TaxTMI 
TaxTMI 
1972 (12) TMI 16
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....turn was filed on May 3, 1962, i,e., after a delay of about 7 months. When the Income-tax Officer proposed to levy a penalty for the late filing of the return, the assessee pleaded that her husband was ill and that she had to leave the station for a long period. She also stated that she was a regular taxpayer and the sources of income were salary on which tax was already deducted at source and share from registered firm for which returns were filed by the firms themselves. The Income-tax Officer held that the assessee was not prevented by reasonable cause from filing the return of income within the prescribed time. He, therefore, levied a penalty of Rs. 4,060 under section 271(1)(a) of the new Act. The assessee preferred an appeal before the Appellate Assistant Commissioner against the order of the Income-tax Officer levying the penalty and raised two contentions, namely : (i) that as the default had been made under the provisions of the Indian Income-tax Act, 1922 (hereinafter referred to as " the old Act ") the penalty could not be levied under the provisions of the hew Act ; (ii) that the notice issued by the Income-tax Officer proposing to levy the penalty was not issu....
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....rule laid down by the Supreme Court in that case affords guidance on the question which we have to answer in the present case, it is necessary to state the facts of that case and also some of the contentions which had been raised before the Supreme Court in that case and also the findings of the Supreme Court on such contentions. The assessee in that case was served with a notice on May 26, 1960, under section 22(2) of the old Act calling upon the assessee to file its return of income for the assessment year 1960-61 within 35 days of the service of the notice. The assessee did not file the return within that time, but filed it on November 18, 1961. The assessment was completed on November 23, 1964, under the provisions of the old Act. The Income-tax Officer, however, levied a penalty on the assessee under section 271(1)(a) of the new Act for non-compliance with the notice under section 22(2) of the old Act. Ultimately, the assessee took the matter before the Supreme Court. The levy of penalty was challenged on various grounds. One of the contentions was that section 297(2)(g) of the new Act was violative of article 14 of the Constitution of India inasmuch as it created a discrim....
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....f 1961, but that will not make the part relating to payment of penalty inapplicable once it is held that section 297(2)(g) governs the case. Both sections 271(1) and 297(2)(g) have to be read together and in harmony and so read the only conclusion possible is that for the imposition of a penalty in respect of any assessment for the year ending on March 31, 1962, or any earlier year which is completed after first day of April, 1962, the proceedings have to be initiated and the penalty imposed in accordance with the provisions of section 271 of the Act of 1961. Thus, the assessee would be liable to a penalty as provided by section 271(1) for the default mentioned in section 28(1) of the Act of 1922 if his case falls within the terms of section 297(2)(g). " In support of the contention that section 297(2)(g) of the new Act was violative of article 14 of the Constitution, it was also argued that the substantive and the procedural provisions relating to penalty contained in the Act of 1961 were more onerous than the similar provisions in the Act of 1922. In considering this argument, the Supreme Court took notice of the difference between the provisions of the old Act and the new Act....
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.... a maximum penalty and did not prescribe a minimum penalty. The Tribunal did not give any reasons for determining the quantum of penalty with reference to the provisions of section 28 of the old Act, but merely followed the order of the Tribunal in another case. That order of the Tribunal is not before us and I am, therefore, not aware of the reasons given by the Tribunal in the said order except what has been stated in the order of the Tribunal in the present case, namely : " that since the default was committed at the time when the Indian Income-tax Act, 1922, was in force, the penalty must also be in consonance with that Act, and, therefore, it was urged that the discretion in fixing the quantum of penalty should be exercised with reference to the provisions of the Income-tax Act, 1922. " The learned counsel for the assessee, Shri S. K. Dholakia, has, however, sought to support the order of the Tribunal on the following grounds, namely : (i) that section 297(2)(g) of the new Act is violative of article 20(1) of the Constitution because the assessee would be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the....
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....71 is not greater than the maximum penalty that could be levied under section 28 of the old Act. The question is whether the provisions to levy a minimum penalty under clause (i) of section 271(1) will amount to subjecting the assessee to a penalty greater than that which might have been inflicted under section 28 of the old Act when under the latter provision no minimum penalty was prescribed. In K. Satwant Singh v. State of Punjab, Satwant Singh was convicted under section 420, Indian Penal Code, read with section 10 of Ordinance No. 29 of 1943. The said Ordinance provided that whether or not a sentence of imprisonment was imposed by the Special Tribunal, a sentence of fine must be imposed and that fine shall not be less in amount than the amount of money or value of other property found to have been procured by the offender by means of an offence. In other words, the Ordinance imposed a minimum fine in any event whether a sentence of imprisonment was or was not imposed. Under section 420, Indian Penal Code, although an unlimited amount of fine could be imposed, there was no provision for the imposition of a minimum amount of fine. A contention was raised before the Supreme Co....
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....efault committed under the old Act was violative of article 20(1) of the Constitution, and K. K. Mathew J. (as his Lordship then was) observed as follows : " The maximum penalty being the same in both the enactments, I think there is no substance in the contention that the petitioner is being subjected to a greater penalty under the Act because a minimum is specified in section 271 of the Act. " Although in the case of Jain Brothers the Supreme Court was not considering the effect of section 297(2)(g) of the new Act in the light of article 20(1) of the Constitution, still the following observations of the Supreme Court in that case, in my view, afford sufficient guidance for the determination of the contention that has been raised before us on the basis of article 20(1) of the Constitution : " Thus, whereas under the Act of 1922 a defaulting assessee had certain protection in the matter of prosecution, no such protection has been afforded under the Act of 1961 ; but the maximum amount of penalty which can be imposed has been reduced and a period of limitation has been prescribed for passing a penalty order which is of distinct advantage to a defaulting assessee. It is not ....
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....counsel for the assessee contends that while levying penalty for a default committed under the old Act, the procedure to be followed is one prescribed under the new Act, the quantum of the penalty is to be levied with reference to section 28 of the old Act. I am wholly unable to accept this interpretation put on the observations of the Supreme Court. According to Chambers' Twentieth Century Dictionary, revised edition, the words mutatis mutandis mean "with necessary changes" and according to Webster's Third New International Dictionary, the words mutatis mutandis mean " with the respective differences having been considered ". In my view, the observations of the Supreme Court relied upon by the learned counsel only mean that section 271(1)(a) which reads as follows : " If the Income-tax Officer or the Appellate Assistant Commissioner, in the course of any proceedings under this Act, is satisfied that any person- (a) has without reasonable cause failed to furnish the return of total income which he was required to furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139 or section 148 or has without reasonable cause failed to furnish....
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....by my learned brother, Kapur J., on 15th February, 1972. The judgment relied upon by the learned counsel is clearly distinguishable and as my learned brother is delivering a separate judgment, I do not propose to give my reasons for my view that the judgment of the learned brother in the case referred to by the learned counsel is clearly distinguishable. It is sufficient for me to say that the words " such penalty " occurring in clauses (f) and (g) only mean the penalty which is referred to in the earlier part of the clauses (f) and (g) and they do not mean a penalty which is imposable under section 28 of the old Act. This brings me to a consideration of the last contention urged by the learned counsel for the assessee, namely, that clause (i) of sub-section (1) of section 271 does not prescribe a minimum penalty and that it is open to the Income-tax Officer to levy a penalty at the rate lower than 2% of the tax for every month during which the default occurred. In support of this contention, the learned counsel refers to the language used in section 271(1) of the new Act. The relevant portion reads as follows : " If the Income-tax Officer or the Appellate Assistant Commissio....
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....ll not exceed twice, the amount of the income in respect of which the particulars have been concealed or inaccurate particulars have been furnished. " According to the learned counsel, the use of the words " not less than " in clauses (ii) and (iii) and the absence of similar words in clause (i) would imply that no minimum was fixed under clause (i). I am unable to accept this contention also. The only significance of the use of the words " not less than " in clauses (ii) and (iii) is that while the Income-tax Officer cannot impose a penalty which is less than the minimum prescribed under these two clauses, it is open to him to levy a higher penalty subject to the maximum prescribed under the two clauses. But, under clause (i), it is not open to the Income-tax Officer to levy a penalty at a rate of more than 2% of the tax for every month during which the default continued. In other words, under clause (i), the Income-tax Officer, if he decides to levy a penalty, shall levy a penalty at the rate of 2% and not either at a lower rate or at a higher rate. That the rate prescribed under clause (i) is the minimum penalty prescribed under the said clause is apparent from the other p....
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....er by providing a criterion when there was no such corresponding criterion prescribed under the old Act. " In P. Ummali Umma v. Inspecting Assistant Commissioner of Income-tax, the Kerala High Court held as follows : " The maximum penalty being the same in both the enactments, I think there is no substance in the contention that the petitioner is being subjected to a greater penalty under the Act because a minimum is specified in section 271 of the Act. " In Commissioner of Income-tax v. Venichand Maganlal, the Rajasthan High Court again held as follows : " Section 271(1)(i) speaks in unequivocal terms that in the cases referred to in clause (a) a sum equal to 2% of that tax for every month during which the default continues, but not exceeding in the aggregate 50% of the tax was to be the amount of penalty. This means that the penalty to be imposed is to be calculated at 2% of the tax for every month during which the default continues, but the maximum limit was 50% of the tax. The view taken by the Tribunal is that clause (i) does not lay down any minimum limit as has been provided in section 271(1)(iii), just as in section 271(1)(iii) both the minimum and maximum limit....
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....ould be applied by reason of section 297(2)(g) of the Act. I came to the conclusion that it could not. One of the reasons I gave for this conclusion was that the disqualification specified in section 288(4) of the Act was not " such penalty " as could be imposed by virtue of that provision. In this case again, the question before us is whether the words " such penalty " occurring in section 297(2)(g) mean that the same penalty as specified in section 28 of the Act of 1922 can be imposed or whether the penalty mentioned in section 271 can be imposed. In relation to this subject, there are two provisions in section 297(2) of the Act of 1961 ; sub-clause (f) deals with those cases where the assessment has been completed before 1st April, 1972, and sub-clause (g) deals with the cases in which the assessment has been completed on or after that date although relating to an earlier year. As far as sub-clause (f) is concerned, there is no difficulty in construction, because the penalty has to be imposed as if the Act of 1961 had never been enacted. For that type of case, reference to the Act of 1922 alone would be necessary. In the cases covered by sub-clause (g), the penalty has to be ....