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TMI Blog1973 (4) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... to be Rs. 70,369. At the time of passing the assessment order the Income-tax Officer directed that notice under section 28 for late submission of return under section 22(1) should also be issued. In the penalty proceedings, the Income-tax Officer levied a penalty of Rs. 2,000 under section 28(1)(a) of the Indian Income-tax Act, 1922 (hereinafter referred to as " the old Act "). The assessee filed an appeal before the Appellate Assistant Commissioner against the order of assessment and the Appellate Assistant Commissioner set aside the assessment and inconsequence thereof the order of penalty was also set aside. Thereafter, fresh assessment was made and a sum of Rs. 66,169 was determined as the total income of the assessee for the assessment year 1956-57; and this assessment order was passed by the Income-tax Officer on June 15, 1963. At the time of passing this order on June 15, 1963, the Income-tax Officer directed that penalty notice for default under section 22(1) of the old Act should be issued and fresh notice under section 28(3) of the old Act was issued by the Incometax Officer on July 19, 1964. The Income-tax Officer passed an order on January 30, 1963, levying the penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a penalty in respect of any assessment for the year ending 31st day of March, 1962, may be initiated and any such penalty may be imposed under the new Act. The Tribunal in its order has observed in paragraph 3 that the main contention on behalf of the assessee was that the Income-tax Officer has no jurisdiction to levy penalty under section 271(1)(a) inasmuch as the proceedings for penalty had not been initiated when the Income-tax Officer finalised the assessment ; and the Tribunal observed that in their opinion this submission on behalf of the assessee had no answer. The Tribunal also observed in paragraph 4 that since the order of the Appellate Assistant Commissioner, dated November 16, 1964, had become final in the sense that it was not appealed against by the department, it was not open to challenge. The main contention before us is whether it is necessary for the Income-tax Officer to initiate proceedings for penalty before finalising the assessment. The question as to the condition precedent for the commencement of penalty proceedings has been considered by the Supreme Court in D. M. Manasvi v. Commissioner of Income-tax. The Supreme Court examined the provisions of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition for the exercise of the jurisdiction." The Supreme Court has pointed out at page 563 of the report that it would be the satisfaction of the Income-tax Officer in the course of the assessment proceedings regarding the concealment of income which would constitute the basis and foundation of the proceedings for levy of penalty. In the light of this judgment of the Supreme Court and also in the light of the judgment of the Supreme Court in Commissioner of Income-tax v. S. V. Angidi Chettiar I it is obvious that both under section 28 of the old Act and section 271 of the new Act, what is required is that the satisfaction of the Income-tax Officer should have been reached in the course of the assessment proceedings. Once that satisfaction is shown to have been arrived at in the course of assessment proceedings, the notice to show cause why penalty should not be levied and subsequent step in the course of the penalty proceedings can follow. In view of these two judgments of the Supreme Court, it is obvious that the conclusion of the Tribunal that the income-tax Officer had no jurisdiction to levy penalty under section 271(1)(a) inasmuch as the proceedings for penalty had not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed under the new Act. The contention on behalf of the assessee was that in clause (g) the proceedings for penalty may be initiated under the new Act but once the proceedings are initiated under the old Act, they must be continued under the old Act. We are unable to accept this contention on behalf of the assessee. In the instant case, the assessment order, though for assessment year 1956-57, was passed on June 15, 1963 and, therefore, once it is shown that satisfaction of the Income-tax Officer was reached before the assessment order was passed, the rest of the steps are required to be taken under the new Act by virtue of clause (g), unless the proceedings can be said to have been initiated before repeal. The proceedings could not have been initiated under the old Act at any time prior to June 15, 1963. It is after the satisfaction of the Income-tax Officer in the course of the assessment proceedings is reached that the question of issuance of notice and initiation of penalty proceedings can arise ; but in the instant case, the order itself was passed on June 15, 1963, and, thereafter, the proceedings for penalty were started. It is true that when the Income-tax Officer issued t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of the old Act. He contends that this case would be governed by section 6 of the General Clauses Act, 1897, and not by section 297(2)(g) of the new Act. In our opinion, it is not possible to accept this contention of Mr. Shah. In the first place, it would not be correct to say that there was any initiation of penalty proceedings which remained pending under the provisions of the old Act. It was only because of the satisfaction of the Income-tax Officer arrived at on June 15, 1963, that the proceedings for penalty could be initiated and appropriate notice could be issued. The error committed by the Income-tax Officer when he issued the notice, annexure " F ", on July 19, 1963, was to issue the notice under section 28(3) of the old Act. Really speaking, in the light of the provisions of section 297(2)(g), he should have issued the notice under section 271 read with section 274 and he should have also passed the penalty order under the provisions of the new Act. It is well-settled that if any officer has power to act under any particular Act, the fact that reference is made to a provision of another Act, does not mean that the exercise of the power is bad. In the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be imposed under the provisions of the new Act, it cannot be said that the words " any such penalty may be imposed under this Act " are conjunctive with the initiation of the proceedings for the imposition of penalty. Thus, under section 297(2)(g), the proceedings for the imposition of the penalty can be initiated if other conditions of that clause are satisfied under the new Act and if the assessment is completed after 1st April, 1962, then the penalty, if any, has to be imposed under the new Act. At this stage, we may point out that in Jain Brothers v. Union of India, the Supreme Court has pointed out the relevant factors arising under section 297(2)(g) in conjunction with section 274 of the new Act. At page 116 of the report, it has been pointed out : "It is not possible to say that while applying the penalty provisions contained in the Act of 1961 to cases of persons whose assessments are completed after 1st April, 1962, any class has been singled out for special treatment. It is obvious 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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had not submitted an estimate of the advance tax payable by him and had also not paid the same for the assessment year 1961-62. The Income-tax Officer issued a notice under the Indian Income-tax Act, 1922, requiring the assessee to show cause why penalty should not be imposed on him, and, thereafter,the imposed the penalty of Rs. 1,500 on the assessee describing it as a penalty under section 273(b) of the new Act for the assessee's default under section 18A(3) of the old Act ; and the question that was referred to the Rajasthan High Court was : "Whether, on the facts and in the circumstances of the case, the Income-tax Officer was competent to initiate penalty proceedings for the second time and impose a penalty in pursuance thereof ? ". In between, it may be pointed out, the assessee had filed an appeal before the Appellate Assistant Commissioner who had cancelled the order imposing the penalty and thereafter fresh notice was issued by the Income-tax Officer to the assessee under section 273(b) of the new Act and the penalty of Rs. 1,000 was subsequently imposed and the question that was really agitated before the Rajasthan High Court was " whether the Income-tax Off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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