Transitional penalty provisions apply to late return defaults under the old Income-tax Act, with penalty running for the full delay period.

Penalty for late filing of a return under the 1961 Act was treated as applicable to a default that arose under section 22(1) of the 1922 Act because section 297(2)(g) preserved the new penalty machinery for such transitional cases. The calculation of penalty was also held to cover the entire continuance of the default, not merely the period after 1 April 1962, since section 271(1)(i) requires computation at a monthly rate for the whole period of delay. The penalty under section 271(1)(a) was therefore validly attracted and correctly computed for the full default period.

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Issues: Whether penalty for late filing of the return for assessment year 1958-59 could be imposed under section 271(1)(a) of the Income-tax Act, 1961 by reason of section 297(2)(g) notwithstanding that the default arose under section 22(1) of the Indian Income-tax Act, 1922; and whether such penalty could be computed for the whole period of default, including the period before 1 April 1962.

Analysis: The assessment year in question was 1958-59 and the return should have been filed under section 22(1) of the Indian Income-tax Act, 1922. The penalty was, however, imposed under section 271(1)(a) of the Income-tax Act, 1961. The operative question was governed by the transitional scheme in section 297(2)(g) of the Income-tax Act, 1961. Applying the principle already affirmed by the Supreme Court, the penalty provisions of the new Act were attracted to defaults committed under the old Act where the case fell within section 297(2)(g). The further contention that penalty could run only from April 1962 was rejected because section 271(1)(i) directs computation at a monthly rate for the period during which the default continued, without restricting the calculation to the period after the commencement of the 1961 Act.

Conclusion: The penalty under section 271(1)(a) of the Income-tax Act, 1961 was validly attracted and was correctly computed for the entire period of default. The question was answered in the negative, in favour of the Revenue.

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