Penalty for pre-repeal tax default remains sustainable when the successor provision makes the earlier breach punishable.

A penalty under the Income-tax Act, 1961 may be imposed for a default committed under the corresponding obligation in the Indian Income-tax Act, 1922 where the successor provision makes that default punishable. The earlier view that such penalty could not be levied was stated to be no longer good law because it had been overruled. The governing principle was that the later penalty provision could operate in respect of the earlier default, so the fact that the breach arose under the repealed enactment did not defeat the legal basis of penalty. The issue was answered against the assessee, and penalty was held sustainable in principle.

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Issues: Whether the assessee could be penalised under section 273(b) of the Income-tax Act, 1961 for a failure committed under section 18A(3) of the Indian Income-tax Act, 1922.

Analysis: The earlier view that no such penalty could be levied was no longer good law, as it stood overruled. The governing principle applied was that the penalty provision in the later Act could operate in respect of the default mentioned in the earlier Act, so the legal basis of the penalty was not defeated merely because the default arose under the repealed enactment.

Conclusion: The question was answered in the negative and against the assessee, and the penalty was held to be sustainable in principle.

Ratio Decidendi: A penalty under the Income-tax Act, 1961 can be imposed for a default committed under the corresponding obligation in the Indian Income-tax Act, 1922 where the successor provision makes the default punishable.

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