Transitional penalty rules under the Income-tax Act allow pre-1962 default periods to count when assessment follows the new Act.

Section 297(2)(g) of the Income-tax Act, 1961 permits penalty under section 271(1)(a) for assessment years preceding 1962-63 where the assessment is completed on or after 1 April 1962. The applicable penalty regime is therefore determined by the law in force at the time of assessment, rather than by the earlier Act. Once penalty is levied under the 1961 Act, its computation follows section 271(1), and the period of default is measured from the date of default itself. The commencement of the Act does not exclude default occurring before 1 April 1962 from the penalty calculation.

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Issues: (i) Whether penalty for the assessment years 1960-61 and 1961-62 could validly be levied under section 271(1)(a) of the Income-tax Act, 1961. (ii) Whether, in computing the penalty, the period of default prior to 1 April 1962 could be taken into account.

Issue (i): Whether penalty for the assessment years 1960-61 and 1961-62 could validly be levied under section 271(1)(a) of the Income-tax Act, 1961.

Analysis: The transitional scheme in section 297(2)(g) permits levy of penalty under the 1961 Act where the assessment for a year preceding 1962-63 is completed on or after 1 April 1962. The governing principle is that the law in force at the time of assessment determines the penalty regime, and the earlier Act does not control where the new Act expressly applies.

Conclusion: The levy of penalty under section 271(1)(a) of the Income-tax Act, 1961 was valid and the issue was decided against the assessee.

Issue (ii): Whether, in computing the penalty, the period of default prior to 1 April 1962 could be taken into account.

Analysis: Once penalty is levied under the 1961 Act, its computation must follow section 271(1) of that Act. The relevant default is to be measured from the date on which it occurred, and the commencement date of the Act does not provide a basis for excluding the earlier period of default from the computation.

Conclusion: The period of default prior to 1 April 1962 could be taken into account, and the issue was decided against the assessee.

Final Conclusion: The reference was answered wholly in favour of the Revenue, upholding the penalty under the 1961 Act and its computation from the actual date of default.

Ratio Decidendi: Where the assessment for a year preceding 1962-63 is completed on or after 1 April 1962, penalty is governed by the Income-tax Act, 1961, and its quantum must be computed under that Act from the date of the default.

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