Penalty under the Income-tax Act 1961 applies to saved proceedings for late return filing, with statutory computation under the new law.

Penalty proceedings for late filing of a return relating to an assessment year governed by the repealed Act are saved by section 297(2)(g) and transfer to the Income-tax Act, 1961 where the assessment was completed on or after 1 April 1962. Because penalty proceedings are distinct from assessment proceedings, the old law does not continue to apply merely under section 297(2)(a) when the new Act specifically provides for penalty. Proceedings covered by section 297(2)(g) are treated as proceedings under the 1961 Act, so section 271(1)(a) applies mutatis mutandis and the penalty is to be computed under the statutory formula. On that basis, the penalty was governed by section 271(1)(a) and was not legally reducible to a nominal amount.

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Issues: Whether penalty for late filing of the return for an assessment year governed by the repealed Act could be imposed under section 271(1)(a) of the new Act, and whether the Tribunal was justified in reducing the penalty from Rs. 4,781.12 to Rs. 1,000.

Analysis: Section 297(2)(g) of the new Act expressly saves and transfers to the new Act proceedings for imposition of penalty in respect of assessments for the year ending on 31 March 1962 or earlier years where the assessment was completed on or after 1 April 1962. Penalty proceedings are distinct from assessment proceedings, and where the legislature has specifically provided for penalty under the new Act, clause (a) of section 297(2) cannot be used to apply the old law. The expression in section 271(1) requiring satisfaction in the course of proceedings under the new Act is satisfied because proceedings covered by section 297(2)(g) become proceedings under the new Act. The provision must be applied mutatis mutandis, and the penalty is to be computed under section 271(1)(a)(i) according to the statutory formula, taking account of the relevant tax base as explained in the departmental circular relied upon by the Court.

Conclusion: The penalty was liable to be governed by section 271(1)(a) of the Income-tax Act, 1961, and it was not legally permissible to reduce it to Rs. 1,000 on the view taken by the Tribunal.

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