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Commissioner of Income-tax Vs. Khubchand Meghraj - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMadhya Pradesh High Court
Decided On
Case NumberMiscellaneous Civil Case No. 320 of 1970
Judge
Reported in[1973]91ITR498(MP)
ActsIncome Tax Act, 1961 - Sections 271, 271(1) and 297(2)
AppellantCommissioner of Income-tax
RespondentKhubchand Meghraj
Cases ReferredJain Brothers v. Union of India
Excerpt:
- - the language of clause (g) is very clear and distinctly says that any proceeding for the imposition of penalty in respect of the assessment year referred to in the clause may be initiated and any such penalty may be imposed under the 1961 act......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.' 5. in view of the above authorities, there is no doubt that the imposition of penalty in this case had to be according to the provisions of section 271(1)(a) which provides a minimum of 2% in the case of delayed filing of return. the income-tax officer had imposed this minimum penalty and, consequently, the tribunal had no power to interfere with that imposition of penalty and to reduce it below the minimum. we, accordingly, answer the question referred to this court as follows:on the facts and in the circumstances of the case, the tribunal was not competent to reduce the penalty for the delayed filing of.....
Judgment:

Bishambhar Dayal, C.J.

1. This is a reference under Section 256(1) of the Income-tax Act, 1961.

2. The reference has been made at the instance of the Commissioner of Income-tax. The assessee filed a return in respect of the assessment year 1960-61 on 2nd August, 1961. The Income-tax Officer completed the assessment on 13th March, 1962, but on the application of the assessee itself, this order was set aside and the assessment reopened. After reopening of the assessment, a fresh assessment was made on 23rd October, 1962, that is, after the Income-tax Act, 1961, had come into force. After this assessment had become final, proceedings for imposition of penalty under Section 271(1)(a) of the Income-tax Act, 1961, were started against the assessee for filing the return late. The Income-tax Officer did not accept the explanation given by the assessee and imposed a minimum penalty of 2% by virtue of the provisions of Section 297(2)(g) of the Act of 1961. The appeal filed by the assessee was also dismissed, but on second appeal to the Tribunal, it was argued that Section 297(2)(g) merely made the procedure of the 1961 Act applicable, but the quantum of penalty could be imposed under the Act of 1922 and, consequently, there was no minimum which was to be imposed in such cases. The Tribunal, relying upon a decision of the Supreme Court in a criminal matter in Rao Shiv Bahadur Singh v. State of V.P, A.I.R. 1953 S.C. 394. held that the quantum of punishment could not exceed that which was prescribed under the law at the time of the commission of the offence and, consequently, reduce the penalty from 2% to Rs. 1,000 in a lump sum. Against that order, the Commissioner of Income-tax asked for a deference and the following question has been referred to this court:

' Whether, on the facts and in the circumstances of the case, the Tribunal was competent to refuse the penalty for the delayed filing of the return in respect of the assessment year 1960-61 to Rs. 1,000 which was below the minimum prescribed under Section 271(1)(a) of the Income-tax Act, 1961 ?'

3. We have heard learned counsel for both the parties. We are of opinion that the Tribunal made a mistake in applying the principle of criminal law. The matter is by now fully covered by two decisions, one of this court and the other by their Lordships of the Supreme Court. In Kishanlal v. Commissioner of Income-tax, [1967] 64 I.T.R. 285, 289 (M.P.) it was argued that the provisions of Section 297(2)(g) of the 1961 Act merely prescribed the procedure under the new Act and penalty had to be imposed under the old Act of 1922. Dealing with that argument, it was observed at page 289 as follows :

' We are unable to accept the contention advanced by learned counsel for the assessee that Clause (g) of Section 297(2) is only a machinery provision for the initiation of proceedings for the imposition of penalty and is not a provision for the imposition of penalty under the 1961 Act. The language of Clause (g) is very clear and distinctly says that any proceeding for the imposition of penalty in respect of the assessment year referred to in the clause may be initiated and any such penalty may be imposed under the 1961 Act. To construe the clause as empowering only the initiation of proceedings for the imposition of penalty and not the imposition of penalty itself under the 1961 Act is to render altogether nugatory the words ' any such penalty may be imposed under this Act' occurring in that clause.'

4. A similar question arose before their Lordships of the Supreme Court in Jain Brothers v. Union of India, [1970] 77 I.T.R. 107. 116, 117 (S.C.). It was contended in that case before their Lordships that the penalty was imposed for not filing the return within time and that act having been committed while the old Act was in force, penalty should be imposed according to the old law. Repelling this contention, their Lordships observed as follows:

' It is obvious that for the imposition of penalty it is not the assessment year or the date of the filing of the return which is important but itis the satisfaction of the income-tax authorities that a default has beencommitted by the assessee which would attract the provisions relating topenalty. Whatever the stage at which the satisfaction is reached, thescheme of Sections 274(1) and 275 of the Act of 1961 is that the orderimposing penalty must be made after the completion of the assessment.The crucial date, therefore, for purposes of penalty is the date of suchcompletion....

It is true that Clause (a) of Sub-section (1) of Section 271 mentions the corresponding provisions of the Act of 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.'

5. In view of the above authorities, there is no doubt that the imposition of penalty in this case had to be according to the provisions of Section 271(1)(a) which provides a minimum of 2% in the case of delayed filing of return. The Income-tax Officer had imposed this minimum penalty and, consequently, the Tribunal had no power to interfere with that imposition of penalty and to reduce it below the minimum. We, accordingly, answer the question referred to this court as follows:

On the facts and in the circumstances of the case, the Tribunal was not competent to reduce the penalty for the delayed filing of the return in respect of the assessment year 1960-61 to Rs. 1,000 which was below the minimum prescribed under Section 271(1)(a) of the Income-tax Act, 1961. Parties shall bear their own costs of this reference.


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