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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 ..... ved a notice under section 22(2) of the Indian Income-tax Act, 1922 (hereinafter referred to as "the 1922 Act"), to the assessee on October 7, 1960, requiring, it to furnish its return of income by November 11, 1960. On the request of the assessee, this time was extended to April 20, 1961. The return was, however, filed on January 1, 1963, that is, after a delay of little more than twenty months. The assessment order was passed on March 24, 1965, and the income liable to tax was assessed at Rs. 81,346. As the assessee, could not prove that the delay in filing the return of income was for a sufficient cause, the Income-tax Officer took proceedings for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s involved : " 297. (1) The Indian Income-tax Act, 1922 (XI of 1922), is hereby repealed. (2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 (XI of 1922) (hereinafter referred to as the repealed Act),- (a) where a return of income has been filed before the commencement of this Act by any person for any assessment year, proceedings for the assessment of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 ; (b) where a return of income is filed after the commencement of this Act otherwise than in pursuance of a notice under section 34 of the repealed Act by any person for the assessment year ending on the 31st day of March, 1962, or any earlier year, the assessment of that person for that year shall be made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 s ..... 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Act, may be recovered under this Act, but without prejudice to any action already taken for the recovery, of such sum under the repealed Act ; (k) any agreement entered into, appointment made, approval given, recognition granted, direction, instruction, notification, order or rule issued under any provision of the repealed, Act shall, so far as it is not inconsistent with the corresponding provision of this Act, be deemed to have been entered into, made, granted, given or issued under the corresponding provision aforesaid and, shall continue in force accordingly ; (l) any notification issued under sub-section (1) of section 60, or section 60A of the repealed Act and 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 lon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions prescribing the quantum of penalty. If only the procedural provisions of the 1961 Act for the imposition of penalty were intended to be followed and the quantum of penalty had to be fixed in accordance with the provisions of the 1922 Act, the legislature would have clearly provided therefore as has been done in clause (b) of sub-section (2) of section 297. When we compare the language of clauses (f) and (g), we find that in clause (f), the Act applicable is only the 1922 Act, and the 1961 Act has been excluded while the reverse is the case in clause (g), that is, only the 1961 Act has been applied and the 1922 Act has been excluded. Thus it follows that the penalty 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 1922 and not under section 271 of the Act of 1961. The assessment having been completed under the Act of 1922, the proceedings for imposition of penalty could also be under that Act and not under the Act of 1961. The provisions of clause (g) of sub-section (2) of section 297 of the Act of 1961, upon which the revenue relied in order to invoke the provisions of the Act of 1961, are violative of article 14 of the Constitution. " The above contention was not accepted by the learned judges of the High Court with the following observations : " Although there can be no dispute so far as the proposition is concerned that penalty is the liability to pay additional tax for dishonest 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition of penalty in respect of any assessment for the year ending on 31st day of March, 1962, or any earlier year under the Act of 1961. The penalty has also to be imposed in their case under the latter Act. It all depends, therefore, on the sweet will of the Income-tax Officer to complete the assessment before the first day of April, 1962, or to complete it thereafter in order to make the provisions of the Act of 1922 or the Act of 1961 applicable in the matter of initiation of proceedings for and imposition of a penalty. A fortuitous event of the assessment being made on or before 1st April, 1961, has no reasonable relation with the object of legislation. It is further pointed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order cannot be passed after the expiration of two years from the date of the completion of proceedings in the course of which the proceedings for imposition of a penalty have been commenced. It may be mentioned that in Chapter XXII dealing with offences and prosecutions a provision has been made in section 276 for punishment with fine in case of failure without reasonable cause or excuse to furnish in due time a return under section 139(2) which was equivalent to section 22(2) of the Act of 1922. As the present case relates only to a penalty having been imposed on account of the failure to furnish a return, we may notice the main changes made in the Act of 1961 in the matter 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . v. Union of India the State is undoubtedly prohibited from denying to any person equality before the law or the equal protection of the laws but by enacting a law which applies generally to all persons who come within its ambit as from the date on which it becomes operative, no discrimination is practised. In that case although a distinction had been made with reference to section 25FFF(1) of the Industrial Disputes Act, 1947, as inserted by Act 18 of 1957, between employers who had closed their undertakings on or before November 27, 1956, and those who had done so after that date, it was held that article 14 had not been violated. According to the arguments on behalf of the appellants 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 assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order imposing penalty must be made after the completion of the assessment. The crucial date, therefore, for purposes of penalty, is the date of such completion. It is equally difficult to understand the argument that because it rests with the Income-tax Officer to complete the assessment by a particular date, it will depend on his fiat whether the penalty should be imposed under the Act of 1922 or under the Act of 1961. There is no presumption that officers or authorities, who are entrusted with responsible duties under the taxation laws, would not discharge them properly and in a bona fide manner. If in a particular case any mala fide action is taken, that can always be challenged 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7(2)(g), as contended for by the attorney for the assessee in this case, the penalty could not be imposed under section 271 of the 1961 Act, and it had to be imposed under section 28 of the 1922 Act, the entire discussion with regard to discrimination was unnecessary. The attorney for the assessee has contended that only an assumption was made by the learned counsel for the appellant before their Lordships that the penalty had to be imposed under section 271 of the 1961 Act, which created discrimination. But, it was not contended by either side that it was not so and their Lordships accepted that contention and examined it to find out whether on that interpretation section 297(2)(g) violated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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