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Commissioner of Income-tax, Delhi Vs. Maya Rani Punj - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtDelhi High Court
Decided On
Case NumberIncome Tax Reference No. 50 of 1968
Judge
Reported inILR1973Delhi605; [1973]92ITR394(Delhi)
ActsIncome tax Act, 1961 - Sections 271(1)
AppellantCommissioner of Income-tax, Delhi
RespondentMaya Rani Punj
Advocates: B. Kirpal,; S.K. Dholakia and; D.R. Sethi, Advs
Cases ReferredShri V. S. Malhotra v. Union of India and
Excerpt:
in the instant case, the new statute had provided for minimum penalty of 2% and maximum of 50% on the amount of tax payable, for any delay in filing of return - it was observed that the old statute had not prescribed any minimum amount of penalty although it had prescribed a maximum of one and half times of amount of tax - it was further noticed that the maximum penalty that could have imposed under old statute was greater -in view of the fact, it was ruled that the new statute related to levy of penalty in respect of the default committed earlier was not unconstitutional - - (7) before proceeding to consider the contention urged on behalf of the assessed as well as on behalf of the revenue on the question whether the tribunal was right in reducing the penalty, it may be stated that on.....m.r.a. ansari, j. (1) the following question has been referred to this court by the income-tax appellate tribunal (hereinafter referred to as the tribunal) under section 256(1) of the income-tax act, 1961 (hereinafter referred to as the new act): 'whether the facts and in the circumstances of the case, the tribunal was in law competent to reduce the penalty levied under section 271(1)(a) to a figure lower than the sum equal to 2/g of the tax for every month during which the default continued but not exceeding the aggregate 50^ of the tax?'(2) the relevant facts may be briefly stated. the income tax return of the respondent herein, who will be referred to hereinafter as the assessed, for the assessment year 1961-62 was due to be filed on or before z8-9-1961. the assessed did not file the.....
Judgment:

M.R.A. Ansari, J.

(1) The following question has been referred to this Court by the Income-tax Appellate Tribunal (hereinafter referred to as the Tribunal) under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as the new Act):

'Whether the facts and in the circumstances of the case, the Tribunal was in law competent to reduce the penalty levied under section 271(1)(a) to a figure lower than the sum equal to 2/g of the tax for every month during which the default continued but not exceeding the aggregate 50^ of the tax?'

(2) The relevant facts may be briefly stated. The income tax return of the respondent herein, who will be referred to hereinafter as the assessed, for the assessment year 1961-62 was due to be filed on or before z8-9-1961. The assessed did not file the return by that date nor did she apply for extension of time for filing the return. The return was filed en 3-5-1962, i.e., after a delay of about 7 months. When the Income-tax Officer proposed to levy a penalty for the late filing of the return, the assessed pleaded that her husband was ill and that she had to leave the station for a long period. She also stated that she was a regular tax-payer and the sources of income were salary on which tax was already deducted at source and share from registered firm for which returns were filed by the firms themselves. The Income-tax Officer held that the assessed was not prevented by a reasonable cause from filing the return of income within the prescribed time. He, thereforee, levied a penalty of Rs. 4,060.00 under section 271(1)(a) of the new Act.

(3) The assessed preferred an appeal before the Appellate Assistant Commissioner against the order of the Income-tax Officer levying the penalty and raised two contentions, namely,-

'(I)that as the default had been made under the previsions of the Indian Income-tax Act, 1922 (hereinafter referred to as the old Act), the penalty could no(r)- be levied under the provisions of the new Act, (ii) that the notice issued by the Income-tax Officer proposing to levy the penalty was not issued in the course of the assessment proceedings and was, thereforee, in contravention of section 274 of the new Act.'

(4) The Appellate Assistant Commissioner did not accept either of these contentions and confirmed the penalty levied by the Income-tax Officer.

(5) The assessed thereupon preferred a second appeal before the Tribunal and raised the following contentions, namely:-

'(I)that the default being under the provisions of the old Act, no penalty could be levied under the provisions of the new Act, (ii) that even if the penalty could validly be levied under the new Act, the quantum of the penalty was to be determined with reference to ihe provisions of section 28 of the old Act and that in view of the extenuating circumstances pleaded by the assessed, the penalty levied by the Income-tax Officer may be suitably reduced, and (iii) that the penalty notice was not in conformity with the provisions of section 274 of the new Act.'

(6) The Tribunal did not accept the first and the third contentions mentioned above and held that penalty could be levied under the provisions of the new Act even though the default occurred under the provisions of the old Act and also that there was no contravention of the provision of section 274 of the new Act. The Tribunal, however, accepted the second contention of the assessed mentioned above and following an order of the Tribunal in another case held that though the penalty was levied under section 271(l)(a) of the new Act, the quantum of the penalty had to be determined with reference to the provisions of section 28 of the old Act. Taking into consideration the extenuating circumstances pleaded by the assessed, the Tribunal reduced the penalty to Rs. 400. This reduction of the penalty is being challenged by the Department.

(7) Before proceeding to consider the contention urged on behalf of the assessed as well as on behalf of the Revenue on the question whether the Tribunal was right in reducing the penalty, it may be stated that on the date of the order of the Tribunal, there was divergence of opinion among the several High Courts on the question whether penalty could be levied under the provisions of the new Act when the default had occurred under the provisions of the old Act. This controversy has, however, since been settled by the Supreme Court in the case of .Jain Brothers and others v. Union of India and others reported in (1970) 77 I.T.R. 107,0. Since in my view the rule laid down by the Supreme Court in that case affords guidance on the question which we have to answer in the present case, it is necessary to state the facts of that case and also some of the contentions which had been raised before the Supreme Court in that case and also the findings of the Supreme Court on such contentions.

(8) The assessed in that case was served with a notice on May 26, 1960 under section 22(2) of the old Act calling upon the assessed to file its return of income for the assessment year 1960-61 within 35 days of the service of the notice. The assessed did not file the return within that time but filed it on November 18, 1961. The assessment was completed on November 23, 1964 under the provisions of the old Act. The Income-tax Officer, however, levied a penalty on the assessed under section 271(l)(a) of the new Act for non-compliance with the notice under section 22(2) of the old Act. Ultimately, the assessed took the matter before the Supreme Court. The levy of penalty was challenged on various grounds. One of the contentions was that section 297(2)(g) of the new Act was vocative of Article 14 of the Constitution of India inasmuch as it created a discrimination between two sets of assesseds with reference to a particular date, namely, completion of assessment proceedings on or after the first day of April, 1962. In support of this contention, it was argued that penalty par took of the character of an additional tax and thereforee its imposition should not have been made dependent on the date when the assessment had been completed, particularly, when under clauses (a) and (b) it was the date of filing of the return which governed the procedure relating to assessment under one Act or the other. The Supreme Court repelled these contentions with the following observations:-

'THERE can be no manner of doubt that penalty has to be calculated and imposed according to the tax assessed. It follows that imposition of penalty can take place only after assessment has been completed. For this reason there was every justification for providing in clauses (f) and (g) that the date of the completion of the assessment would be determinative of the enactment under which the proceedings for penalty were to be held. It may be that the legislature considered that a separate treatment should be given in the matter of asessment itself and under clauses (a) and (b) of section 297(2) the point of time when a return of income had been filed was made decisive for the purpose of application of the Act of 1922 or the Act of 1961. But merely because the legislature in its wisdom decided to give a different treatment to proceedings relating to penalty it is difficult to find discrimination with regard to the classification which has been made in clauses (f) and (g) which are independent of clauses (a) and (b). Although penalty has been regarded as an additional tax in a certain sense and for certain purposes it is not possible to hold that penalty proceedings are essentially a continuation of the proceedings relating to assessment where a return has been filed.'

(9) Another contention that was raised before the Supreme Court was that the language of section 271 (of the new Act) does not warrant the taking of proceedings under that section when a default had been committed by failure to comply with the notice issued under section 22(2) of the old Act. This contention was also repelled with the following observations:-

'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. Thus the assessed would be liable to a penalty as, provided by section 271(1) for the default mentioned in section 28 (1) of the Act of 1922 if his case falls within the terms of section 297(2)(g).'

(10) In support of the contention that section 297(2)(g) of the new Act was vocative of Article 14 of the Constitution, it was also argued that the substantive and the procedural provisions relating to penalty contained in the Act of 1961 were more onerous than the similar provisions in the Act of 1922. In considering this argument, the Supreme Court took notice of the difference between the provisions of the old Act and the new Act relating to penalty. To quote the observations of the Supreme Court.-

'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 had 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 the Inspecting Assistant Commissioner. Under the 1961 Act no such previous approval is necessary. Thirdly, the Act of 1922 did not prescribe any minimum amount of penalty. According to the Act of 1961, the penalty cannot be less than the minimum prescribed. This is, of course, subject to the Commissioner's power of reduction. Fourthly, the maximum penalty imposable in a case where there has been a failure to file a return in compliance with a notice issued by the Income-tax Officer has been reduced under the Act of 1961. Lastly, there was no time limit in the Act of 1922 for passing of a penalty order but under the Act of 1961 a period of two years has been prescribed by section 275 as stated above. Thus, whereas under the Act of 1922 a defaulting assessed had certain protection in the matter of prosecution no such protection has been afforded under the Act of 1961; but the maximum amount of penalty which can be imposed has been reduced and a period of limitation has been prescribed for passing a penalty order which is of distinct advantage to a defaulting assessed.'

(11) After taking note of these differences, the Supreme Court held that-

'IT is not possible to accept the suggestion on behalf of the appellants that the substantive and the procedural provisions relating to penalty contained in the Act of 1961 are altogether onerous.'

(12) Now to determine the question that we are called upon to answer in the present case, I shall first proceed on the basis that the Incometax Officer was right in levying the penalty under section 271(l)(a) of the new Act although the default had occurred under the provisions of the old Act. The Tribunal also upheld the action of the Income-tax Officer in levying the penalty under section 271(l)(a) of the new Act. The Tribunal, however, determined the quantum of the penalty with reference to the provisions of section 28 of the old Act which only prescribed a maximum penalty and did not prescribe minimum penalty. The Tribunal did not give any reasons for determining the quantum of penalty with reference to the provisions of section 28 of the old Act but merely followed the order of the Tribunal in another case. That order of the Tribunal is not before us and I am, thereforee, not aware of the reasons given by the Tribunal in the said order except what has been stated in the order of the Tribunal in the present case, namely,-

'THAT since the default was committed at the time when the Indian Income-tax Act, 1922 was in force, the penalty must also be in consonance with that Act, and, thereforee, it was urged that the discretion in fixing the quantum of penalty should be exercised with reference to the provisions of the Income-tax, Act 1922.'

(13) The learned counsel for the assessed, Shri S.K. Dholakia, has, however, sought to support the order of the Tribunal on the following grounds, namely,-

'(I)that section 297(2)(g) of the new Act is vocative of Article 20(1) of the Constitution because the assessed would 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, (ii) that section 297(2)(g) of the new Act must be construed in such a way as it would not violate Article 20(1) of the Constitution and if it is so construed, the determination of the quantum of the penalty should be made with reference to section 28 of the old Act. (iii) that even under the rule laid down by the Supreme Court in Jain Brothers' case the quantum of the penalty has to be determined with reference to the provisions of section 28 of the old Act, and (iv) that even under section 271(IXa) of the new Act, a discretion is given to the Income-tax Officer to levy a penalty less than the rate prescribed in clause (i) of sub-section (1) of section 271 of the new Act.'

(14) The first contention proceeds on the basis that clause (i) of subsection (1) of section 271 provides for the levy of a minimum penalty at the rate of 1% of the tax for every month during which the default occurred and that no discretion is given to the Income-tax Officer to levy a penalty which is below this minimum. Section 28 of the old Act did not prescribe any minimum penalty and the Income-tax Officer could impose any penalty subject to the maximum prescribed under section 28. It is contended that inasmuch as a minimum penalty is provided under the new Act for default which was committed under the old Act, such a provision is vocative of Article 20(1) of the Constitution. That Article reads as follows:-

'20(1)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 in force at the time of the commission of the offence.'

(15) SUB-ARTICLES (2) and (3) of this Article are not relevant. Section 297(2)(g) of the new Act would be vocative of Article 20(1) of the Constitution only if the penalty prescribed under clause (i) of sub-section (1) of section 271 is greater than that which might have been inflicted under section 28 of the old Act. Under clause (i) of sub-section (1) of section 271, the maximum penalty that could be levied is 50 % of the tax. Under section 28 of the old Act, the maximum penalty that could be levied was 1.5 times the amount of the tax. thereforee, the maximum penalty that can be levied under clause (i) of sub-section (1) of section 271 is not greater than the maximum penalty that could be levied under section 28 of the old Act. The question is whether the provision to levy a minimum penalty under clause (i) of section 271(1) will amount to subjecting the assessed to a penalty greater than that which might have been inflicted under section 28 of the old Act when under the latter provision no minimum penalty was prescribed.

(16) In K. Satwant Singh v. The State of Punjab ( : [1960]2SCR89 Satwant Singh V. Vas convicted under section 420 Indian Penal Code read with section 10 of the Ordinance 29 of 1943. The said Ordinance provided that whether or not a sentence of imprisonment was imposed by the Special Tribunal, a sentence of fine must be imposed and that fine shall not be less in amount than the amount of money or value of other property found to have been procured by the offender by means of an offence. In other words, the Ordinance imposed a minimum fine in any event whether a sentence of imprisonment was or was not imposed. Under section 420 Indian Penal Code although an unlimited amount of fine could be imposed, there was no provision for the imposition of a minimum amount of fine. A contention was raised before the Supreme Court that the imposition of the minimum sentence of fine was vocative of Article 20(1) of the Constitution. This contention was rejected by the Supreme Court with the following observations:-

'IT cannot be said that S. 10 of the Ordinance in imposing the minimum fine which a Court shall inflict on a convicted person was a penalty greater than that which might have been inflicted on that person under the law in force at the time of the commission of the offence, where under such law the extent of fine, which could be imposed is unlimited. A law which provides for a minimum sentence of fine on conviction cannot be read as one which imposes a greater penalty than that which might have been inflicted under the law at the time of the commission of the offence where for such an offence there was no limit as to the extent of fine which might be imposed.'

(17) The learned counsel for the assessed has referred to a decision of the Supreme Court of the United States of America reported in Elbert B. Lindsey and E.R. Lindsey V. State of Washington, U.S. Supreme Court Reports,81 Lawyers' Edition 1182,in which it was held that-

'THE application to prior offences of state statute changing the law as to indeterminate sentences is a violation of the ex post facto clause of the Federal Constitution, where the original statute, which allowed the court to impose a sentence not less than the minimum nor greater than the maximum term of imprisonment, is changed so as to require the court to impose the maximum sentence, the duration of the confinement to be fixed by a parole board which is given the power to lengthen such duration of confinement not exceeding the maximum term and to return the prisoner to confinement after his release at any time before the expiration of the maximum term, there being no possibility under the new law, as there was under the old law, of an unqualified release before the expiration of the maximum term.'

(18) The rule laid down in this case cannot be applied in view of the rule laid down by the Supreme Court in K. Satwant Singhs case.

(19) The rule laid down by the Supreme Court in K. Satwant Singh's case was applied by the Kerala High Court in P. Urnmah Umnw v. Inspecting Assistant Commissioner of Income-tax and others : [1967]64ITR669(Ker) , in rejecting a contention similar to the one which has been advanced in the present case, namely, that section 297(2)(g) of the new Act by virtue of which a minimum penalty was imposed for a default committed under the old Act was vocative of Article 200 of the Constitution, and K.K. Mathew J. (as his Lordship then was) observed as follows:-

'THE maximum penalty being the same in both the enactments, I think there is no substance in the contention that the petitioner is being subjected to a greater penalty under the Act because a minimum is specified in section 271 of the Act.'

(20) Although in the case of Jain Brothers the Supreme Court was not considering the effect of section 297(2)(g) of the new Act in the light of Article 20(1) of the Constitution, still the following observations of the Supreme Court in that case, in my view, afford sufficient guidance for the determination of the contention that has been raised before us on the basis of Article 20(1) of the Constitution:-

'THUS,whereas under the Act of 1922 a defaulting assessed had certain protection in the matter of prosecution no such protection has been afforded under the Act of 1961; but the maximum amount of penalty which can be imposed has been reduced and a period of limitation has been prescribed for passing a penalty order which is of distinct advantage to a defaulting assesses. It is not possible to accept the suggestion on behalf of the appellants that the substantive and the procedural provisions relating to penalty contained in the Act of 1961 are altogether onerous.'

(21) In view of the rule laid down by the Supreme Court in K. Satwant Singh's case and also in the case of Jain Brothers and also the observations of the Kerala High Court with which T am in respectful agreement, I have to hold that section 297(2)(g) of the new Act which makes the provisions of section 271(l)(i) of the new Act applicable to the levy of penalties for defaults committed under the old Act are not vocative of Article 20(1) of the Constitution.

(22) The second contention that the provisions of section 271(l)(i) of the new Act should be so interpreted as not to conflict with Article 20(1) of the Constitution, namely, that a penalty below the minimum prescribed under clause (i) could be levied in cases of default occurring under the old Act, does not arise in view of my finding that the provision to levy a minimum penalty for defaults committed under the old Act was not vocative of Article 20(1) of the Constitution.

(23) In support of the third contention, namely, that in spite of section 297(2)(g) of the new Act, it is still open tothe Income-tax Officer to levy a penalty below the minimum prescribed under clause (i) of subsection (1) of section 271, reliance is sought to be placed upon the following observations of the Supreme Court in the case of Jain Brothers (1)- We may usefully refer to this Court's decision in Third Income- tax Officer, Managalore v. Damodar Bhat : [1969]71ITR806(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 mutates mutants. Similarly the provision of section 271 of the Act of 1961 will apply mutates mutants to proceedings relating to penalty initiated in accordance with section 297(2)(g) of that Act.

(24) Relying on the above observations, the learned counsel for the asses- see, contends that while levying penalty for a default committed under the old Act, the procedure to be followed is one prescribed under the new Act, the quantum of the penalty is to be levied with reference to section 28 of the old Act. I am wholly unable to accept this interpretation put , the observation of the Supreme Court. According to Chamber's Twentieth Century Dictionary, revised edition, the words 'mutates mutants' mean 'with necessary changes' and according to Webster's Third New International Dictionary, the words 'mutates mutants' mean 'with the respective differences having been considered'. In my view, the observations of the Supreme Court relied upon by the learned counsel only mean that section 271(l)(a), which reads 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- (a) has without reasonable, cause failed to furnish the return of total income which he was required to furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139 or section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by sub-section (1) of section 139 or by such notice, as the case may be,'

has to be applied in the case of default occurring under the old Act as if in the place of section 139, section 22 should be substituted and in the place of section 148, the corresponding provision in the old Act should be substituted. The interpretation sought to be put by the learned counsel on the words 'mutates mutants' would run counter to what was held by the Supreme Court in the case of Jain Brothers. The Supreme Court had held in that case that-

'WE are further unable to agree that the language of section 271 does not warrant the taking of proceedings under that section when a default has been committed by failure to comply with a notice issued under section 22 (2) of the Act of 1922. 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. Thus the assessed would be liable to a penalty as provided by section 271(1) for the default mentioned in section 28(1) of the Act of 1922 if his case falls within the terms of section 297(2)(g).'

(25) In further support of his contention that the words 'mutates mutants' use( by the Supreme Court in the case of Jain Brothers') contemplate the determination of the quantum of the penalty with reference to section 28 of the old Act, the learned counsel for the assessed has referred to the use of the words 'such penalty' in clauses (f) and (g) of sub-section (2) of section 297 of the new Act. According to the learned counsel, the words 'such penalty' occurring in these two clauses mean the penalty which is imposable under section 28 of the old Act. The learned counsel has also referred to a judgment of this Court in C.W. No. 1090/71 (Shri V.S. Malhotra v. Union of India and others) delivered by my learned brother Kapur J. on 15th February, 1972(5). The judgment relied upon by the learned counsel is clearly distinguishable and as my learned brother is delivering a separate judgment, I do not propose to give my reasons for my view that the judgment of the learned brother In the case referred to by the learned counsel is clearly distinguishable. It is sufficient for me to say that the words 'such penalty' occurring in clauses (f) and (g) only mean the penalty which is referred to in the earlier part of the clauses (f) and (g) and they do not mean a penalty which is imposable under section 28 of the old Act.

(26) This brings me to a consideration of the last contention urged by the learned counsel for the assessed, namely, that clause(i) of subsection (1) of section 271 does not prescribe a minimum penalty and that it is open to the Income-tax Officer to levy a penalty at the rate lower than 2/o of the tax for every month during which the default occurred. In support of this contention, the learned counsel refers to the language used in section 271(1) of the new Act. The relevant portion reads 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- (a) has without reasonable cause failed to furnish the return of total income which he was required to furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139 or section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by sub-section (1) of section 139 or by such notice, as the case may be, or (b) has without reasonable cause failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143, or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty etc. etc.'

(27) According to the learned counsel, the use of the word 'may' implies that the Income-tax Officer has a discretion to levy a penalty below the rate provided under clause (i). Such a interpretation, in my view, will be doing violence to the language. The only significance of the word 'may' is that the Income-tax Officer has a discretion either to levy a penalty or not to levy a penalty. But if he decides to levy a penalty, then he has to levy it 'in accordance with the provisions of clause (i). The discretion does not extend to levying a penalty at a rate other than the rate prescribed in clause (i). The learned counsel also refers to the difference in the language of clause (i) on the one hand and clauses (ii) and (iii) on the other. In order to appreciate the contention put forward by the learned counsel, it is necessary to re-produce the three clauses:-

'(I)in the cases referred to in clause (a), in addition to the amount of the tax, if any, payable by him, a sum equal 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; (ii) in the cases referred to in clause (b), in addition to any tax payable by him, a sum which shall not be less than ten per cent but which shall not exceed fifty per cent of the amount of the tax, if any, which would have been avoided if the income returned by such person had been accepted as the correct income; (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 but which shall not exceed twice, the amount of the income in respect of which the particulars have been concealed or inaccurate particulars have been furnished.'

(28) According to the learned counsel, the use of the words 'not less than' in clauses (ii) and (iii) and the absence of similar words in clause (i) would imply that no minimum was fixed under clause (i). I am unable to accept this contention also. The only significance of the use of the words 'not less than' in clauses (ii) and (in) is that while the Income-tax Officer cannot impose a penalty which is less than the minimum prescribed under these two clauses, it is open to him to levy a higher penalty subject to the maximum prescribed under the two clauses. But under clause (i) it is not open to the Income-tax Officer to levy a penalty at a rate of more than 2 /o of the tax for every month during which the default continued. In other words under clause (i), the Income-tax Officer if he decides to levy a penalty shall levy a penalty at the rate of 2 % and not either at a lower rate or at a higher rate.

(29) That the rate prescribed under clause (i) is the minimum penalty prescribed under the said clause is apparent from the other provisions of section 271. Sub-section (4A) of section 271 reads as follows:- (4A). Notwithstanding anything contained in clause (i) or clause (iii) of sub-section (1) the Commissioner may in his discretion- (i) reduce or waive the amount of minimum penalty imposable of a person under clause (i) of sub-section (1) for failure, without reasonable cause, to furnish the return of total income which such person was required to furnish under sub-section (1) of section 139'.

(30) The proviso to sub-section (4A) reads as follows:-

'PROVIDED that if in a case the minimum penalty imposable under clause (i) or, as the case may be, clause (iii) of sub-section (1) in respect of the relevant assessment year, or where such disclosure relates to more than one assessment year, the aggregate of the minimum penalty imposable in respect of those years, exceeds a sum of rupees fifty thousand, no order reducing or waiving the penalty shall be made by the Commissioner unless the previous approval of the Board has been obtained.'

(31) The use of the words 'the minimum penalty' in sub-section (4A) with reference to the penalty that is imposable under clause (i) of sub-section (1) clearly expresses the intention of the Legislature that the penalty prescribed under clause (i) is the minimum penalty.

(32) The Supreme Court also in the case of Jain Brother has understood the penalty imposable under clause (i) of sub-section (1) as the minimum penalty. Referring to the difference between the penalty provisions of the old Act and the penalty provisions of the new Act, the Supreme Court observed as follows:-

'THIRDLY,the Act of 1922 did not prescribe any minimum amount of penalty. According to the Act of 1961, the penalty cannot be less than the minimum prescribed.'

(33) Some of the High Courts also have expressed similar views. In Indra & Co. v. Union of India and another reported in , the Rajasthan High Court has observed as follows:-

'THE maximum limit of penalty is obviously not enhanced by the new Act and then it is discretionary under the provisions of the new Act also that the Income-tax Officer may choose not to inflict any penalty in the circumstances of a case. However, if he chooses to do so, then a yardstick for the determination of the penalty based on each month of the default is prescribed. This rather results in rationalising the exercise of discretion bythe income-tax Officer by providing a criterion when there was no such corresponding criterion prescribed under the old Act,'

(34) In P. Urnmah' Um'nav. Inspecting Assist ant Commissioner of Income- tax and others : [1967]64ITR669(Ker) the Kerala High Court held as follows:-

'THE maximum penalty being the same in both the enactments, I think there is no substance in the contention that the petitioner is being subjected to a greater penalty under the Act because a minimum is specified in section 271 of the Act,'

(35) In Commissioner of Income-fax v. Venichand Maganlal the Rajasthan High Court again held as follows:-

'SECTION 271(1) speaks in unequivocal terms that in the cases referred to in clause (a) a sum equal to 2%of the tax for every month during which the default continues, but not exceeding in the aggregate 50% of the tax was to be the amount of penalty. This means that the penalty to be imposed is to be calculated at 2% of the tax for every month during which the default continues, but the maximum limit was 50/o of the tax. The view taken by the Tribunal is that clause (i) does not lay down any minimum limit as has been provided in section 271(l)(iii), just as in section 271(l)(iii) both the- minimum and maximum limits have been prescribed, and, thereforee, it can be any sum which is less than 2/o of the tax for every month during which the default continues. This. argument is fallacious. In arithmetic 'equal to a particular number' means not less than that particular number as also- not more than that particular number. It conveys the idea that it must be exactly the same. Thus it cannot be said that section 271(l)(i) does not prescribe the lower limit for imposing the penalty.'

(36) In Commissioner of Income-fax v. Munshi Ram Tilak Raj reported in (1971) 81 I.T.R. 620 the Punjab and Haryana High Court held that the Tribunal was wrong in reducing the penalty which was less than the minimum prescribed by section 271(l)(i) of the new Act.

(37) Although Mr. Dholakia, learned counsel for the assessed has. argued this case with great ability. I am unable to accept any of his arguments which were urged in support of the order of the Tribunal reducing the penalty to an amount which was below the minimum prescribed under section 271(l)(i) of the new Act. The question referred to us has, thereforee, to be answered in the negative, i.e., in favor of the Revenue and against the assessed. Under the circumstances of the case, there shall, however, be no order as to costs.

D.K. Kapur, J.

(38) I have had the advantage of reading my learned brother's judgment. I entirely agree with the same, but, in view of the fact that certain observations made by me in Civil Writ No. 1090 of 1971, Shri V. S. Malhotra v. Union of India and others have been referred to, I think it only proper that I should make my own comments on the applicability of that judgment. The problem in that case was that the petitioner, Shri V. S. Malhotra, who was a legal practitioner had been disqualified from representing assesseds before the Income-tax authorities for a period of two years by application of Section 288(4) of the Income-tax Act, 1961. He had previously been subjected to a penalty under Section 271(l)(c) of that Act, and the question arose before me as to whether the disqualification mentioned in Section 288(4) could be imposed on him in view of the fact that no such disqualification existed in the Income-tax Act, 1922. He had been assessed for the year 1958-59, but the proceedings had been completed after the Act of 1961 came into force. In other words, the question was, whether the disqualification specified in Section 288(4) of the Act of 1961 could be applied by reason of Section 297(2)(g) of the Act. I came to the conclusion that it could not. One of the reasons I gave for this conclusion was that the disqualification specified in Section 288(4) of the Act was mot 'such penalty' as could be imposed by virtue of that provision.

(39) In this case again, the question before us is, whether the words ''such penalty' occurring in Section 297(2)(g) mean that the same penalty as specified in Section 28 of the Act of 1922, can be imposed, or, whether the penalty mentioned in Section 271 can be imposed. In relation to this subject, there are two provisions in Section 297(2) of the Act of 1961; sub-clause (f) deals with those cases where the assessment has been completed before 1st April, 1962, and sub-clause (g) deals with the cases in which the assessment has been completed on or after that date although relating to an earlier year. As far as sub-clause (f) is concerned, there is no difficulty in construction, Tiecause the penalty has to be imposed as if the Act of 1961 had never been enacted. For that type of cases, reference to the Act of 1922 alone would be necessary. In the cases covered by sub-clause (g), the penalty has to be imposed under the new Act, although the default might have been before the new Act was passed. The question that is posed is, whether the penalty has to be the same as under the Act . of 1922, or the one mentioned in the Act of 1961. In this connection, it is very important to note that the Act of 1961 does not permit a penalty greater than the one mentioned in the Act of 1922 to be imposed. I may slightly elaborate this.

(40) In Section 28 of the Act of 1922, which corresponds with Section 271 of the Act of 1961. three types of defaults are mentioned in Section 28(1), the same three defaults are mentioned in Section 271(1) of the new Act. Under the penalty provision corresponding to these defaults, the maximum penalty was specified in Section 28 as being one and a half times of the income-tax in the case of sub-clause (a) and one and a half times of the income-tax and super-tax that might have been avoided in the case of sub-clauses (b) and (c). In the corresponding Section 271, the maximum has been reduced in the case of sub-clauses (a) and (b) to only fifty per cent of the amount of tax and in the case of sub-clause (c) the maximum is the same as before. However, the minimum has been altered. In the case of the Act of 2922, there was no minimi.im and, hence the Income-tax Officer had a discretionary power to impose a nominal penalty. This power has been removed in the Act of 1961. As far as sub-clause (a) is concerned, the rate of penalty is now two per cent of the tax per month. In the case of sub-clause (b) it is at least ten per cent of the tax, and in the case of sub-clause (c) it is at least twenty per cent of the tax. Thus, although the Act of 1961 generally reduces the maximum penalty that can be imposed, it also provides a minimum, which was not provided for before. The fact remains that no penalty which can be imposed under Section 271 of the Act of 1961, can be considered to be a penalty which could not be imposed under the Act of 1922. Whether one applies the minimum given in Section 271, or the maximum given in that Section, there cannot be more than the penalties that could have been imposed under Section 28 of the Income-tax Act, 1922.

(41) The Supreme Court has observed in Jain Brothers case(^) that 'the- provisions of Section 271 of the Act of 1961 will apply mutates mutants to proceedings relating to penalty initiated in accordance with section 297(2)(g) of that Act'. As I read this: it means that the penalty will be imposed under Section 271 for the default mentioned in Section 28 subject to the changes made in the new Act, the change being that the margin of discretion given to the Income-tax Officer has been reduced. He cannot go below the minimum mentioned in Section 271. It, thereforee, follows that the words 'such penalty' mentioned in sub-clause (g) have to be read as referring to the penalty which can. be imposed under Section 271 of the Act of 1961. I, thereforee, agree with my learned brother, Ansari J., that the answer to the question referred to us should be in the negative in favor of the Revenue and. against the assessed.


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