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TMI Blog1969 (6) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment was made on October 31, 1962, after the commencement of the Income-tax Act, 1961. Under the provisions of section 297(2)(g) of the 1961 Act the proceedings for imposition of penalty had to be initiated and completed (sic). That is why the assessee was served with a fresh notice under section 274(1) of the 1961 Act. In response to the show-cause notice, the assessee took a preliminary objections The assessee contended that the notice under section 274(1) was issued on the 15th May, 1963, that is, after the completion of the assessment proceedings. The notice, therefore, was invalid and no penalty proceedings could be initiated, The Income-tax Officer rejected this contention. The assessee also submitted that its-audited balance-sheet, owing to the absence of its accountant, was ready only in October, 1960, In these premises, the assessee could not file its return earlier. The Income-tax Officer did not accept this explanation as sufficient for the non filing of the return. He imposed a penalty of Rs. 12,734 under section 271(1)(a) of the 1961 Act. The Appellate Assistant Commissioner agreed with the Income-tax Officer on both the points aforesaid and sustained the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount paid by the assessee under the provisional assessment under section 23B of the Indian Incme-tax Act, 1922, was to be deducted from the amount of tax determined under section 23(3) of that Act in order to determine the amount of tax on which the computation of penalty was to be based and in reducing the amount of the penalty imposed on the assessee to Rs. 2,737 ? " The relevant provisions of section 271 of the 1961 Act are as follows : " 271. Failure to furnish returns, 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 total income which he was required to furnish under subsection (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been paid or not. In Income-tax Officer, "A" Ward, Agra v. Firm Madan Mohan Damma Mal the Allahabad High. Court has observed as follows : "All that was provided under section 28 of the Income-tax Act, 1922, was that in certain cases, the assessee was liable to pay, something more in addition to the tax already assessed. Formerly, there was no separate chapter dealing with penalties but in the Act of 1961, Chapter XXI has been separately provided dealing with penalties alone and under the new scheme it was necessary that section 297. of the Act should provide definitely and separately for the procedure to be followed in penalty matters and, therefore, clauses (f) and (g) separately deal with the question of penalty and it cannot be said that the matter of penalty is also by necessary implication included within clauses (a) and (b) which deal with only that assessment. Since penalty has to be calculated and then imposed according to the tax assessed, the penalty being proportionate to the tax, the imposing of the penalty must necessarily follow the assessment. The question of imposition of penalty thus arises after the assessment has been completed and, therefore, the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be understood to meat). "the tax payable". The result would be that, unless on the day penalty is being imposed some amount of tax remains outstanding or payable by the assessee, no penalty can be imposed at all. This means that penalty is to be calculated with reference to the actual amount due and payable by the assessee on the date of imposition of the penalty. And from this point of view the Tribunal, in the instant reference, has come to the correct conclusions. As against the latter construction, Mr. Sen Gupta for the Commissioner has placed for our consideration two other provisions of the Act of 1961. In section 2(43) "tax" has been defined. It says : " 'tax' means income-tax and super-tax chargeable under the provisions of the Act ". It should be remembered that this definition is to be followed "unless the context otherwise requires". The context of the expression "the tax" in clause (i) of section 271(1) may fully justify the construction that this expression means "the tax payable". If the intention of the legislature was that a penalty should be imposed on the tax assessed, to remove all ambiguities, the word "assessed" could have been added after the words "the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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