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TMI Blog1969 (8) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee filed an application giving grounds for filing the return late, but the same were held as not showing any justifiable or reasonable cause for the delay in filing the return and the said officer imposed a penalty of 50% of the tax assessed and this amount came to Rs. 4,781.12. The appeal to the Appellate Assistant Commissioner filed by the assessee failed. In the second appeal by the assessee, the Tribunal held that, though the penalty was to be levied in accordance with the provisions of section 271(1)(a) of the new Act, yet the default was committed at the time when the old Act was in force, and, therefore, the Tribunal was not bound to impose the penalty in accordance with the rigid formula laid down in section 271 (1)(a)(i) of the new Act and after pointing out some redeeming features in the case, it reduced the penalty to a sum of Rs. 1,000 only. On the application of the Commissioner of Income-tax, the Tribunal has referred the following question for the opinion of this court : " Whether, on the facts and in the circumstances of the case, the penalty of Rs. 4,781.12 imposed under section 271(1)(a) of the Income-tax Act, 1961, was legally and validly reduced to a su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comply with notices, concealment of income, etc.-(1) If the Income-tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under this Act, is satisfied that any person (a) has without reasonable cause failed to furnish the return of his total income which he was required to furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139 or section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by sub-section (1) of section 139 or by such notice, as the case may be, or (b) has without 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 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 exceeding in the aggregate fifty per cent. of the tax ; (ii) in the cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there is a controversy whether the provision contained in section 297(2)(g) of the new Act is ultra vires the Constitution or not. This court has taken the view that it is not so, while the Bombay High Court in Shakti offset Works v. Inspecting Assistant Commissioner of Income-tax has taken the view that it is so because of discrimination in classifying the proceedings for imposition of penalty in two categories, (f) and (g), i.e., in respect of any assessment completed before 1st April, 1962, and the other in respect of proceedings completed on or after 1st April, 1962, The Allahabad High Court in Income-tax Officer, A-Ward, Agra v. Firm Madan Mohan Damma Mal and the Madhya Pradesh High Court in Gopichand Sarjuprasad v. Union of India have taken the same view as the Rajasthan High Court and have dissented from the judgment of the Bombay High Court. We wish to steer clear through this judicial controversy for the reason that, in a reference, the examination of the constitutionality of the provisions of section 297(2)(f) and (g) are foreign to the jurisdiction which this court exercises while answering the reference. In this connection reference may be made to C. T. Senthilnathan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of default has been prescribed and thus the law has become more onerous and a literal construction should not be adopted. It may be pointed out that previously the maximum limit of penalty was 150% in such a case and this has been lowered down to 50% but the minimum penalty is also prescribed. While discussing the effect of article 20 of the Constitution, their Lordships of the Supreme Court in K. Satwant Singh v. State of Punjab observed as follows: " A law which provides for a minimum sentence of fine on conviction cannot be read as one which imposes a greater penalty than that which might have been inflicted under the law at the time of the commission of the offence where for such an offence there was no limit as to the extent of fine which might be imposed. " Here the maximum penalty that could be imposed for default under section 28(1)(a) has been lowered down while the minimum penalty has been provided. This by itself is not so inequitable as to take the view that the legislature could not have intended to make the new provision contained in section 271(1) applicable to the defaults committed under the old Act. Moreover, when there is an express provision of law, there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), of the new Act. The reason given was that the scope and ambit of the expression "assessment" in section 297(2)(a) was comprehensive enough to cover the entire procedure for imposing liability on the taxpayer. In taking this view their Lordships of the Gujarat High Court followed Kalawati Devi Harlalka v. Commissioner of Income-tax. The argument that was rejected in Kalawati Devi's case was that the expression "proceedings for the assessment of person" in clause (a) of section 297(2)(a) of the new Act meant only the original proceedings for the assessment of a person and not appellate or revisional proceedings. After citing certain authorities, their Lordships of the Supreme Court observed as follows: " It is quite clear from the authorities cited above that the word 'assessment' can bear a very comprehensive meaning ; it can comprehend the whole procedure for ascertaining and imposing liability upon the taxpayer. Is there then anything in the context of section 297 which compels us to give to the expression 'procedure for the assessment' the narrower meaning suggested by the learned counsel for the appellant ? In our view, the answer to this question must be in the negative. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nserted only by way of abundant caution. They have been purposely placed on the statute book as it was thought proper that the procedure for imposition of penalty should be separately provided for. We are, therefore, of the opinion that when there is express provision dealing with penalty proceedings, it is not open to take recourse to clause (a) of sub-section (2) of section 297 for imposing that penalty. Now we take up the second argument urged for not applying section 271 of the new Act. The Gujarat High Court has taken the view that under section 271(1) it has been provided that for imposing penalty, the Income tax Officer or the Appellate Assistant Commissioner should be acting " in the course of any proceedings under the new Act " and that the proceedings for imposing penalty in respect of any assessment for the year ending on 31st March, 1962, or for any earlier year was not a proceeding under free new Act and therefore section 271(1) was inapplicable for imposing a penalty for that year. But, such proceedings become proceedings under the new Act by virtue of clause (g) of sub-section (2) of section 297 of the new Act. Had this sub-section been not on the statute book, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng which the default continued but not exceeding 50% in the aggregate of the tax. A question may arise whether the assessee was entitled to any deduction in respect of advance tax payable by him while calculating the amount of penalty. The counsel for the department has drawn our attention to Circular No. 10-D (V-50 of 1965) (F. No. 10/102/63-I.T.) (AI), dated June 21, 1965, of the Central Board of Direct Taxes, the relevant portion of which runs as follows : " 2. On a representation made by the Gujarat Chamber of Commerce, the matter has been reconsidered by the Board in consultation with the Ministry of Law. Under section 271 (1)(a)(i) of the Income-tax Act, 1961, the penalty is to be 2% of the tax, if any, payable by the assessee. Section 219 of the Income-tax Act, 1961, makes it clear that any sum, other than penalty or interest, paid by or recovered from an assessee as advance tax in pursuance of Chapter XVII shall be treated as payment of tax in respect of the income of the period which would be the previous year for an assessment for the assessment year next following the financial year in which it was payable and credit therefore shall be given to the assessee in the regu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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