DULAT, J. - Finding that an assessee, (Firm, Nathu Ram-Babu Ram), had concealed a part of the income relating to the assessment year 20006 Bk., the Income-tax Officer, Bhatinda, imposed a penalty of Rs. 3,000 acting under section 28 of the Patiala Income-tax Act. This was reduced to Rs. 1,000 by the Appellate Assistant Commissioner, but on appeal to the appellate Tribunal the penalty was set aside on the ground that subsequent to the enactment of the Indian Finance Act, 1950, which did away with the Patiala Income-tax Act, no such penalty could have been legally imposed. The penalty was actually imposed on the November 4, 1951, both subsequent to the Indian Finance Act, 1950. It was argued before the Appellate Tribunal that the saving clause contained in section 13 of the Fiance Act, 1950, had the effect of saving the power of the Income-tax Officer to impose even a penalty, but the Appellate Tribunal did not agree. The Income-tax Commissioner thereupon applied to the Income-tax Appellate Tribunal for referring the following question of law for our decision :
'Whether on the facts and in the circumstances of this case the Income-tax Officer, Bhatinda, after April 1, 1950, had jurisdiction to impose penalty under section 28 of the Patiala Income-tax Act in respect of an assessment for the Samvat year 2006 (1949-50) ?'
On behalf of the Commissioner reliance is placed on section 13 of the Indian Finance Act. This runs :
'13. Repeals and savings. - (1) If immediately before the April 1, 1950, there is in force in any Part B State other than Jammu and Kashmir or Manipur, Tripura or Vindhya Pradesh or in the merged territory of Coach-Behar any law relating to income-tax or super-tax or tax on profits of business, that law shall case to have effect except for the purposes of the levy, assessment and collection of income-tax and super-tax in respect of any period not included in the previous year for the purposes of assessment under the Indian Income-tax Act, 1922 (XI of 1922), for the year ending on the March 31, 1951,...'
Mr. Sikri urges that although the previous law in Pepsu as contained in the Patiala Income-tax Act did cease to have effect on the enactment of the Finance Act, 1950, the same Act continued to operate so far as the levy, assessment and collection of income-tax and super-tax were concerned and that the assessment and collection of income-tax included the imposition of penalties provided in the Patiala Income-tax Act. The argument is that the imposition of various penalties provided in the Patiala Income-tax Act, and similar penalties provided in the Indian Income-tax Act, is an essential part of the scheme of the act to assess and collect income-tax and super-tax. It is, however, difficult to see what necessary connection there is between those provisions of the Income-tax Act, whether we consider the Patiala Income-tax act or the Indian Income-tax Act, which provide for the assessment and collection of the income-tax and super-tax and those other provisions which relate to the position of penalties on the doing of or the omission of certain acts by an assessee. It is true that the existence of those penalties does act as a deterrent and possibly facilitates the ensuring of certain acts to be done by the assessee, but it is possible to agree that but for such provision about the imposition of penalties, the assessment or collection of tax would not have any effect. It is quite clear from the scheme of the Acts that thieveries penalties are by way of punishment either for concealment of income or refusal or failure to make certain returns, and these punishments are over and above and quite outside the assessment and collection of the taxed themselves. It is, in the circumstances, difficult to agree that when Parliament used the expressions 'levy', 'assessment' and 'collection of income-tax and super-tax', it intended to include the imposition of penalties which could be imposed under the law previously in force. Mr. Sikri referred to the observation of the Supreme court in Lakshman Shenoy v. Income-tax Officer, Ernakulam, that the word 'assessment' used in the Finance Act of 1950 is capable of bearing a comprehensive meaning. That, however, does not assist in the present case, because the Supreme Court were in that case concerned with determining whether the word 'assessment' did or did not include 're-assessment', a matter about which there can really be no great difficulty. It is totally a different matter to say that the expression 'assessment' also includes a penalty that can be imposed under the Act. No other decided case supports Mr. Sikris argument. On the other hand two direct decisions bearing on this question support the view of the Appellate Tribunal. The first is a judgment of the Kerala High Court, Velayudhan v. Additional Income-tax Officer, Trivandrum, where the vary words now in question came up for interpretation, and Joseph, J., held that as used in the Indian Finance Act, 1950, the expression 'levy, assess and collect tax' did not include the 'imposition of a penalty' which was a punishment for certain defaults. the same view was taken by a Division Bench of the Hyderabad High Court in Bhikajee Dadabhai & Co. v. Commissioner of Income-tax. A Full Bench of the Andhra High Court in Commissioner of Income-tax v. Rayalaseema Oil Mills although not directly dealing with the interpretation of the Finance Act, 1950, did adopt the same view distinguishing the expression 'assessment' from a penalty capable of being imposed under the Income-tax Act. It is thus clear that the decided case against Mr. Sikris submission, and as far as the language of section 13 of the Indian Finance Act, 1950, is concerned, it does not lend much support to his argument. In my opinion, therefore, the view taken by the Appellate Tribunal must be upheld and I would answer the question referred to us in the negative. The assessee will get the costs of this reference which we assess at Rs. 150.
KHOSLA, C.J. - I agree.
Question answered in the negative.