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TMI Blog1972 (2) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... r imposition of penalty under the provisions of the Income-tax Act, 1961 (hereinafter referred to as " the 1961 Act "). The penalty was calculated in accordance with the provisions of clause (i) of section 271(1)(a) of the said Act, that is, at the rate of 2 per cent. of the income-tax for each month of delay, the total being 40 per cent. of the income-tax assessed as the delay was of more than twenty completed months. This order was passed by the Income-tax Officer on March 20, 1967. The assessee filed an appeal against that order which was dismissed by the Appellate Assistant Commissioner of Income-tax on November 23, 1967. A further appeal was filed before the Income-tax Appellate Tribunal, Chandigarh Bench, which was accepted in part. The Tribunal held that the penalty at the rate of 2 per cent. as provided under section 271(1)(a)(i) could be imposed for the period from April 1, 1962, to December 31, 1962, only, that is, for nine months because the 1961 Act had come into force with effect from April 1, 1962, and the provisions of section 271 thereof could not be made applicable to the defaults that had occurred before that date. For the period of eleven months prior to April 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 31st day of March, 1962, or any earlier year, the assessment of that person for that year shall be made in accordance with the procedure specified in this Act ; (c) any proceeding pending on the commencement of this Act before any income-tax authority, the Appellate Tribunal or any court, by way of appeal, reference or revision, shall be continued and disposed of as if this Act had not been passed ; (d) where in respect of any assessment year after the year ending on the 31st day of March, 1940,- (i) a notice under section 34 of the repealed Act had been issued before the commencement of this Act, the proceedings in pursuance of such notice may be continued and disposed of as if this Act had not been passed (ii) any income chargeable to tax had escaped assessment within the meaning of that expression in section 147 and no proceedings under section 34 of the repealed Act in respect of any such income are pending at the commencement of this Act, a notice under section 148 may, subject to the provisions contained in section 149 or section 150, be issued with respect to that assessment year and all the provisions of this Act shall apply accordingly ; (e) subject to the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in force immediately before the commencement of this Act shall to the extent to which provision has not been made under this Act, continue in force until rescinded by the Central Government ; (m) where the period prescribed for any application, appeal, reference or revision under the repealed Act had expired on or before the commencement of this Act, nothing in this Act shall be construed as enabling any such application appeal, reference or revision to be made under this Act by reason only of the fact that a longer period therefor is prescribed or provision is made for extension of time in suitable cases by the appropriate authority." This section provides for repeals and savings. The Indian Income-tax Act of 1922 has been repealed by sub-section (1) of section 297 of the 1961 Act and in sub-section (2), a provision has been made to provide for various matters resulting from the repeal of that Act. According to clause (a) of sub-section, where a return of income has been filed before April 1, 1962, by any person for any assessment year, proceedings for the assessment of that person for that year are to be taken under the 1922 Act and no reference has to be made to the 1961 Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty in respect of defaults committed with regard to any assessment year prior to April 1, 1962, in respect of which assessment is completed after that date is to be imposed under the 1961 Act, that is, the penalty has to be imposed at the rate and in accordance with the procedure prescribed in the 1961 Act and not as prescribed in the 1922 Act. The above conclusion, in my opinion, is fully supported by the decision of their Lordships of the Supreme Court in Jain Brothers v. Union of India . In that case the assessee, M/s. Jain Brothers, was a registered firm with four partners. For the assessment year 1960-61 (account year ending on October 31, 1959), a notice dated May 14, 1960, under sub-section (2) of section 22 of the 1922 Act was served by the Income-tax Officer on May 26, 1960, calling upon the firm to submit a return of income within 35 days of the service of the notice. The return was thus due by June 30, 1960, but it was filed on November 18, 1961. The assessment for that year was completed on November 23, 1964. On that very date, the Income-tax Officer issued notice under section 271 read with section 274 of the 1961 Act calling upon the assessee-firm to show cause wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nest contumacious conduct of the assessee, we are unable to accept the contention advanced on behalf of the petitioners that, as the petitioners had filed their return before the coming into force of the Act of 1961, the proceedings for imposition of penalty can only be under the Act of 1922. Clause (a) of sub-section (2) of section 297, on which reliance has been placed on behalf of the petitioners, deals with proceedings for assessment of a person, while clauses (f) and (g) specifically deal with proceedings for imposition of penalty. Clause (g) makes it clear that, if the assessment is completed on or after the 1st day of April, 1962, the proceedings would have to be initiated and the penalty imposed under the Act of 1961 even though the penalty relates to an assessment for a year preceding the 1st day of April, 1962. It is a well-established rule of the interpretation of statutes that a general provision must yield to a special provision providing for particular cases. As clause (g) makes a specific provision for proceedings for imposition of penalty in respect of assessments completed on or after the 1st day of April, 1962, no resort, in our opinion, can be made to the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted out that under clause (a) of section 297(2) where a return has been filed before the commencement of the Act of 1961, i.e., 1st April, 1962, the proceedings for assessment have to be taken under the Act of 1922. If the assessment had to be made under the Act of 1922, there seems to be no rationale behind the provisions contained in clauses (f) and (g) which introduce an apparent inconsistency and contradiction with what is provided by clause (a). Logically, it is claimed, the proceedings for imposition of penalty should have followed the same course as the assessment where the return of income has been filed. Penalty partakes of the character of an additional tax and, therefore, its imposition should not have been made dependent on the date when the assessment has been completed, particularly, when under clauses (a) and (b) it is the date of filing of the return which governs the procedure relating to assessment under one Act or the other. Under section 22(2) of the Act of 1922, the Income-tax Officer could serve a notice requiring any person whose total income was of such amount as to render him liable to income-tax to furnish within a specified period a return in the prescri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of imposition of penalty for such a default. The first departure from the Act of 1922 is that no prosecution could be, instituted under the Act of 1922 in respect of the same facts on which a penalty had been imposed. Under the Act of 1961, a penalty can be imposed and a prosecution launched on the same facts. The second change is that under the Act of 1922 the Income-tax Officer could not impose any penalty without the previous approval of the Inspecting Assistant Commissioner. Under the 1961 Act no such previous approval is necessary. Thirdly, the Act of 1922, did not prescribe any minimum amount of penalty. According to the Act of 1961, the penalty cannot be less than the minimum prescribed. This is, of course, subject to the Commissioner's power of reduction. Fourthly, the maximum penalty imposable in a case where there has been a failure to file a return in com- pliance with a notice issued by the Income-tax Officer has been reduced under the Act of 1961. Lastly, there was no time limit in the Act of 1922 for passing of a penalty order but under the Act of 1961 a period of two years has been prescribed by section 275 as stated above. Thus, whereas under the Act of 1922 a def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants article 14 is attracted because the classification which has been made is purely arbitrary depending on the accident of the date of the completion of the assessment. There can be no manner of doubt that penalty has to be calculated and imposed according to the tax assessed. It follows that imposition of penalty can take place only after assessment has been completed. For this reason there was every justification for providing in clauses (f) and (g) that the date of the completion of the assessment would be determinative of the enactment under which the proceedings for penalty were to be held. It may be that the legislature considered that a separate treatment should be given in the matter of assessment itself and under clauses (a) and (b) of section 297(2) the point of time when a return of income had been filed was made decisive for the purpose of application of the Act of 1922 or the Act of 1961. But, merely because the legislature in its wisdom decided to give a different treatment to proceedings relating to penalty, it is difficult to find discrimination with regard to the classification which has been made in clauses (f) and (g) which are independent of clauses (a) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nged by an assessee in appropriate proceedings but the mere possibility that some officer may intentionally delay the disposal of a case can hardly be a ground for striking down clause (g) as discriminatory under article 14. We are clearly of the view, in concurrence with the decisions in Gopichand Sarjuprasad v. Union of India and Income-tax Officer, A Ward, Agra v. Firm Madan Mohan Damma Mal that no discrimination was practised in enacting that clause which would attract the application of article 14. The classification made is based on intelligible differentia having reasonable relation to the object intended to be achieved. The object essentially was to prevent the evasion of tax. We are further unable to agree that the language of section 271 does not warrant the taking of proceedings under that section when a default has been committed by failure to comply with a notice issued under section 22(2) of the Act of 1922. It is true that clause (a) of sub-section (1) of section 271 mentions the corresponding provisions of the Act of 1961 but that will not make the part relating to payment of penalty inapplicable once it is held that section 297(2)(g) governs the case. Both section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olated the provisions of article 14 of the Constitution. If only the provisions of section 28 of the 1922 Act were applicable to both the groups of assessees, then there was no question of any discrimination and the entire discussion was unnecessary. Their Lordships also held that the order imposing penalty had to be made after the completion of the assessment and, therefore, the selection of the date of the completion of an assessment was not arbitrary but was in fact quite justified. Their Lordships also held that the substantive and the procedural provisions relating to penalty contained in the Act of 1961 were not onerous. This discussion, in a way, decided that section 297(2)(g) which applied section 271 and other sections of the 1961 Act relating to the imposition of penalty to cases in which the assessments were completed after April 1, 1962, although in respect of the assessment years prior, to that date, were not hit by the provisions of article 20(1) of the Constitution, the plea which has been strenuously urged before us by the attorney for the assessee. Moreover, we must presume that, while deciding the vires of section 297(2)(g), their Lordships considered the matter f ..... 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