Penalty on penalty under the Income-tax Act was invalid; recovery provisions did not authorise fresh penal liability.

Section 46(1) of the Income-tax Act, 1922 was construed in its ordinary sense, and "income-tax" was held not to include an earlier penalty. The Court treated the provision as penal in character and ruled that it could not be enlarged by implication to impose a fresh penalty for default in paying a penalty already levied under section 28. Section 47 was held to be only a recovery provision, authorising recovery of sums already imposed in the manner of tax arrears, and not a separate source of liability for imposing another penalty. The impugned additional penalty was therefore invalid.

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Issues: Whether a penalty could be imposed under section 46(1) of the Income-tax Act, 1922 for default in payment of a penalty already imposed under section 28, and whether such imposition could be justified as a mode of recovery under section 47.

Analysis: The provision in section 46(1) was construed in its ordinary and natural sense, and the expression "income-tax" was not read as including "penalty". A wider construction would render section 47 partly redundant, and the Act elsewhere used the expressions "tax", "penalty" and "interest" separately. The Court held that section 46(1) was punitive in character and, as a penal provision, could not be expanded by implication. On the second question, the Court held that recovery machinery and imposition of a penalty are different concepts: section 47 deals with recovery of sums already imposed as penalty in the manner provided for arrears of tax, but it does not authorise the imposition of a fresh penalty upon an unpaid penalty. The reliance placed on earlier Supreme Court decisions was distinguished on the basis that they dealt with different statutory expressions and different modes of recovery.

Conclusion: The imposition of penalty on penalty was invalid and was not authorised by sections 46(1) or 47 of the Act.

Final Conclusion: The assessment of the impugned penalty could not be sustained, and the appellant succeeded in obtaining quashing of the order imposing the additional penalty.

Ratio Decidendi: A penal provision cannot be extended by interpretation to authorise a fresh penalty for non-payment of an earlier penalty unless the statute clearly and expressly provides for such liability.

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