A.D.V. Reddy, J.
1. This reference made under Section 256(1) of theIncome-tax Act of 1961 by the Appellate Tribunal at the instance of theCommissioner of Income-tax is for the decision on the following question:
'Whether, on the facts and in the circumstances of the case, since the assessment related to the assessment year 1960-61 governed by the provisions of the Indian Income-tax Act, 1922, the levy of penalty of Rs. 5,000 which was less than the minimum provided for under Section 271(1)(c) of Income-tax Act, 1961, was justified?'
2. The assessee is a Hindu undivided family having income from property, share from the firm of M/s. Maduri Rajiahgari Kistaiah and from their own business. For the assessment year 1960-61 as against a returnof income of Rs. 54,069 the assessable income was fixed at Rs. 1,59,298 as certain amounts were disallowed towards brokerage and entertainment expenses and gross profits disclosed being found to be less. Therefore, holding that the assessee had deliberately inflated these items of expenditure and suppressed the profits, penalty proceedings were started and as the minimum penalty leviable exceeded Rs. 1,000, the case was referred to the Inspecting Assistant Commissioner and he, after enquiry, levied a penalty of Rs. 58,000. On appeal, the Tribunal held that the addition on account of gross profit rate and also some of the disallowances have been made on estimate basis, as the assessing officer was not satisfied with the proof, and this could not form the basis of penalty. But the Tribunal, however, found that with regard to the brokerage as well as vehicle expenses claimed, the points made out by the Income-tax Officer had not been refuted by the assessee and this has been brought about by his own action in including some items of non-genuine nature. Keeping this in view, the Tribunal was of the opinion that a penalty on this score only is leviable and the quantum of penalty levied by the Income-tax Officer was unconscionably high. The Tribunal, however, held that the assessment year under appeal being 1960-61, the provisions of the Indian Income-tax Act of 1922 applied as far as the substantive provisions were concerned and as under the relevant provision no minimum penalty had been prescribed and as the application of the provisions of the Income-tax Act of 1961 would offend the provisions of Article 20(1) of the Constitution, the Tribunal, applying Section 28(1) of the Indian Income-tax Act of 1922, which was in existence at the time the alleged 'offence' was committed, considered that restricting the levy of penalty to a sum of Rs. 5,000 would meet the ends of justice. Hence this reference.
3. The assessment year was 1960-61. The Act then in force was the Indian Income-tax Act, 1922. Section 28(1) of that Act reads as follows:
'If the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal, in the course of any proceedings under this Act, is satisfied that any person,--.....
(c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income,
he or it may direct that such person shall pay by way of penalty, in the case referred to in Clause (a), in addition to the amount of the income-tax and super-tax, if any, payable by him, a sum not exceeding one and a half times that amount and in the cases referred to in Clauses (b) and (c) in addition to any tax payable by him, a sum not exceeding one and a half times the amount of the income-tax, and super tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income.'
4. This provision while fixing the maximum has not prescribed any minimum penalty that has to be levied. The Tribunal would have been correct, if the assessment had been completed before the new Act of 1961 came into force in levying a penalty of Rs. 5,000. But, in this case, the assessment was completed after the Income-tax Act of 1961 had come into force and a notice for the levy of penalty under Section 271 of the Income-tax Act of 1961 for concealment of income and furnishing inaccurate particulars was issued to the assessee on May 20, 1965. The order imposing the penalty was passed by the Inspecting Assistant Commissioner on March 28, 1967, imposing a penalty under the provisions of the Income-tax Act of 1961. Section 271(1) of the new Act, as it stood before the amendment by the Finance Act of 1968, read 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,--.....
(c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income,
he may direct that such person shall pay by way of penalty,--.....
(iii) in the cases referred to in Clause (c), in addition to any tax payable by him, a sum which shall not be less than twenty per cent. but which shall not exceed one and a half times the amount of the tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income.'
5. This shows that though the maximum fixed is the same, as under Section 28(1) of the old Act, a minimum of 20 per cent. has been fixed in the new Act and no discretion is left to the assessing officer to levy any penalty less than the minimum, whatever the circumstances be, while under the old Act, there is no minimum and the assessing officer could levy any amount befitting the circumstances of the case.
6. However, under Section 297(2)(g) of Income-tax Act, 1961, 'any proceeding for the imposition of a penalty in respect of any assessment for the year ending on the 31st March of 1962, or any earlier year, which is completed oft or after the 1st day of April, 1962, may be initiated and any such penalty may be imposed under this Act'. As the penalty proceedings in this case were initiated by a notice served on the assessee on May 20, 1965, those proceedings are governed by the provisions of the new Act and prima facie the Inspecting Assistant Commissioner was right in imposing the penalty under the provisions of the new Act.
7. The Tribunal, however, have chosen to impose the penalty under the provisions of Section 28 of the old Act on the mistaken ground that for the assessment year 1960-61, there is no minimum penalty prescribed, thereby ignoring or not considering the effect of the provisions of Section 297(2)(g)of the Act of 1961. They had also chosen to say that the compulsory levy of a minimum penalty would offend the provisions of Article 20(1) of the Constitution, as the provisions of the Income-tax Act in existence at the time the 'offence' was committed only would bs applicable to the case and in that view did not choose to levy the penalty as per the provisions of Section 271(1)(c) of the Income-tax Act of 1961 whereunder the minimum is prescribed and chose to levy a penalty under Section 28(1)(c) of the Indian Income-tax Act of 1922. It is, therefore, to be seen how far the provisions of Article 20(1) of the Constitution are attracted in the circumstances of the case. Article 20(1) reads as follows :
'No person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.'
8. The above article, it may be seen, has two limbs, the first dealing with conviction for any offence and the second dealing with penalty to be imposed on the commission of the offence. What is now contended is that a case of penalty imposed under the Income-tax Act attracts the second limb of the above article and no penalty, greater than that which might have been inflicted under the law then in force at the time the act attracting penalty was committed can be imposed. The fallacy lies in equating the acts attracting the penalty under the Income-tax Act to an offence. In Commissioner of Income-tax v. Anwar Ali : 76ITR696(SC) the question that came up for consideration, related to the burden of proof in the case of penalty proceedings and in that connection their Lordships of the Supreme Court stated as follows (page 700):
'It is true that penalty proceedings under Section 28 are included in the expression 'assessment' and the true nature of penalty has been held to be additional tax. But one of the principal objects in enacting Section 28 is to provide a deterrent against recurrence of default on the part of the assessee. The Section is penal in the sense that its consequences are intended to be an effective deterrent which will put a stop to practices which the legislature considers to be against the public interest. It is significant that in C. A. Abraham's case : 41ITR425(SC) this court was not called upon to determine whether penalty proceedings were penal or of quasi-penal nature and the observations made with regard to penalty being an additional tax were made in a different context and for a different purpose.'
9. The above observations had been made for holding that the proceedings for levying the penalty are penal in character and, therefore, the burden in establishing the acts attracting the penalty will be on the department andit is for the department to establish that the receipt of the amounts in dispute constitute income of the assessee and the concealment thereof, therefore, attracted the penalty provisions. From those observations it cannot be said that the acts that attracted the penalty are in the nature of offences. The framers of the Income-tax Act have chosen to make a difference between the two--while Section 271 of the Income-tax Act, 1961, relates to penalty proceedings, Section 277 of the Income-tax Act, 1961, prescribes what are offences under the Act and what punishment has to be imposed for the said offence. Therefore, penalty proceedings cannot be equated to criminal proceedings attracting punishment. Even in the case cited above, it has been pointed out that penalty proceedings are included in the expression 'assessment' and the true nature of penalty has been held to be additional tax and not punishment. The objects of the two provisions appear to be different: The one entailing the prosecution and punishment is to vindicate public, justice by punishing the offender, whereas the object of penalty proceedings is to render evasion unprofitable and to secure to the State the compensation for damages or attempted evasions. As pointed out in P. Ummali Umma v. Inspecting Assistant Commissioner of Income-tax : 64ITR669(Ker) , they are mutually exclusive remedies and under the new Act both the proceedings are available, though under the old Act penalty proceedings would have been a bar to the launching of a prosecution. This does not make a difference to the distinction drawn.
10. In Spies v. United States 317 US 492, Jackson J. brought out the distinction in the following terms:
'The penalties imposed by Congress to enforce the tax laws embrace both civil and criminal sanctions. The former consist of additions to the tax upon determinations of fact made by an administrative agency and with no burden on the Government to prove its case beyond a reasonable doubt. The latter consist of penal offences enforced by the criminal process in the familiar manner. Invocation of one does not exclude resort to the other.'
11. Therefore, the contention that the proceedings entailing a penalty under the Income-tax Act are to be equated to the prosecution attracting the punishments cannot be accepted, as no conviction for any offence is involved in the imposing of a penalty. From a reading of the provisions of Article 20(1) of the Constitution it is evident that the first limb and the second limb are interlinked and have to be read together, that while the first limb refers to a conviction for an offence, the second limb refers to the punishment that has to be inflicted with regard to an offence. Penalty is, on the other hand, levied for an act or omission of the assessee, not because it is an offence but because it is an attempt at evasion in the payment of the tax. Therefore, Article 20(1) of the Constitution is not attracted.
12. In M. P. Indra & Co. v. Union of India it was held that though under the provisions of Section 271 of the Income-tax Act of 1961 fixing the minimum rate of penalty, made applicable retrospectively by Section 279(2)(g) of the said Act, the minimum penalty payable may be higher than under Section 28 of the Act of 1922, as the maximum penalty is the sime in both the cases and the overall burden of penalty has not been increased, the provisions of Article 20(1) of the Constitution are not infringed. The applicability of the provisions of Article 20(1) of the Constitution to provisions imposing penalty has not been considered. For the reasons set out supra, we find that Article 20(1) of the Constitution is not applicable to the proceedings imposing penalty under the Income-tax Act. Therefore, the levy of penalty of Rs. 5,000 in this case which is less than the minimum provided under Section 271(1)(c) of the Income-tax Act, 1961, is not justified.
13. We, therefore, answer the reference in the negative and against the assessee. The department will get its costs from the assessee. Advocate's fee Rs. 250.