Income-tax penalty proceedings follow the 1961 Act after its commencement; article 20(1) does not bar the statutory minimum.

Penalty proceedings for an assessment year governed substantively by the 1922 Act, but initiated after the 1961 Act came into force, were held to fall under the transitional provision in section 297(2)(g) of the Income-tax Act, 1961. The article explains that the Tribunal wrongly applied the 1922 Act merely because it had no minimum penalty. It further states that income-tax penalty is a deterrent fiscal consequence, not a criminal prosecution for an offence, so article 20(1) of the Constitution does not bar application of the penalty provisions in force when proceedings are initiated. The statutory minimum penalty under section 271(1)(c) therefore applied.

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Issues: Whether, for an assessment year governed substantively by the Indian Income-tax Act, 1922, the penalty proceedings initiated after the commencement of the Income-tax Act, 1961 were governed by the 1961 Act and whether the minimum penalty prescribed under section 271(1)(c) of the 1961 Act could be avoided by invoking article 20(1) of the Constitution of India.

Analysis: The assessment year was 1960-61, but the penalty proceedings were initiated after the 1961 Act came into force. Under section 297(2)(g) of the Income-tax Act, 1961, penalty proceedings in respect of earlier assessment years completed on or after 1 April 1962 could be initiated and imposed under the new Act. The Tribunal erred in applying section 28(1) of the Indian Income-tax Act, 1922 merely because that Act contained no minimum penalty. The penalty under the Income-tax Act is not equivalent to a criminal prosecution for an offence; it is a deterrent measure and an additional tax consequence, distinct from punishment for an offence. Since no conviction for an offence is involved, the protection in article 20(1) does not apply to penalty proceedings under the Income-tax Act.

Conclusion: The penalty was rightly governed by section 271(1)(c) of the Income-tax Act, 1961, and the levy of a penalty below the statutory minimum was not justified. The reference was answered against the assessee and in favour of the Revenue.

Ratio Decidendi: Penalty proceedings under the Income-tax Act are not criminal prosecutions for an offence, and article 20(1) of the Constitution does not bar application of the penalty provisions of the law in force when the proceedings are initiated under the statutory transitional provision.

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