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TMI Blog1982 (8) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------ Asst. The due date The date on Delay in The date on The amount year for filing the which the complete which the of penalty return return was months penalty was levied filed levied Rs. -------------------------------------------------------------------------------- 1960 61 30-6-60 29-1-64 42 15-12-71 4,738 1961-62 30-6-61 29-1-64 30 15-12-71 4,506 1962-63 30-6-62 14-12-64 29 15-12-71 4,648 1963-64 30-6-63 2-6-66 31 15-12-71 6,944 1964-65 30-6-64 19-2-68 43 15-12-71 7,085 -------------------------------------------------------------------------------- In all the five assessment years, the WTO initiated penalty proceedings under s. 18(1)(a) of the Act. The assessee appeared before the WTO and some explanation was given before him but the WTO has not pointed out what explanation was given. The WTO has pointed out that no written explanation was filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il 1, 1965, the amendment will be applicable to all the proceedings which were pending. The Tribunal found that the WTO imposed the penalty on December 15,1971, and so the Tribunal held that it was not necessary for the WTO to take the previous approval of the IAC of Wealth-tax as no provision was there at the time he was levying the penalty and the Tribunal also held that obtaining the prior approval of the IAC of Wealth-tax was only a procedural matter and when the provision was omitted no approval was necessary. In view of the aforesaid finding, the Tribunal has held that the AAC was not correct in cancelling the orders of the WTO on the ground that he had failed to take the prior approval of the IAC of Wealthtax before imposition of penalty under s. 18(1)(a) of the Act. It further held that as the AAC had not given any finding on the other pleas which were taken by the assessee before the AAC the Tribunal set aside the order of the AAC and directed him to decide the other grounds taken by the assessee according to law after giving opportunity to both the parties of being heard. Before we proceed to consider the rival contentions raised on behalf of the parties, we think it a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .. (2) No order shall be made under section (1) unless the person concerned has been given a reasonable opportunity of being heard. (3) Notwithstanding anything contained in clause (iii) of subsection (1), if in a case falling under clause (c) of that sub-section, the minimum penalty imposable exceeds a sum of rupees one thousand, the Wealth-tax Officer shall refer the case to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this section for the imposition of penalty ......... (5) No order imposing a penalty under this section shall be passed after the expiration of two years from the date of the completion of the proceedings in the course of which the proceedings for the imposition of penalty have been commenced..." Mr. J. P. Bhattacharjee, the learned counsel for the assessee, submits that it is settled law that a penalty proceeding can be held according to the law in existence at the time of the default in furnishing the return in accordance with the provision of s. 14 of the Act. As in this case the WTO has not taken the prior approval of the IAC, which was necessary according to law in existence prior to the amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied). Ultimately this court has held that the penalty can be imposed on the assessee only on the basis of the law as it stood on that date. Similar view has been taken by the Supreme Court in CWT v. Suresh Seth [1981] 129 ITR 328, where it was held that non-performance of any of the acts mentioned in s. 18(1)(a) gives rise to a single default and to a single penalty, the measure of which, however, is geared up to the time lag between the last date on which the return has to be filed and the date on which it is filed. The default, if any, committed, is committed on the last date allowed to file the return. The default cannot be one committed every month thereafter. The words " for every month during which the default continued " indicate only the multiplier to be adopted in determining the quantum of penalty and do not have the effect of making the default in question a continuing one. Nor do they make the amended provisions modifying the penalty applicable to earlier defaults in the absence of necessary provisions in the amending Acts. The distinctive nature of a continuing wrong is that the law that is violated makes the wrongdoer continuously liable for penalty. A wro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere matter of procedure but is a substantive right. The institution of the suit carries with it the implication that all rights of appeal then in force are preserved to the parties thereto till the rest of the career of the suit. There the suit was instituted on April 22, 1949, the right of appeal vested in the parties thereto at the date and is to be governed by the law as it prevailed on that date, that is to say, on that date the parties acquired the right, if unsuccessful, to go up in appeal from the sub-court to the High Court and from the High Court to the Federal Court under the Federal Court (Enlargement of jurisdiction) Act, 1947, read with cl. 39 of the Letters Patent (Mad) and ss. 109 and II 0 of the CPC provided the conditions thereof were satisfied, unless that right had been taken away expressly or by necessary intendment by any subsequent enactment. The Constitution by art. 395 repealed the Govt. of India Act and thereby abolished the Federal Court. It, however, continued the abolition of Privy Council jurisdiction Act, 1949, which directed that the Federal Court, in addition to the powers conferred on it by the Federal Court (Enlargement of Jurisdiction) Act, 194 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght has been wrongly denied to him the Supreme Court would be prepared to grant him special leave to appeal under article 136 of the Constitution . " Discussing a catena of decisions, their Lordships have laid down the following principles (p. 553) : " (i) That the legal pursuit of a remedy, suit, appeal and second appeal are really but steps in a series of proceedings all connected by an intrinsic unity and are to be regarded as one legal proceeding. (ii) The right of appeal is not a mere matter of procedure but is substantive right. (iii) The institution of the suit carries with it the implication that all rights of appeal then in force are preserved to the parties thereto till the rest of the career of the suit. (iv) The right of appeal is a vested right and such a right to enter the superior court accrues to the litigant and exists as on and from the date the: lie commences and although it may be actually exercised when the adverse judgment is pronounced such right is to be governed by the law prevailing at the date of the institution of the suit or proceeding and not by the law that prevails at the date of its decision or at the date of the filing of the appeal. (v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h court. What is sought to be conferred under s. 96(1)(b) is the power to make rules for regulating the procedure before the insurance court after an application has been filed and when it is seized of the matter. That apart, r. 17 bars the claim itself and extinguishes the right which is not within the pale of procedure. It has been observed (p. 350 of 40 FJR) : "There is no gainsaying the fact that if an employee does not file an application before the insurance court within 12 months after the claim has become due or he is unable to satisfy the insurance court that there was a reasonable excuse for him in not doing so, his right to receive payment of any benefit conferred by the Act is lost. Such a provision affects substantive rights and must therefore be dealt with by the Legislature itself and is not to be inferred from the rule-making power conferred for regulating the procedure unless that is specifically provided for." r Dealing with the concept of substantive right and procedural right, the court has said: (p. 1936 of AIR 1972 SC-See also pp. 341, 342, 343 344 of 40 FJR): " The question which directly confronts us is whether the power to prescribe periods of limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at p. 645) (underscored by us). The manner of this approach may be open to the criticism of having over-simplified the distinction, but none the less this will enable us to grasp the essential requisites of each of the concepts which at any rate has been found to be a workable concept to point out the real and valid difference between the rules in which stability is of prime importance and those in which flexibility is a more important value. (American Jurisprudence, vol. 51, second edn., p. 695). Keeping these basic assumptions in view it will be appropriate to examine whether the topic of limitation belongs to the branch of procedural law or is outside it. If it is a part of the procedure whether the entire topic is covered by it or only a part of it and if so what part of it and the tests for ascertaining them. The law of limitation appertains to remedies because the rule is that claims in respect of rights cannot be entertained if not commenced within the time prescribed by the statute in respect of that right. Apart from Legislative action prescribing the time, there is no period of limitation, recognised under the general law and, therefore, any time fixed by the statute is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme when forms of action ruled. In the words of Maine 'so great is the ascendancy of the Law of Actions in the infancy of courts of justice that substantive law has at first the look of being gradually secreted in the interstices of procedure '. Maine, Early Law and Custom, p. 399. Even after the forms of action were abolished Maitland in his Equity was still able to say. ' The forms of action we have buried but they still rule us from their graves ' to which Salmond added 'In their life they were powers of evil and even in death they have not wholly ceased from troubling': 21 LQR 43. Oliver Wendel Holmes had, however, observed in The Common Law, 'wherever we trace a leading doctrine of substantive law far enough back we are likely to find some forgotten circumstances of procedure at its source '. It does not therefore appear that the statement that substantive law determines rights and procedural law deals with remedies is wholly valid, for neither the entire law of remedies belongs to procedure nor are rights merely confined to substantive law, because as already noticed, rights are hidden even `in the interstices of procedure'. There is, therefore, no clear-cut From a perusal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f s. 18(4). Under the Act the IAC was not at all an authority to impose a penalty. We do not think that the decision cited above in any way comes to the assistance of the assessee. That apart, with respect, we like to observe that the reason given in that case does not commend itself to our mind so as to follow and apply it to the case in hand. Mr. G. K. Talukdar, the learned counsel appearing on behalf of the Department, submits that sub-s. (4) of s. 18 of the Act has been rightly held to be a procedural one by the Tribunal. By the amendment of s. 18 in 1964 the provision for taking the prior approval by the WTO has been expressly deleted and now the WTO has got untrammelled jurisdiction to impose the penalty. Where it is found necessary by the Legislature that in some cases the IAC shall have jurisdiction to impose a penalty it has been done so as can be seen from the provision of sub-s (3) of s. 18 of the amended Act. The learned counsel for the Department submits that nobody has got any right in the change of forum or authority for levying the tax. It has been further submitted that the decision in T. K. Roy [1978] 115 ITR 746 (Gauhati) and Suresh Seth [1981] 129 ITR 328 (S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... days of the receipt of the notice why adjudication proceedings should not be held against him for contravention of s. 23(1) of the Act. On May 10, 1958, the respondent replied to the above memorandum giving his version as to how he came into possession of the foreign currency, but be denied having sold any travellers cheques. He prayed that the proceedings may be dropped and the currency seized returned to him. The Director of Enforcement, after considering the cause shown by the respondent, came to the conclusion that the adjudication proceedings should be held. He, therefore, requested the respondent to arrange to be present either personally or through his authorised representative before the Director on May 13, 1958, in the office of the Calcutta branch of the Directorate. On May 13, 1959, the respondent filed a petition under art. 226 of the Constitution challenging the adjudication proceedings on various grounds, the principal grounds being that s. 23(1)(a) and s. 23D of the Act were ultra vires art. 20(2) of the Constitution and that the offence having been committed in 1954 , the proposed adjudication was illegal and entirely without jurisdiction. The Calcutta High Court he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. As observed by this court in Rao Shiv Bahadur Singh v. State of Vindhya Pradesh [1933] SCR 1188; AIR 1953 SC 394, a person accused of the commission of an offence has no vested Tight to be tried by a particular Court Or a particular, procedure except in so far as there is any constitutional objection by way of discrimination or the violation of any other fundamental right is involved. It is well recognized that 'no person has a vested right in any course of procedure' (vide Maxwell, 11th Edn., p. 216), and we see no reason why this ordinary rule should not prevail in the present case. There is no principle underlying art. 20 of the Constitution which makes a right to any course of procedure vested right. Mr. Chatterjee complains that there is no indication in the Amending Act that the new procedure would be retrospective and he further says that this affects his right of appeal under the Criminal Procedure Code. But if this is a matter of procedure, then it is not necessary that there should be a special provision to indicate that the new procedural law is retrospective. No right of appeal under the Criminal Procedure Code is affected because no proceedings bad ever been started ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 6 then provided for notification by the Custodian and s. 8 for preferring claims. The second Mysore Act, however, made a departure from this and section 5 thereof provided that : "Where the Custodian is of opinion that any property is evacuee property within the meaning of this Act he may, after causing notice thereof to be given in such manner as may be prescribed to the persons interested, and after holding such inquiry into the matter as the circumstances of the case permit, pass an order declaring any such property to be evacuee property." Section 6 then Provided for the vesting of any property declared to be evacuee property, in the Custodian. Thus, while under the first Mysore Act the evacuee property vested in the Custodian and the person who claimed that it was not evacuee property had to make an application under s. 8 and to get it declared that it was not evacuee property, under the second Mysore Act there was no vesting in the Custodian and the Custodian had to give a notice in the manner prescribed and after hearing the persons interested to declare the property to be evacuee property ; and it was only thereafter that the property vested in him as evacuee propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e explicit from December 7, 1950, so that from April 17, 1950, only the Act held the field. On February 11, 1952, the Custodian-General set aside the order of the Custodian dated August 22, 1950, and ordered that further proceedings in these cases should be taken before the Custodian as an original matter and he was directed to dispose of the cases afresh in the light of the evidence already recorded and such other evidence as might be produced before him by the two respondents. When the matter thus came back to the Custodian he ordered the Deputy Custodian on April 7, 1952, to record the evidence and then submit the record to him for final disposal. Eventually the matter came before the Custodian for final disposal on December 2, 1952. He held that the two respondents were evacuees and their properties were evacuee properties. This was followed by two appeals to the High Court on January 2, 1953. As, however, the respondents felt some doubt whether any appeal lay to the High Court two writ petitions were also filed on September 7, 1953, against the order of the Custodian. The two appeals as well as the two writ petitions were disposed of by the High Court by a common judgment on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to say that the remedy provided by the first Mysore Act under section 30 had been superseded by the remedy provided in the Act, that remedy being an appeal to the Custodian-General under section 24 of the Act. The argument further proceeds that neither the second Mysore Act nor the Act provides anything similar to what was provided by section 8 of the first Mysore Act. Therefore, even though the first Mysore Act was repealed by the second Mysore Act the proceedings in the present case must be deemed to be still under the first Mysore Act which must be deemed to be existing for this purpose and, therefore, the right of appeal being a vested one and arising when the proceedings commenced, there would still be a right of appeal under section 30 of the first Mysore Act in spite of its being repealed. When the matter came before the Custodian in 1952 it was contended before him that the proceedings should be taken to be under the first Mysore Act. He accepted this contention though he added that it was immaterial for the purposes of the present case as the definition of " evacuee " in section 2(c) of the first Mysore Act was practically the same as in section 2(d) of the Act. It is urg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the High Court. The Legislature has provided another forum where the appeal will lie and in the circumstances it must be held that by necessary intendment the Legislature intended that forum alone to be the forum where the appeal will lie and not the forum under the first Mysore Act. Reference in this connection may be made to G. Veeraya v. N. Subbiah Choudhry [1957] SCR 488; AIR 1957 SC 540, where this court held that the vested right of appeal was a substantive right and was governed by the law prevailing at the time of the commencement of the suit and comprised all successive rights of appeal from court to court which really constituted one proceeding but added that such right could be taken away expressly or by necessary intendment. In the present case we are of opinion that once proceedings under section 8(1) of the first Mysore Act are held to be similar to proceedings under section 5(1) of the second Mysore Act or section 7(1) of the Act, it must necessarily follow that the Legislature intended that all subsequent proceedings in the nature of appeal, after the first Mysore Act came to an end, must be in the forum provided by the subsequent legislation. We are, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty. Although those proceedings were still pending a writ petition was filed on August 26, 1966, in the High Court challenging, inter alia, the validity and the constitutionality of s. 23(5) of the Act of 1922 and s. 297(2)(g) and s. 271(2) of the Act of 1961, respectively. The High Court did not accede to any of the contentions of the present appellants and the petition was dismissed. The appellant, being aggrieved, preferred an appeal before the Supreme Court. Under s. 22(2) of the 1922 Act, the ITO could serve 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 return in the prescribed form setting forth his total income during the previous year. Under s. 28, if the ITO, the AAC or the Appellate Tribunal, in the course of any proceedings, was satisfied that any person had, without reasonable cause failed to furnish the return of his total income which he was required to furnish by notice given under s. 22 it could be directed that such person shall pay by way of penalty, in addition to the amount of income-tax and super-tax payable by him, a sum not exceeding 1 1/2 times that amount. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fourthly, the maximum penalty imposable in a case where there has been a failure to file a return in compliance 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 defaulting assessee had certain protection in the matter of prosecution no such protection has been afforded under the Act of 1961 ; but the maximum amount of penalty which can be imposed has been reduced and a period of limitation has been prescribed for passing penalty order which is of distinct advantage to a defaulting assessee." Their Lordships held that it was not possible, to accept the suggestion on behalf of the appellants that the substantive and the procedural provisions relating to penalty contained in the Act of 1961 are altogether onerous. Ultimately, the Supreme Court held as under (p. 117) : " We are further unable to agree that the language of section 271 does not warrant the taking of proceedings under that section when default has been committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But we must observe that the aforesaid decision of the Supreme Court turns on the provision of s. 297(2)(g) of the I.T. Act, 1961, which can be gathered from the relevant portion of the judgment noticed above. Hence we find that the decision in Jain Bros. [1970] 77 ITR 107 (SC) does not directly support the submission of the learned counsel for the Department. The learned counsel for the Department refers to a decision of this court in Rajputana Stores v. IAC [1975] 99 ITR 499. This case was also relied upon by the Tribunal. There the petitioner challenged the authority of the order dated September 2, 1966, passed by the IAC, Dibrugarh Range, imposing on the petitioner a penalty of Rs. 10,000 under s. 271 of the I.T. Act, 1961. For the year 1964-65 the petitioner submitted a return of its income on October 21, 1964, showing its total income at Rs. 28,270. The ITO, however assessed the income of the petitioner at Rs. 47,273 for that year. After the first appeal of the petitioner had been dismissed, penalty proceedings were initiated against it by the ITO, Jorhat, in terms of cl. (c) of a. 271(1) of the 1961 Act. The penalty proceedings had, however, to be referred by that ITO to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me from his share in a partnership business filed returns of income disclosing only his share of income from the said firm. Assessments were completed for these two years on February 28, 1970, and the ITO included the income of the minor children of the assessee who were also partners in the same firm and the income from the house property standing in the name of the assessee's wife which actually belonged to the assessee. As a result of these additions, as against the returned income of Rs. 5,940 for the assessment year 1968-69 and Rs. 7,020 for the assessment year 1969-70, the assessee was assessed on an income of Rs. 30,840 and Rs. 19,472, respectively. The ITO initiated proceedings for imposition of penalty under s. 271(1)(c) Of the I.T. Act. 1961, and as he was of the view that the cases were covered by s. 274 of the Act, referred them to the IAC. While the matter was pending before the IAC, s. 274(2) was amended by the T.L. (Amend.) Act, 1970, with effect from April 1, 1971. The IAC imposed penalties of Rs. 24,000 and Rs. 12,500, respectively, for these two years. On appeal, the Appellate Tribunal held that, in view of the amendment of s. 274(2), the IAC lost jurisdiction to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of concealment and it was the IAC who was competent to impose penalty and not the ITO. On further appeal, the Appellate Tribunal affirmed the order of the ITO. On a reference, the Karnataka High Court held that the question of determining the quantum of penalty payable by an a with reference to the date of concealment of income had no bearing on the question of competence of the authority to impose penalty and the latter had to be determined with reference to the date when the penalty was imposed. Therefore, it was held that the ITO had jurisdiction to impose penalty under s. 271(1)(c) for the assessment years 1968-69 and 1969-70, alter the amendment of s. 274(2) by the T.L. (Amend.) Act, 1970, with affect from April 1, 1971. The court referred to the Madras decision in Continental Commercial Corporation v. ITO [1975] 100 ITR 170, but did not follow it. We may also notice another decision of the Karnataka High Court in R. Abdul Azeez v. CIT [1981] 128 ITR 547 (Kar), where the I.T. (Amend.) Act, 1975, came up for consideration. The Amendment Act, 1975, while omitting s. 274(2), made three consequent changes : (i) By s. 48 of the Amending Act, cl. (b) of sub-s. (1) of a. 154 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC 494, the court has also made the following significant observation [head note of 128 ITR 547 (Kar)] : " Section 6 of the General Clauses Act, 1897, applies to repeals and not to omissions. After the omission of section 274(2) of the Income-tax Act, 1961, with effect from 1-4-1976, the Inspecting Assistant Commissioner would have no jurisdiction to pass orders of penalty after that date in cases where concealment of income exceeded Rs. 25,000 and the proceedings were pending before him. Section 6 of the General Clauses Act cannot be invoked to save such proceedings. " We have already noticed the decisions of the Supreme Court in Sukumar Pyne, AIR 1966 SC 1206, Khan Saheb Abdul Shukoor, AIR 1961 SC 1087, where it has been held that in the change of forum by law nobody has got any vested right nor can it be said to have taken away any substantive right of anybody. In Rajputana Stores [1975] 99 ITR 499 (Gauhati), Om Sons [1979] 116 ITR 215 (All), Dhadi Sahu [1976] 105 ITR 56 (Orissa), M. Y. Chandragi [1981] 128 ITR 256 (Kar) and R. Abdul Azeez [1981] 128 ITR 547 (Kar), we have noticed that none has got any right in the change of law as to who would impose penalty. It has been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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