Penalty under the 1961 Income-tax Act applies to pre-1962 return defaults assessed after 1 April 1962, with no reduction below the minimum.

Where a return default arose under the 1922 Act but assessment was completed on or after 1 April 1962, penalty proceedings fall under section 271(1)(a) of the Income-tax Act, 1961 by virtue of section 297(2)(g). The provision applies the 1961 Act's fixed penalty formula of 2% of tax for each month of default, subject to the 50% ceiling, and does not permit reduction below the statutory minimum merely because the default occurred earlier. The Tribunal therefore lacked jurisdiction to scale the penalty down below the prescribed minimum.

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Issues: Whether, in a case where the default in filing the return occurred under the Indian Income-tax Act, 1922 but the assessment was completed after 1 April 1962, penalty had to be imposed under section 271(1)(a) of the Income-tax Act, 1961 and whether the quantum of penalty could be reduced below the statutory minimum by resort to the earlier Act.

Analysis: Section 297(2)(g) of the Income-tax Act, 1961 governs penalty proceedings for assessments for the year ending on 31 March 1962 or earlier years if the assessment is completed on or after 1 April 1962. In such cases, the penalty proceedings are initiated and the penalty is imposed under section 271(1)(a) of the Income-tax Act, 1961. That provision prescribes a fixed measure of penalty, namely 2% of the tax for every month of default, subject to an aggregate ceiling of 50% of the tax. The statutory expression used in the provision leaves no discretion to reduce the penalty below the prescribed minimum merely because the default arose when the old Act was in force.

Conclusion: The Tribunal had no jurisdiction to reduce the penalty below the minimum prescribed by section 271(1)(a) of the Income-tax Act, 1961, and the reduction to Rs. 2,000 was unjustified.

Ratio Decidendi: Where section 297(2)(g) of the Income-tax Act, 1961 applies, penalty for pre-1962 defaults completed after 1 April 1962 must be imposed under section 271(1)(a) of the 1961 Act, and the prescribed quantum cannot be reduced below the statutory minimum.

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