Transitional penalty under the Income-tax Act, 1961 applies where assessment is completed after the commencement date.

For an assessment year ending before 1 April 1962 but completed on or after that date, penalty for failure to furnish a return is governed by the Income-tax Act, 1961 under the transitional scheme in section 297(2)(g). The classification based on the date of completion of assessment is treated as a valid transitional classification, and penalty proceedings are distinct from assessment proceedings. The text also states that article 20(1) is not infringed where the penalty does not exceed the maximum under the repealed law and the later order only corrects an erroneous reduction.

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Issues: Whether penalty for failure to file a return in respect of an assessment year ending before 1 April 1962, but completed after that date, is governed by section 271(1)(a) of the Income-tax Act, 1961, and whether section 297(2)(g) is invalid under Articles 14 and 20(1) of the Constitution of India.

Analysis: Section 297 of the Income-tax Act, 1961 contains a specific saving and transitional scheme. Clause (f) applies the repealed Act where the assessment was completed before 1 April 1962, while clause (g) applies the new Act where the assessment for an earlier year was completed on or after 1 April 1962. The Court held that clause (g) is a special provision governing penalty proceedings and, when read with sections 271, 274 and 275 of the Income-tax Act, 1961, it requires the penalty to be imposed under the new Act even though the default related to an earlier assessment year. The Court relied on the principle that fiscal classification based on the date of completion of assessment is permissible, that penalty proceedings are distinct from assessment proceedings, and that the statutory scheme does not create unconstitutional discrimination. The Court also held that article 20(1) was not violated because the penalty imposed did not exceed the maximum that existed under the repealed law and the later order merely corrected an erroneous reduction.

Conclusion: The answer was in the affirmative. Penalty was rightly held to be imposable under section 271(1)(a) of the Income-tax Act, 1961, and section 297(2)(g) was not unconstitutional. The decision was in favour of Revenue and against the assessee.

Ratio Decidendi: Where an assessment for an earlier year is completed on or after the commencement of the Income-tax Act, 1961, penalty for failure to furnish a return is governed by the new Act under section 297(2)(g), and the classification based on the date of completion of assessment is a valid transitional classification.

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