TaxTMI 
TaxTMI 
1982 (8) TMI 38
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....---------------------------------- Asst. The due date The date on Delay in The date on The amount year for filing the which the complete which the of penalty return return was months penalty was levied filed levied Rs. -------------------------------------------------------------------------------- 1960 61 30-6-60 29-1-64 42 &n....
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....or an imposition of penalty under s. 18(1)(a) of the Act. Therefore, the AAC took the view that for the imposition of penalty under s. 18(1)(a) up to the assessment year 1964-65, the WTO had to take the prior approval of the IAC of Wealth-tax and unless that is done, the WTO had no jurisdiction for imposing penalty under the said section. It is a finding that the WTO did not take any prior approval of the IAC before imposition of the penalty under s. 18(1)(a) of the Act. Accordingly, the AAC held that the imposition of penalty by the WTO was bad in law. He, therefore, cancelled the penalty orders of the WTO for all the five assessment years. The Department, being aggrieved by the order of the AAC, preferred appeals before the Tribunal on the ground that the AAC was not correct in holding that the prior approval of the IAC was necessary for the imposition of penalty under s. 18(1)(a) of the said Act in respect of the assessment years in question though the assessment was made after the date on which the W.T. (Amend.) Act, 1964, came into force and though the returns were filed after the date on which the W.T. (Amend.) Act, 1964, came into force relating to the assessment years 19....
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....to two per cent. of the tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the tax ;....... (2) No order shall be made under sub-section (1) unless the person concerned has been given a reasonable opportunity of being heard ...... (4) The Wealth-tax Officer shall not impose any penalty under this section without the previous approval of the Inspecting Assistant Commissioner of Wealth-tax. " The relevant portion of s. 18(1)(a) substituted by the Amending Act of 1964 reads as under : "18. (1) If the Wealth-tax Officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal in the course of any proceedings under this Act is satisfied that any person (a) has without reasonable cause failed to furnish the return which he is required to furnish under sub-section (1) of section 14 or by notice given under sub-section (2) of section 14 or section 17, or has without reasonable cause failed to furnish it within the time allowed and in the manner requited by sub-section (1) of section 14 or by such notice, as the case may be or ...... he or it may, by order in writing, direct that such person shall pay by ....
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....he learned counsel in support of his submission refers to a decision of this court in T. K. Roy v. CWT [1978] 115 ITR 746 (Gauhati), where the question that came up for consideration was whether the penalty proceeding would be according to the provision of the amended Act of 1964 and subsequent amendment Act of 1969 although the default by the assessee in filing the return was before those amendments. On these facts it was held that when the default was made by the assessee the infringement was complete once and for all as and when there is a failure on the part of the assessee to file return as required under s. 14 of the Act. It was further held that such infringement was complete and it could not be stopped by the filing of any subsequent return. If any return is filed subsequently that would not be a return under s. 14 but it may be a return under s. 15 which may reduce the period of default, but would not absolve the assessee of the offence committed by him by not filing the return on the crucial date, namely, on 30th June of each corresponding year. It has been held that the penalty imposable under s. 18 would be on the basis of the law as it stood on the date of the failure ....
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.... our opinion, is only a provision for imposing the penalty by an officer. He is only a machinery or authority for the imposition of penalty. In the above cases the question that was decided was the impact of the incidence of penalty, viz., whether the penalty should be on the basis of the law when the default occurred or on the basis of the amended provision. In the amended law, sub-s (4), as it stood prior to 1964 amendment, has been deleted and now the sole authority for the imposition of penalty has been conferred on the WTO. The precise question is whether sub-s. (4) of s. 18 of the Act, as it stood prior to the amendment of 1964, was procedural in nature in which the assessee would not have any right. Whether a particular provision is procedural or substantive depends upon the nature, content and sweep of the provision. It is the settled principle of law that the right of appeal is a substantive right. In Garikapati Veeraya v. N. Subbiah Choudhry, AIR 1957 SC 540 the question that came up for consideration is whether an increase in the pecuniary jurisdiction by a subsequent amendment would prejudicially affect the right of a person whose suit was filed prior to the amendmen....
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....ntinuation of that right and the Federal Court having been abolished, the Supreme Court is substituted for the Federal Court as the machinery for the purpose of giving effect to the exercise of that right of appeal. As the old law continues to exist for the purpose of supporting the pre-existing Tight of appeal, the old law must govern the exercise and enforcement of that right of appeal. It has been further observed by their Lordships (Headnote at p. 541, AIR 1957 SC) : " Where the suit has been instituted before the date of the Constitution the parties thereto has from the date of the institution of the suit, vested right of appeal upon terms and conditions then in force and where the judgment sought to be appealed from is a judgment of a reversal and the value of the subject-matter is above Rs. 10,000 the aggrieved party has a vested right of appeal to the Federal Court under the provisions of the old Civil Procedure Code read with the Government of India Act, 1935, and the Federal Court (Enlargement of jurisdiction) Act, 1947. Such a vested right of appeal is a matter which does not fall within article 133 and jurisdiction and powers with respect to such right of appeal w....
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....ot made any express provision for dealing with the pending matters. If the Act has not provided for such a case either by express provision or necessary intendment, the learned counsel submits, the Department must thank its stars. The learned counsel for the assessee refers to Bharat Barrel and Drum Mfg. Co. Private Ltd. v. Employees' State Insurance Corporation, AIR 1972 SC 1935 ; 40 FJR 339, in order to show the difference between procedural right and a substantive right. There the Supreme Court had to deal with the provision of a rule made under s. 96(1)(b) of the Employees' State Insurance Act by the Bombay Government under which r. 17 prescribed the limitation for filing application under s. 75 of the Employees' State Insurance Act, 1948. Dealing with this question the court held that the omission to provide a period of limitation under ss. 68 and 75 while providing for a limitation of claim by an employee for the payment of any benefit under the regulations shows clearly that the Legislature did not intend to fetter the claim under s. 75(2Xd) of the said Act. The court proceeded to say that where the Legislature clearly intends to provide specifically the period of limitat....
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....ations or other statements. There is also, it is submitted, no indication in the scheme of, the Act that it is otherwise or that there is any impediment for the Government to prescribe under the rule making authority the period of limitation for applications under section 75(2). Before we consider the scheme of the Act it may be necessary to examine the scope and ambit of the term ` procedure ' as used in section 96(1)(b). The topic of procedure has been the subject of academic debate and scrutiny as well as of judicial decisions over a long period but in spite of it, it has defied the formulation of a logical test or definition which enables us to determine and demarcate the bounds where procedural law ends and substantive law begins, or in other words it hardly facilitates us in distinguishing in a given case whether the subject of controversy concerns procedural law or substantive law. The reason for this appears to be obvious, because substantive law deals with right and is fundamental while procedure is concerned with legal process involving actions and remedies which Salmond defines ' as that branch of law which governs the Process of litigation or to Put it in another way....
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....e who sleep). Therefore, the object of the statutes of limitations is to compel person to exercise his right of action within a reasonable time as also to discourage and suppress stale, fake or fraudulent claims. While this is so there are two aspects of the statutes of limitation, the one concerns the extinguishment of the right if a claim or action is not commenced within particular time and the other merely bars the claim without affecting the right which either remains merely as a moral obligation or can be availed of to furnish the consideration for a fresh enforceable obligation. Where a statute prescribing the limitation extinguishes the right it affects substantive rights while that which purely pertains to the commencement of action without touching the right is said to be procedural. According to Salmond, the law of procedure is that branch of the law of actions which governs the process of litigation, both civil and criminal. ' All the residue ' he says ' is substantive law, and relates, not to the process of litigation but to its purposes and subject-matter '. It may be stated that much water has flown under the bridges since the original English theory justifying a sta....
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....assessment of the petitioner for 1970-71, the return for which was filed on December 22, 1970, the ITO included sum of Rs. 4,000 as income from undisclosed sources by his order dated January 25, 1973. Thereafter, he initiated penalty proceedings under s. 271(1)(c) of the I.T. Act and by his order dated October 9, 1973, levied a penalty of Rs. 4,000. This order was confirmed by the Commissioner. The assessee filed a writ petition in the High Court where the petitioner contended that by reason of the provision of s. 274(2) prior to this amendment with effect from 1st April, 1971, by Act 42 of 1970, the officer did not have any jurisdiction to levy the penalty. The High Court held that it was the law in force on December 22, 1970, when the return was filed that would be applicable, s. 274(2) as it stood prior to the amendment of April 1, 1970, was the relevant provision that was to be applied in the instant case. Hence, the ITO had no jurisdiction to levy the penalty. On going through the facts and position of law in this case, it is found that under the unamended provisions of sub-s. (2) of s. 274, in such a case the ITO had no jurisdiction at all to levy the penalty as it was spe....
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.... procedure a vested right. The Foreign Exchange Regulation Act, 1947, was amended by Act 39 of 1957, where s. 23(1)was substituted and s. 23D was added in the Act. The effect of these provisions is that after the amendment of 1957, adjudication proceedings or criminal proceedings can be taken up in respect of a contravention mentioned in s. 23(1) while before the amendment only criminal proceedings before a court could be instituted to punish the offender. It was contended on behalf of the respondent that the Amending Act had prejudicially affected his right to be tried by an ordinary criminal court. That contention was repelled and it was held that the view that the new amendment did not apply to contraventions, which took place before the Amending Act came into force, was not correct. Further, the contention that there was no indication in the Amending Act that the new procedure would be retrospective could not be accepted. For, in a matter of procedure, it is not necessary that there should be a special provision to indicate that the new procedural law is retrospective. The facts that emerge from the decision in the case are to the following effect : In 1954, following the....
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....f a right by putting new restriction thereupon is not a matter of procedure only. It impairs substantive right and an enactment which does so is not restrospective unless it says so expressly or by necessary intendment". Accordingly, the adjudication proceedings were quashed as being without jurisdiction. The Department being aggrieved by the decision of the Calcutta High Court preferred an appeal in which the Supreme Court set aside the judgment of the Calcutta High Court and the writ petition stood dismissed. In the Supreme Court it was contended on behalf of the respondent that a substantive vested right to be tried by an ordinary court existed before the amendment and the counsel relied on Maxwell, 11th Edn., p. 217, where it is stated that " the general principle, however, seems to be that alterations in procedure are retrospective unless there be some good reason against it ". It was further urged that there is a good reason if the principles of art. 20 are borne in mind. The Solicitor-General, appearing on behalf of the appellant, contended that the High Court was in error in holding that the accused bad a vested right to be tried by an ordinary criminal court. It was sub....
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.... 30 of the first Mysore Act, an appeal lay to the High Court where the original order under s. 8 of the Act has been passed by the Custodian, an Additional Custodian or an Authorised Deputy Custodian. On September 21, 1949, the Custodian issued a notification by which he declared the properties of the two respondents as evacuee properties which had vested in him, as the respondents had become evacuees. Thereupon two claims were filed under s. 8 of the first Mysore Act separately by the two respondents. These claims were investigated by the Deputy Custodian, who dismissed the same on April 17, 1950, declaring that the properties were evacuee properties. In the meantime, the second Mysore Act was passed repealing the first Mysore Act.. But s. 53(2) of the second Mysore Act provided that anything done or any action taken in the exercise of any power conferred by the first Mysore Act shall be deemed to have been done or taken in the exercise of the power conferred by the second Mysore Act. It was also provided that any penalty incurred or proceeding commenced under the first Mysore Act shall be deemed to be a penalty incurred or proceeding commenced under the second Mysore Act as if th....
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.... or the Custodian on appeal. The Act of 1950 came into force on the day the Deputy Custodian passed the order dated April 17, 1950. The 1950 Act by necessary implication repealed the second Mysore Act, as the 1950 Act substantially enacted all that was contained in the second Mysore Act. However, be that as it may, appeals were filed by the respondents against the order of April 17, 1950, before the Custodian. These appeals were allowed on August 22, 1950. The Custodian held that there was no sufficient evidence to prove the respondents as evacuees and consequently the properties in question could not be treated as evacuee properties. On October 3, 1950, the Custodian-General gave notices to the respondents under s. 27 of the Act in respect of the order of the Custodian dated August 22, 1950, and asked them to show, cause, why the said order of the Custodian be not revised. On December 7, 1950, the Administration of Evacuee Property (Amendment) Act, No. LXVI of 1950, was passed by which, inter alia, s. 58 of the Act was amended and it was provided that if immediately before the commencement of the Act there was in force in any State to which the Act extended any law which correspon....
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....ged firstly that the High Court was in error when it held that the Custodian-General had no power to set aside the order of August 22, 1950, under s. 27 of the Act. In the second place, his contention was that the High Court was in error in holding that an appeal lay to it from the order of the Custodian dated December 2, 1952. On these facts their Lordships of the Supreme Court observed as follows (p. 1091): "This brings us to the next question whether any appeal lay to the High Court against the order of December 2, 1952. There is no doubt that the proceedings in the present case commenced under the first Mysore Act with a notification under section 6 and claim applications under section 8. If the original proceedings had finished when the first Mysore Act was in force and the order of December 2, 1952, had been passed during its operation there would undoubtedly have been an appeal to the High Court under section 30 thereof. But the first Mysore Act was repealed by the second Mysore Act in November, 1949, and the second Mysore Act was in its turn repealed by the Act as from April, 1950. The question, therefore, that arises for consideration is whether after the repeal of the ....
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....on either in the second Mysore Act or in the Act in this behalf. But once it is held that proceedings which commenced under section 8 of the first Mysore Act must, when the second Mysore Act came into force, be deemed under section 53(2) thereof to be a proceeding under section 5(1) or when the Act came into force be deemed under section 58(3) thereof to be a proceeding under section 7(1) and must be continued under these Provisions, it follows that the Legislature necessarily intended that all subsequent action following an order under section 5(1) or section 7(1) must be taken under the second Mysore Act or under the Act, as the case may be. It could not have been intended by the Legislature when it was expressly providing for appeal from an order under section 5(1) of the second Mysore Act or under section 7(1) of the Act that a proceeding commenced under the first Mysore Act (which was equivalent to a proceeding under section 5(1) or section 7(1) should continue to be governed in the matter of appeal by the first Mysore Act. This is therefore in our view a case where by necessary intendment (though not by express provision) the legislature intended that the provision as to appe....
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....rior approval of the IAC. But the provision having been amended by the 1964 Act, no such approval is necessary. The learned counsel submits that the change of law has not taken away any substantive right of the assessee. In support of the submission, the learned counsel refers to a Constitution Bench decision of the Supreme Court in Jain Brothers v. Union of India [1970] 77 ITR 107. There, on May 26, 1960, a notice under s. 22(2) of the Indian I.T. Act, 1922, was served on the appellant-firm calling upon it to submit a return of its income for the assessment year 1960-61 (accounting year ending October 31, 1959). The return had to be filed within 35 days of the service of the notice. It was not filed. Further notices were served on two occasions. It filed a return on November 18, 1961, showing income of Rs. 3,55,566. The ITO completed the assessment on November 23, 1964, computing the total income of the firm at Rs. 4,75,368. On November 23,1964, the ITO issued a notice under s. 271 read with s. 274 of the I.T. Act, 1961, calling upon the firm to show cause why an order imposing a penalty should not be passed on account of its failure to furnish the return within time. After consid....
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....sing a penalty. Such an order cannot be passed after the expiration of two years from the date of the completion of proceedings in the course of which the penalty proceedings for imposition of penalty, have been commenced. It may be mentioned that in Chap. XXII dealing with offences and prosecutions a provision had been made in s. 276 for punishment with fine in case of failure without reasonable cause or excuse to furnish in due time a return under s. 139(2) which was equivalent to s. 22(2) of the 1922 Act. The case before the Supreme Court related only to a penalty having been imposed on account of the failure to furnish return. Their Lordships noticed the main changes made in the 1961 Act in the matter of imposition of penalty for such a default in the following manner (p. 114) : " The first departure from the Act of 1922 is that no prosecution could be instituted under the Act of 1922 in respect of the same facts on which a penalty bad been imposed. Under the Act of 1961, a penalty can be imposed and a prosecution launched on the same facts. The second change is that under the Act of 1922, the Income-tax Officer could not impose any penalty without the previous approval of t....
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....(1) of the Act of 1922, if his case falls within the terms of section 297(2)(g). We may usefully refer to this court's decision in Third Income-tax officer, Mangalore v. Damodar Bhat [1969] 71 ITR 806 (SC) with reference to section 297(2)(j) of the Act of 1961. According to it in a case falling within that section in a proceeding for recovery of tax and penalty imposed under the Act of 1922, it is not required that all the sections of the new Act relating to recovery or collection should be literally applied, but only such of the sections will apply as are appropriate in the particular case and subject, if necessary, to suitable modifications. In other words, the procedure of the new Act will apply to cases contemplated by section 297(2)(j) of the new Act mutatis mutandis. Similarly, the provision of section 271 of the Act of 1961 will apply mutatis mutandis to proceedings relating to penalty initiated in accordance with section 297(2Xg) of that Act." The learned counsel for the Department submits that in the aforesaid case prior to the commencement of the 1961 Act, the ITO could exercise the jurisdiction of imposing penalty with the prior approval of the IAC in view of the prov....
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....her the income related to a period prior to April 1, 1964, or thereafter. The penalty clause. (c) can be invoked only if a false return is filed, and if the return is filed after the Explanation had become operative, surely such return, if it offends the Explanation, would attract its applicability. Therefore, we have no doubt on the point that the Explanation applies to the case in hand since the relevant return was admittedly filed after April 1, 1964. This interpretation does not tantamount to operation of the Explanation retrospectively as contended. " In CIT v. Om Sons [1979] 116 ITR 215, the Allahabad High Court had to consider the question of the penalty order passed by the IAC. There the ITO initiated proceedings for levy of penalty on the assessee for the assessment year 1969-70, and referred the matter to the IAC who imposed an order of penalty by his order dated November 29, 1971. Meanwhile as a. 274(2) of the Income-tax Act had been amended by the T.L. (Amend.) Act, 1970, with effect from April 1, 1971, under which the IAC did not have jurisdiction to impose penalty in such matters. On the question whether the IAC had jurisdiction to pass the order of penalty as on t....
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.... of the amendment of 1964. The Karnataka High Court also had to consider the impact of the amendment made to s. 274(2) of the I.T. Act, 1961, by the T.L. (Amend.) Act, 1970. Under s. 274(2) of the I.T. Act, 1961, as it stood before the amendment by the T.L. (Amend.) Act, 1970, with effect from April 1, 1971, the ITO had to refer all cases of penalties in which the minimum penalty imposable under s. 271(1)(c) was above Rs. 1,000 to the IAC. After the amendment the ITO was conferred jurisdiction to impose penalty in all cases where the concealment of income did not exceed Rs. 25,000 and he was required to refer to the IAC only such cases of concealment of income where the amount concealed exceeded Rs. 25,000. In Addl. CIT v. M. Y. Chandragi [1981] 128 ITR 256 (Kar), for the on July 27, 1968, and July 24, 1969, respectively, and the assessments were finalised on that basis. Subsequently, the assessments were reopened and notices under s. 148 of the I.T. Act, 1961, were issued to the assessee on January 6, 1970. The revised returns were filed by the assessee on March 4, 1970. The reassessment orders were passed by the ITO on December 24, 1971, after the amendment of sub-s. (2) of....
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.... IAC even in respect of matters which had already been referred to him by the ITO prior to April 1. 1976. It has been further observed that a party who had already instituted a legal proceeding before a court or tribunal or forum which bad jurisdiction to entertain the proceeding on the date of institution, had the vested right to pursue the matter to a finality before the very forum before whom he had instituted the proceeding as also before the appellate forum which was available to him as on the date of institution of the proceeding unless such right was taken away by an express provision contained in the subsequent legislation. As far as a Proceeding for the imposition of penalty is concerned, neither the assessee nor the ITO nor the IAC are in the Position of a Party to a litigation who intends to Pursue a legal Proceeding, already instituted by him, to a finality. (Emphasis supplied) The court has ultimately held that in a case of this nature it is a case of an exercise of the power conferred by a statute on a particular authority. Therefore, the only question which would be relevant in a case of this type is whether the authority, who has passed the order, had the requisi....