Wrong statutory citation and penalty timing under tax law do not invalidate proceedings where the notice is otherwise lawful.

A penalty notice is not invalid merely because it cites the wrong statutory provision, so long as the action is otherwise supportable under the correct law. Applying that principle, the notice referring to section 28(3) of the 1922 Act remained valid where the proceedings were governed by section 297(2)(g) of the 1961 Act. The Court also held that section 275 of the Income-tax Act, 1961 is a limitation provision fixing the outer time limit for completion of penalty proceedings; it does not require those proceedings to be commenced before assessment is completed. On that construction, the timing objection failed and the penalty proceedings were upheld.

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Issues: (i) Whether a notice for penalty proceedings is invalid merely because it cites the wrong provision of the Income-tax Act. (ii) Whether section 275 of the Income-tax Act, 1961 requires penalty proceedings to be commenced before completion of the assessment proceedings.

Issue (i): Whether a notice for penalty proceedings is invalid merely because it cites the wrong provision of the Income-tax Act.

Analysis: The notice dated 5 June 1962 was issued with reference to section 28(3) of the Indian Income-tax Act, 1922, though the assessment had been completed after the commencement of the Income-tax Act, 1961 and the proceedings had to be governed by section 297(2)(g) of the 1961 Act. The Court applied the settled principle that an act done in exercise of a lawful power is not vitiated merely because the wrong source of power is mentioned, if the action is otherwise supportable under the correct provision.

Conclusion: The notice was not invalid merely because it referred to the 1922 Act instead of the 1961 Act.

Issue (ii): Whether section 275 of the Income-tax Act, 1961 requires penalty proceedings to be commenced before completion of the assessment proceedings.

Analysis: Reading sections 271(1)(c), 274(1) and 275 together, the Court held that section 275 is a limitation provision governing the period within which penalty proceedings must be completed. The phrase referring to the proceedings in the course of which penalty proceedings were commenced was treated as descriptive of the relevant assessment proceedings, not as a restriction fixing the stage by which penalty proceedings must begin. The contrary construction was rejected as inconsistent with the object of the provision and productive of an absurd result.

Conclusion: Section 275 does not require penalty proceedings to be commenced before completion of the assessment proceedings.

Final Conclusion: The reference was answered for the department, and the penalty proceedings were held to be valid notwithstanding the mistaken statutory citation and the timing objection under section 275.

Ratio Decidendi: A wrong statutory citation does not invalidate an otherwise lawful notice, and section 275 of the Income-tax Act, 1961 prescribes only the outer time limit for completion of penalty proceedings, not a mandatory stage of commencement before assessment is completed.

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