be used by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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