Transitional penalty rule under income-tax law: assessment completion date governs application of the new penalty provision.

Transitional penalty proceedings under the Income-tax Act, 1961 depend on the date of completion of the assessment, not merely on when the default under the 1922 Act occurred. Where the assessment was completed on or after 1 April 1962, section 297(2)(g) authorised initiation and imposition of penalty under section 273(b) of the 1961 Act for a default committed under section 18A(3) of the 1922 Act. The controlling principle is that the assessing authority's satisfaction for penalty arises at the stage of assessment completion, making that date determinative for applying the new penalty regime.

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Issues: Whether penalty under section 273(b) of the Income-tax Act, 1961 could be imposed for default committed under section 18A(3) of the Indian Income-tax Act, 1922 where the assessments were completed after 1 April 1962.

Analysis: The reference turned on the transitional operation of section 297(2)(g) of the Income-tax Act, 1961. The controlling principle, as settled by the Supreme Court, was that the applicability of the new penalty provisions depends on the date of completion of the assessment, since the assessing authority's satisfaction for penalty arises at that stage. Once the challenge to the validity of section 297(2)(g) was rejected, the provision clearly authorised initiation and imposition of penalty under the new Act in respect of assessments completed on or after 1 April 1962, even where the default occurred under the old Act.

Conclusion: The answer was in the negative for the assessee and in favour of the Revenue; penalty under section 273(b) of the Income-tax Act, 1961 was legally exigible for the old Act default because the assessments were completed after 1 April 1962.

Ratio Decidendi: For transitional penalty proceedings, the determinative date is the date of completion of the assessment, and where the assessment is completed on or after 1 April 1962, penalty may be imposed under the Income-tax Act, 1961 for a default committed under the Indian Income-tax Act, 1922.

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