Mandatory minimum penalty under Income-tax law applies to old-Act defaults prosecuted under the 1961 Act.

Where a return-filing default occurred under the 1922 Act but penalty proceedings were validly taken under section 297(2)(g) of the 1961 Act, section 271 of the 1961 Act governs the penalty. The Court held that this application does not violate Article 20(1) because the maximum penalty under the 1961 Act is not greater than under the old Act. It further held that the words "may direct" in section 271 confer discretion only on whether to impose penalty, not to reduce it below the statutory minimum fixed by clause (i). The Tribunal therefore had no power to go below the prescribed minimum, and the penalty was sustained.

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Issues: Whether, on defaults committed under the Indian Income-tax Act, 1922, penalty could be levied under section 271 of the Income-tax Act, 1961, and whether the Tribunal could reduce the penalty below the minimum prescribed by section 271(1)(i) of the 1961 Act.

Analysis: The reference arose from a default in filing the return for an assessment year governed by the old Act, but the penalty proceedings were validly taken under the 1961 Act by virtue of section 297(2)(g). The Court held that section 271 of the 1961 Act applies to such cases even though the default occurred under the earlier Act, and that this application does not infringe Article 20(1) because the maximum penalty under the 1961 Act is not greater than the maximum under section 28 of the 1922 Act. The Court further held that the phrase "may direct" in section 271 gives discretion only whether to impose penalty at all, not to reduce it below the prescribed rate where the statute fixes a minimum. The references to mutatis mutandis and to "such penalty" in section 297(2)(g) were construed as requiring application of section 271 with the necessary changes, not substitution of the quantum under section 28 of the old Act. Sub-section (4A) of section 271, which speaks of "minimum penalty", confirmed that clause (i) prescribes a minimum amount.

Conclusion: The Tribunal had no authority to reduce the penalty below the statutory minimum under section 271(1)(i); the constitutional challenge failed and the penalty had to be sustained under the 1961 Act.

Ratio Decidendi: Where section 297(2)(g) applies, penalty for an old-Act default is imposed under section 271 of the Income-tax Act, 1961, and the prescribed amount under clause (i) is a mandatory minimum that cannot be reduced below the statutory rate.

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