1972 (12) TMI 16 - HC - Income Tax

Tribunal lacks authority to reduce tax penalties below statutory minimum

Commissioner of Income-Tax Versus Maya Rani Punj.

Commissioner of Income-Tax Versus Maya Rani Punj. - [1973] 92 ITR 394 Issues Involved:1. Competence of the Tribunal to reduce the penalty under Section 271(1)(a) of the Income-tax Act, 1961.2. Applicability of the old Act versus the new Act for penalties.3. Validity of the penalty notice under Section 274 of the new Act.4. Violation of Article 20(1) of the Constitution by Section 297(2)(g) of the new Act.5. Interpretation of Section 271(1)(a) regarding the minimum penalty.Issue-wise Detailed Analysis:1. Competence of the Tribunal to Reduce the Penalty under Section 271(1)(a):The Tribunal reduced the penalty levied under Section 271(1)(a) of the new Act to Rs. 400, based on extenuating circumstances and referencing Section 28 of the old Act. The Tribunal's decision was challenged by the department. The High Court concluded that the Tribunal was not competent to reduce the penalty to a figure lower than the prescribed minimum under the new Act. The High Court emphasized that the penalty must be calculated and imposed according to the tax assessed, and the Tribunal's discretion did not extend to reducing the penalty below the statutory minimum.2. Applicability of the Old Act versus the New Act for Penalties:The Tribunal upheld the action of the Income-tax Officer in levying the penalty under the new Act, despite the default occurring under the old Act. The High Court referred to the Supreme Court's decision in Jain Brothers v. Union of India, which clarified that for defaults under the old Act but assessed after the new Act came into force, penalties should be imposed as per the new Act. The High Court affirmed that the provisions of Section 271(1)(a) of the new Act apply to defaults under the old Act, aligning with Section 297(2)(g).3. Validity of the Penalty Notice under Section 274:The Tribunal rejected the contention that the penalty notice was not in conformity with Section 274 of the new Act. The High Court agreed, stating there was no contravention of Section 274, and the penalty proceedings were validly initiated under the new Act.4. Violation of Article 20(1) of the Constitution by Section 297(2)(g):The assessee argued that Section 297(2)(g) of the new Act violated Article 20(1) of the Constitution, which prohibits imposing a penalty greater than what could have been inflicted under the law at the time of the offense. The High Court, referencing the Supreme Court's decision in K. Satwant Singh v. State of Punjab, held that the new Act's minimum penalty provision did not violate Article 20(1). The maximum penalty under the new Act was less than or equal to that under the old Act, and the imposition of a minimum penalty did not constitute a greater penalty.5. Interpretation of Section 271(1)(a) Regarding the Minimum Penalty:The High Court examined whether Section 271(1)(a) allowed for a penalty below the minimum prescribed rate. The Court concluded that the word 'may' in Section 271(1) gives the Income-tax Officer discretion to levy a penalty or not, but if a penalty is levied, it must be at the rate specified in clause (i). The Court rejected the argument that the absence of 'not less than' in clause (i) implied no minimum penalty. The Court also noted that Section 271(4A) explicitly refers to the penalty under clause (i) as the minimum penalty, reinforcing this interpretation.Conclusion:The High Court answered the question in the negative, indicating that the Tribunal was not competent to reduce the penalty below the statutory minimum prescribed under Section 271(1)(a) of the new Act. The decision was in favor of the revenue and against the assessee, with no order as to costs.