Statutory minimum penalty under the Income-tax Act could not be reduced below the prescribed floor

Penalty attracted under the Income-tax Act, 1961 could not be reduced below the statutory minimum prescribed by section 271(1)(i). The Tribunal had accepted that the filing default attracted section 271(1)(a) but erred in applying the earlier 1922 Act to reduce the quantum of punishment. The Delhi HC held that, once penalty proceedings were governed by the 1961 Act, the adjudicating authority had no power to go below the minimum fixed by that statute. The reference was answered against the assessee and in favour of the Revenue.

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Issues: Whether the penalty levied under section 271(1)(a) of the Income-tax Act, 1961 could validly be reduced below the minimum prescribed under the Act.

Analysis: The reference concerned a default in filing the return for assessment year 1958-59, but the penalty proceedings were initiated under the Income-tax Act, 1961. The Tribunal had accepted that the default attracted section 271(1)(a), yet reduced the penalty on the view that the law applicable to the quantum of punishment was the earlier 1922 Act. Following the earlier opinion of the Court, it was held that the Tribunal had no authority to reduce the penalty to a figure below the minimum prescribed by section 271(1)(i) of the Income-tax Act, 1961.

Conclusion: The question was answered in the negative, against the assessee and in favour of the Revenue.

Final Conclusion: The statutory minimum penalty under the 1961 Act governed the matter, and the Tribunal's reduction below that floor was not permissible.

Ratio Decidendi: Where penalty is attracted under the Income-tax Act, 1961, the adjudicating authority cannot reduce it below the minimum penalty prescribed by the statute.

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