1971 (4) TMI 31 - HC - Income Tax

Court upholds Income-tax Act penalties pre-1962, dismisses writ petition.

Cement Distributors Private Limited Versus Inspecting Assistant Commissioner (Central) Range II, New Delhi, And Another.

Cement Distributors Private Limited Versus Inspecting Assistant Commissioner (Central) Range II, New Delhi, And Another. - [1973] 87 ITR 163 Issues Involved:1. Jurisdiction of the Income-tax Officer to initiate penalty proceedings under the new Income-tax Act, 1961.2. Alleged violation of Article 14 of the Constitution of India.3. Alleged violation of Article 20(1) of the Constitution of India.4. Comparison of penalty provisions under the old and new Income-tax Acts.Issue-wise Detailed Analysis:1. Jurisdiction of the Income-tax Officer to Initiate Penalty Proceedings:The petitioner, a private limited company, was assessed under the old Income-tax Act, 1922, for the assessment year 1959-60. The Income-tax Officer initiated penalty proceedings under Section 271(1)(c) of the new Income-tax Act, 1961, and referred the matter to the Inspecting Assistant Commissioner under Section 274(2) of the new Act. The petitioner challenged the jurisdiction of the Income-tax Officer to initiate such proceedings under the new Act for an assessment year prior to April 1, 1962. The court held that the Income-tax Officer has the necessary jurisdiction to issue the impugned notice under Section 274(2) read with Section 271(1)(c) of the new Act.2. Alleged Violation of Article 14 of the Constitution of India:The petitioner argued that the application of different penalty provisions to similarly situated assessees under the old and new Acts constituted discrimination, violating Article 14 of the Constitution. However, this contention was no longer tenable in light of the Supreme Court's pronouncement in Brothers v. Union of India, which held that Section 297(2)(g) of the new Act does not offend Article 14. Consequently, the court did not address this issue further.3. Alleged Violation of Article 20(1) of the Constitution of India:The petitioner contended that the imposition of penalty under the new Act for an offence committed under the old Act violated Article 20(1) of the Constitution, which prohibits ex post facto laws. The court analyzed the distinction between penalties imposed by revenue authorities and penalties for criminal offenses. It concluded that penalties under the Income-tax Act are not for convictable offenses but for statutory violations, and therefore, Article 20(1) does not apply. The court cited various precedents to support this view, including decisions from the Kerala High Court, Rajasthan High Court, and Allahabad High Court, which consistently held that penalty proceedings under the Income-tax Act do not equate to criminal prosecutions.4. Comparison of Penalty Provisions under the Old and New Income-tax Acts:The court compared the penalty provisions under Section 28 of the old Act and Section 271 of the new Act. Under the old Act, penalties were imposed for concealment of income or improper distribution of profits, with a maximum penalty of one and a half times the avoided tax. The new Act introduced more stringent penalties, with a minimum penalty equal to the tax avoided and a maximum of twice the amount. Despite these differences, the court held that the new Act's provisions do not constitute a greater penalty in the sense prohibited by Article 20(1) because they are administrative penalties for statutory violations, not criminal punishments.Conclusion:The court dismissed the writ petition, holding that the Income-tax Officer had jurisdiction to initiate penalty proceedings under the new Act, and that such proceedings did not violate Articles 14 or 20(1) of the Constitution. The court emphasized the distinction between administrative penalties and criminal punishments, concluding that the latter's constitutional protections do not extend to the former. The petitioner was ordered to pay costs, and the judgment was to be forwarded to the newly substituted respondents.