Per Shri G. R. Raghavan, Accountant Member - These two appeals by the assessee relating to the assessment years 1972-73 and 1973-74 arise out of the consolidated order of the AAC, Akola Range, Akola in his Appeal Nos. 4 and 5 of 1982-83 dated 27-1-1983 upholding levy of penalty under section 271(1) (a) of the Income-tax Act, 1961 (the Act) to the extent of Rs. 11,729 in each of the years under appeal. The common grounds of appeal for these years are reproduced hereunder : 1. On the facts and in the circumstances and as per the law, the learned AAC, Akola Range, Akola erred in bifurcating the penalties in two parts when the penalties are actually to be computed according to the unamended provisions of law before 1-4-1976.
2. That the learned AAC has accepted in principle that the provisions before 1-4-1976 would be applicable for computing the quantum of penalty, but only because of issue of notice under section 148 and filing of return late, he made the computation of penalty for two periods, i.e., prior to 1-4-1976 and after 1-4-1976 and onwards, which is wrong and bad in law.
3. It is, therefore, prayed that the penalty amount be kindly reduced as per the unamended provisions of law, prior to 1-4-1876.
The fact relating to the levy of penalties, the rival submissions and out conclusion thereon are set out hereunder.
2. The assessee was to have filed its returns of income for 1972-73 and 1973-74 under section 139(1) of the Act, on 31-7-1972 and 31-7-1973, respectively. It actually filed the returns on 5-3-1980 for both these years. There was, therefore, a delay in terms of completed months of 91 months for the first year and 79 months for the second year. The assessments were completed in due course and the assessed tax thereon was Rs. 9,775 in each of the years. Penalty proceedings under section 271(1) (a) for late submissions of the returns were also taken during the course of the assessment proceedings and penalties in the sums of Rs. 17,780 and Rs. 15,444 were levied by the ITO at the rate of 2 per cent of the tax for 91 months and 79 months respectively for 1972-73 and 1973-74.
3. The assessee filed appeals before the AAC being aggrieved only with the quantum of penalty levied for both these years. The cause of appeal was, that as per the provisions of section 271(1) (a), sub-clause (i) as was in force as on 31-7-1972 and 31-7-1973, being the last of the dates on which the returns for both the years were due, the penalty levied should not exceed in the aggregate 50 per cent of the assessed tax and the same would amount to only Rs. 4887 in each of the years under consideration whereas, by levying penalties of Rs. 17,780 and Rs. 15,444 thereagainst, the ITO has committed a serious legal mistake in this behalf. The provisions of section 271(1) (a) (i) prior to amendment with effect from 1-4-1976 restricted the penalty leviable under the section to 50 per cent of the tax. In the present case, the ITO has calculated the penalty at 2 per cent for every month of default for the whole period of default without restricting the same to 50 per cent of the assessed tax. 50 per cent of the assessed tax for both the years in only Rs. 4,887, whereas the ITO had levied penalties of Rs. 17,780 for 1972-73 and Rs. 15,444 for 1973-74. Obviously, he had calculated the penalty with reference to the amended provisions in this behalf which removed the ceiling on the penalty of 50 per cent of the assessed tax with effect from 1-4-1976.
4. The AAC while agreeing with the submission, that the old provisions of law in this behalf prior to amendment with effect from 1-4-1976 would apply for computing the penalty, however, held that the position in the present case stood altered to the extent of the period covered by the default with reference to notice under section 148 of the Act issued to the assessee. He found that the assessee had been served notices under section 148 on 26-2-1977 requiring it to file the returns by 25-3-1980 for both the years. He, therefore, bifurcated the periods of default with reference to the period of non-compliance under the provisions of section 139(1) and the subsequent delay that ensued in the filing of the returns, after the service of notices under section 148 on the assessee. Since the returns with reference to section 148 notices were due by 25-3-1977, he calculated the default with reference to section 139(1) as 55 months for 1972-73 and 43 months for 1973-74 up to 25-3-1972 being the date on which the returns were due under section 148. For these periods, he restricted the penalty to 50 per cent of the assessed tax namely, Rs. 4,887, for both the years. As regards the delay that ensued in the submission of the returns after the notices under section 148 were served on the assessee, he computed the delay at 35 months for each of the years and calculated the penalty at 70 per cent of the tax, as according to him, when the second default was committed, the amended provisions of section 271(1) (a) (i) had already come into force and, therefore, the ceiling of 50 per cent of the assessed tax on the penalty was no longer in existence. In this manner, he ascertained the penalty at Rs. 11,729 for each of the years under appeal as against the penalties actually levied by the ITO. As a result thereof, he allowed a relief of Rs. 6,061 in the first year and Rs. 3,715 in the second year.
5. Aggrieved with this order, the assessee has filed these appeals before us. The appellants representative made the following submissions before us.
The returns of income for both the years being due on 31-7-1972 and 31-7-1973, the provisions relating to levy of penalty for late submission of the returns as in force on those dates alone would be attracted in the present cases. The change made therein by the subsequent amendment with effect from 1-4-1976, removing the ceiling of 50 per cent of the tax on the penalty, is of no consequence as the defaults as far as late submission of returns was concerned had already occurred on the relevant due dates and moreover, such defaults were not continuing defaults. He further submitted, that though the AAC admitted in his order, that only the old provisions of law before their amendment on 1-4-1976 would apply for computing the penalty in these cases, he went wrong in making a distinction in the present case, merely on the ground, that the returns of income were due by 25-3-1977 in response to notice under section 148 served on the assessee and, therefore, penalty for the subsequent delay which ensued after 25-3-1977 would be leviable with reference to the amended provisions in this behalf, inasmuch as, those provisions had come into force on 25-3-1977, being the due date for submission of the returns under section 148. In other words, he submitted, that the AAC should not have bifurcated the period of default into two periods, one relating to the period up to 25-3-1977, being the period of default under section 139(1) and second relating to the period after 25-3-1977 as default relating to section 148 notices and thereby calculated the penalties in respect of the first period under the unamended provisions. He submitted, in fine, that the view taken by the ITO in this behalf is diametrically opposed to the law laid down in this behalf by the Supreme Court in the cases of Brij Mohan v. CIT  120 ITR 1 and CWT v. Suresh Seth  129 ITR 328. The first case deals with penalty leviable under section 271(1) (c) for concealment of income.
The Honble Supreme Court observed that since penalty was imposed on account of the commission of wrongful act, it was the law operating on the date on which the wrongful act was committed, which determined the levy of penalty and, therefore, the provisions in force on the date of the commission of the wrongful act were applicable. In this case, the assessee who was partner in two firms did not disclose his share in the profits of one of the firms in the return filed by him on 24-4-1968.
Penalty proceedings under section 271(1) (c) were instituted and the IAC levied a penalty equal to the income concealed. On appeal, the Tribunal rejected the assessees contention in this behalf though, however, it reduced the quantum of penalty. In this context, the Honble Supreme Court made the following observations : "... In the case of a penalty, however, we must remember that a penalty is imposed on account of the commission of wrongful act, and plainly it is the law operating on the date on which the wrongful act is committed which determines the penalty. Where penalty is imposed for concealment of particulars of income, it is the law ruling on the date when the act of concealment takes place which is relevant. It is wholly immaterial that the income concealed was to be assessed in relation to an assessment year in the past.
The concealment of the particulars of his income was effected by the assessee when he filed a return of total income on April 24, 1968.
Accordingly, it is the substituted clause (iii), brought in by the Finance Act, 1968, which governs the case. That clause came into effect from April 1, 1968." (p. 4) The next case is under the Wealth-tax Act, 1957 (the 1957 Act) relating to levy of penalty under section 18(1) (a) of the 1957 Act for delay submission of the return of wealth. The following head-note from this decision very relevant in this context is reproduced hereunder : "Where the default complained of is one falling under section 18(1) (a) of the W. T. Act, 1957 (e.g., failure to file the return of wealth before the due date without reasonable cause), the penalty has to be computed in accordance with the law in force on the last date on which the return in question had to be filed. Neither the amendment made in 1964 nor the one made in 1969 to clause (i) of section 18(1) has retrospective effect.
Non-performance of any of the acts mentioned in section 18(1) (a) gives rise to a single default and to a single penalty, the measure of which, however, is geared up to the time lag between the last date on which the return has to be filed and the date on which it is filed. The default, if any, committed, is committed on the last date allowed to file the return. The default cannot be one committed every month thereafter. The words for every month during which the default continued indicate only the multiplier to be adopted in determining the quantum of penalty and do not have the effect of making the default in question a continuing one. Nor do they make the amended provisions modifying the penalty applicable to earlier defaults in the absence of necessary provisions in the amending Acts.
The distinctive nature of continuing wrong is that the law that is violated makes the wrong doer continuously liable for penalty. A wrong or default which is complete but whose effect may continue to be felt even after its completion is, however, not a continuing wrong or default." 6. We have considered the relevant submission from either side and the decisions cited before us. Having due regard to the decision of the Supreme Court in Suresh Seths case (supra) the head-note of which has been extracted above, we have absolutely no doubt in out mind, that this decision fully covers the facts of this case which are identical.
Two very important aspects have been brought out in the Supreme Courts decision, namely, penalty for late submission of the return will be governed by the law in force on the last date on which the return in question had to be filed and amendment to the provisions in question after that date being of no relevance. Second important aspect is, that the default, if any, is committed on the last date allowed to file the return and the default once committed, cannot be committed every month thereafter. In other words, the Supreme Court held, that the words for every month during which the default continued indicate only the multiplier adopted in determining the quantum of penalty and do not have the effect of making the default a continuing one. In the present case as well, the defaults for both the years were committed on 31-7-1972 and 31-7-1973 when the restriction on the quantum of penalty up to 50 per cent of the assessed tax was in force. The removal of this restriction took place only with effect from 1-4-1976 by which time, the default had already been committed. Therefore, the provisions prior to the amendment from 1-4-1976 alone are applicable in determining the quantum of penalty, namely, subject to the ceiling of 50 per cent of the assessed tax. Moreover, the Supreme Courts decision, that the default, once committed is not a continuing default also answers the argument of the AAC, that the period of default subsequent to 25-3-1977 being the date on which the returns under section 148 were due, should be considered separately and penalty should be levied with reference thereto under the amended provisions. There is absolutely no warrant for bifurcating the periods as done by the AAC and calculating the penalty under the new provisions with reference to the second period of default. The provisions of law in this regard, both under the 1957 Act and the 1961 Act are more or less the same mutatis mutandis. Hence, the decision of the Supreme Court is squarely applicable to the facts of the case. The maximum penalty leviable being 50 per cent of the assessed tax, namely, Rs. 4,887 in each year under consideration, we reduce the same to this figure. Accordingly, the penalty is reduced to Rs. 4,887 in each of the years under appeal.