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TMI Blog1969 (3) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... er proposing to initiate proceedings for imposition of penalty under the provisions of section 274 read with section 271 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). The said two notices are set out hereinbelow : "Notice under section 274 read with section 271 of the Income-tax Act, 1961. CC.XV/34-S/61-62/726 Income-tax Officer, Central Circle XV, Calcutta. Dated 23rd March, 1966. To Shri Narendra Sharma, 1, Gibson Lane, Calcutta. Whereas in the course of proceedings before me for the assessment year 1961-62 it appears to me that you : 'have without reasonable cause failed to furnish the return of income which you were required to furnish by a notice given under sections 22(2)/34 of the Indian Income-tax Act, 1922, or which you were required to furnish under section 139(1), or by a notice given under section 139(2)/148 of the Income-tax Act, 1961, No. III(I)/7/IV/F dated June 22, 1961, or have without reasonable cause failed to furnish it within the time allowed and in the manner required by the said section 139(1) or by such notice.' You are hereby requested to appear before me at 11.30 A.M. on April 11, 1966, and show cause why an ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such notice, as the case may be, or (b) has without reasonable clause 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 deliberately 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 exceedings in the aggregate fifty per cent. of the tax ; (ii) in 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 twenty per cent., but which shall not exceed one and a half times the amount of the tax, if, any, which would have been avoided if the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of penalty under section 271 of the Act can only be initiated if the assessment proceedings have also taken place under the Act, i.e., the Income-tax Act, 1961. He contended that, as the assessment proceedings in the present case had been commenced and concluded under the provisions of the repealed Act, the Income-tax officer had no jurisdiction to initiate penalty proceedings under section 271 of the Act. Dr. Pal next drew my attention to sub-clauses (a), (b) and (c) of section 271(1) of the Act in support of the contention that penalty proceedings under that section should be initiated only if there was any default or non-compliance on the part of the assessee with regard to the various notices mentioned in the said sub-clauses (a), (b) and (c) of section 271 (1) of the Act. As all the notices mentioned in the said sub-clauses were notices under the Act of 1961, Dr. Pal contended that proceedings for imposition of penalty under the new Act could be only initiated if there was a failure to comply with any of the notices issued under the provisions of the new Act. As, admittedly, all the notices in connection with the assessment proceedings for the assessment year 1961-62 were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f L. Hazari Mal Kuthiala v. Income-tax Officer, Special Circle, Ambala Cantt. In that case the Commissioner of Income-tax purported to take certain proceedings under section 5(7A) of the Indian Income-tax Act, 1922, whereas the said proceedings could have been validly taken only under section 5(5) of the Patiala Income-tax Act, 2001. It was held by the Supreme Court that the exercise of a power would be referable to a jurisdiction which confers validity upon it and not to a jurisdiction under which it will be nugatory. As the Commissioner of Income-tax had power under the Patiala Act to issue the notice, it was held that the mere mention of a wrong section of a wrong Act did not render the notice a nullity. Relying on the above observations of the Supreme Court, Mr. Basu contended that, since the Income-tax Officer, by virtue of the provisions of section 297(2)(a) of the Act, as interpreted by the Supreme Court in the case, of Kalawati Devi Harlalka v. Commissioner of Income-tax, had jurisdiction to issue the notice under section 28(1) of the repealed Act, I should hold that the notice in the instant case is, in effect, a notice issued under section 28(1) of the repealed Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment has been completed before the 1st April, 1962, the provisions of the repealed Act may be invoked ; whereas in respect of proceedings for imposition of penalty where the assessment has been completed on or after the 1st April, 1962, the provisions of the new Act may be invoked. This classification of assessees into two groups, viz,. those whose assessments are completed before the 1st April, 1962, and whose assessments are completed thereafter, is not a reasonable classification and has no nexus with the object of the statute. The matter of completion of assessment before a particular date, it was pointed out, is a fortuitous circumstance entirely beyond the control of the assessee and such a factor could not form the basis of a classification with an intelligible differentia having any rational connection with the object of the statute. It was pointed out, by a comparison of various provisions of the repealed Act with the corresponding provisions of the new Act, that the provisions for imposition of penalty under the Act were more onerous and burdensome than those under the repealed Act. Hence, it was contended that the provisions of' section 297(2)(g) should be struck down as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, the provisions of that sub-section do not, in my view, contain any substantive power for the imposition of penalty but merely lays down the procedural requirement as to the law which is to be applied. If the conditions precedent to the applicability of section 271 of the Act are not satisfied in a case or, in other words, section 271 of the Act is not capable of being applied on its own force, although the case may otherwise come under the provisions of section 297(2)(g) of the Act, no proceedings for the imposition of penalty can be initiated nor can penalty be imposed under the new Act. This view has been taken by their Lordships of the Gujarat High Court in the case of Commissioner of Income-tax v. Hiralal Mohanlal Shah. With respect, I am in entire agreement with that view. As I have already held, the conditions precedent for the applicability of section 271 of the Act are totally absent in the present case. In that view of the matter, it must also be held that the provisions of section 297(2)(g) is of no avail to the revenue in the present case. In the result, this application succeeds and the rules is made absolute.. There will be a writ in the nature of mandamus dire ..... 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