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TMI Blog1971 (12) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Income-tax Act, 1961, in respect of an estimate of the advance tax payable by the assessee for the assessment year 1961-62. R.C. No. 56/1970 arises out of a proceeding for the levy of penalty under section 221 for default in payment of tax in respect of the assessment year 1961-62. R.C. No. 57/70 arises out of a proceeding for the levy of penalty under section 221 for the default in payment of the tax in respect of the assessment year 1962-63. One Nagapotha Rao and his three sons, Seetharama Rao, Raja and Satyanarayanamurthy, constituted a Hindu undivided family. In 1947, Seetharama Rao died leaving behind him a widow, Raja Syamala. Nagapotha Rao died in 1950. Raja Syamala filed a suit O.S. No. 47 of 1954 on the file of the court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us in R.C. No. 57/1970 has, therefore, to be answered against the department. In R.Cs. Nos. 55 and 56 of 1970 Sri P. Rama Rao, learned counsel for the department, urged that the assessment for the assessment year 1961-62 was completed on February 28, 1966, and, therefore, penalty proceedings were initiated and penalties were imposed under the 1961 Act as provided by section 297(2)(g) of the 1961 Act. He submitted that under section 174(4) of the 1961 Act, notwithstanding the disruption of the family during the year of account, the total income of the family in respect of the period up to the date of partition shall be assessed as if no partition had taken place and under section 171(8), the provisions of section 171 applied to the levy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment proceedings. Though in a certain sense penalty is considered to be additional tax and for certain purposes the word " assessment " is considered to mean the whole procedure for the imposition of liability on the taxpayer including the levy of penalty, it is well-known that a penalty has certain distinct characteristics of its own. It is not necessary to embark upon a discussion of the nature of a penalty but it is sufficient to say that penalty cannot be equated to tax, a proceeding for the levy of penalty must be initiated separately, the finding arrived at in assessment proceedings are not binding in penalty proceedings and the burden of proof is different. If this is borne in mind and if what we said, a moment ago, namely, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious that for the imposition of penalty it is not the assessment year or the date of the filing of the return which is important but it is the satisfaction of the income-tax authorities that a default has been committed by the assessee which would attract the provisions relating to penalty. Whatever the stage at which the satisfaction is reached, the scheme of sections 274(1) and 275 of the Act of 1961, is that the 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 clear from the decision of their Lordships that the effect of section 297(2)(g) is to attract all the provisions relating to penalty in the 1961 Act to cases w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s upheld by the Supreme Court who observed : It is admitted in this case that the right ...... was barred under the old Act before the new Act came into force. In our opinion, it is not permissible to construe section 297(2)(d)(ii) of the new Act as reviving the right of the Income-tax Officer to reopen the assessment which was already barred under the old Act. The reason is that such a construction of section 297(2)(d)(ii) would be tantamount to giving of retrospective operation to that section which is not warranted either by the express language of the section or by necessary implication. The principle is based on the well-known rule of interpretation that, unless the terms of the statute expressly so provide or unless there is a neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court and the present case is : there the right to reopen the assessment arose and became extinguished under the old Act, whereas in the present case the occasion for the levy of penalty arose after the new Act had come into force, and the penalty proceedings had, therefore, to be initiated under the new Act. The assessee had no vested right regarding the law applicable to the levy of penalty until the date of completion of the assessment. In R.C. No. 56/70 a further argument was advanced by Sri Anjaneyulu that section 221 of the 1961 Act did not apply as the assessee could not be considered to be in default since the assessment was made under the old Act. There is no substance in this submission since section 221 and other pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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