Saving clause for tax penalties: wide reading of nexus with assessment sustains penalty under the later income-tax law.

Section 297(2)(g) of the Income-tax Act, 1961 was treated as a saving provision enabling penalty proceedings under the 1961 Act for assessments relating to years ending on or before 31 March 1962, where the assessment was completed on or after 1 April 1962. The expression "in respect of" was read broadly to cover matters having a nexus with the assessment process. On that basis, penalty for a default connected with the old section 18A regime could validly be levied under section 273(b) of the 1961 Act despite the default arising under the repealed 1922 Act.

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Issues: Whether penalty for default under section 18A(3) of the Indian Income-tax Act, 1922 could be imposed under section 273(b) of the Income-tax Act, 1961 by virtue of section 297(2)(g) of the 1961 Act.

Analysis: The saving provision in section 297(2)(g) permits initiation and imposition of penalty under the 1961 Act in respect of assessments for the year ending on 31 March 1962 or any earlier year, where the assessment is completed on or after 1 April 1962. A penalty proceeding under section 18A(9) is connected with the regular assessment and has a direct relation to the assessment process. The expression 'in respect of' is of wide import and covers matters having a nexus or relation with assessment. The power to levy penalty under section 273(b), therefore, survives through the saving clause even though the default arose under the repealed 1922 Act.

Conclusion: Penalty under section 18A(9) could validly be imposed under section 273(b) of the Income-tax Act, 1961 for the assessment year under appeal.

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