Transitional penalty rules under the Income-tax Act require quantum to follow the later Act, not the earlier default period.

Under the transitional scheme in section 297(2)(g), penalty for a delayed return had to be imposed under section 271(1)(a) of the Income-tax Act, 1961, even though the default occurred when the 1922 Act was in force. The applicable penalty quantum therefore had to be determined by the later Act's prescribed rates, and it could not be reduced by referring back to the period of infringement under the earlier regime. On that principle, the Tribunal was not justified in cutting the penalty below the statutory minimum applicable under section 271(1)(a), and the Revenue's position prevailed.

---

---

Issues: Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in reducing the penalty imposed under section 271(1)(a) of the Income-tax Act, 1961, for assessment year 1958-59.

Analysis: The return for the assessment year 1958-59 was filed late and the penalty was imposed under section 271(1)(a) of the Income-tax Act, 1961. The Tribunal accepted that the default had occurred when the Indian Income-tax Act, 1922, was in force, and on that basis reduced the penalty. The Court held that, in a case governed by section 297(2)(g), penalty has to be imposed under section 271(1)(a) of the Income-tax Act, 1961. Once that provision applies, the penalty cannot be reduced below the rates prescribed by that section by referring back to the period of default. The Court further noted that the line of cases dealing with the date of infringement did not assist the assessee because the applicable penalty provision had already been settled by the Supreme Court.

Conclusion: The Tribunal was not justified in reducing the penalty from Rs. 7,869 to Rs. 1,000; the question was answered in favour of the Revenue and against the assessee.

Ratio Decidendi: Where penalty is attracted under the transitional provision and the governing penalty section of the later Act applies, the quantum must be determined under that section and cannot be reduced by reference to the period when the default occurred under the earlier Act.

---