1. The assessee is a firm consisting of two partners. Under the Act of 1922, which was then in force, it had to file a return within a period of time allowed by the general notice under Section 22(1) of the Indian Income-tax Act of 1922 It filed returns for the two assessment years, i.e., 1960-61 and 1961-62 on March 6, 1965, by which time the Income-tax Act, 1961, had come into force. For the failure of the assessee to file the return within the period contemplated by the public notice issued under Section 22(1), the Income-tax Officer took up proceedings under Section 271l(1)(a) of the Income-tax Act, 1961, and levied penalty as contemplated by it amounting to Rs. 7,200 and Rs. 8,245, respectively, for the two years.
2. The assessee preferred an appeal to the Appellate Assistant Commissioner, who cancelled the penalty on the ground that no penalty could be imposed under the provisions of the 1961 Act for the default under the Act of 1922. Considering the default in the light of the provisions of Section 22(1) of the Indian Income-tax Act, 1922, he confirmed the penalty to the extent of Rs. 500 and Rs. 750, respectively, for these two years. The matter came before the Tribunal at the instance of the department. It held that it would be correct and legal to impose penalties under the provisions of the new Act. It is as against this order of the Tribunal that the assessee has obtained a reference of the following two questions:
'(i) Whether, in the circumstances of the case, the levy of penalty for 1960-61 and 1961-62 under Section 271(1)(a) of the Income-tax Act,1961, is valid?
(ii) If the answer to the first question is in the affirmative, whether for fixing the amount of penalty the period of default prior to April 1, 1962, could be taken into account ?'
3. That the penalty can be levied in accordance with the provisions of the Income-tax Act, 1961, even in respect of assessments for the assessment years prior to 1962-63 has been decided by the Supreme Court in Jain Brothers v. Union of India : 77ITR107(SC) . Section 297(2)(g) contemplates levy of penalty under the Act of 1961 if the assessment for any assessment year preceding 1962-63 was completed on or after the 1st day of April, 1962. In other words, if the relevant assessment came to be made after 1st day of April, 1962, then the penalty could be levied under the Act of 1961. If an assessment had been made prior to the 1st day of April, 1962, then the penalty had to be levied only under the Act of 1922. In the light of the decision of the Supreme Court in Jain Brothers v. Union of India : 77ITR107(SC) , there is no scope for acceptance of the submission that the penalty had to be levied under the Act of 1922. The first question has, therefore, to be answered in the affirmative and against the assessee.
4. When once the penalty is to be levied under the Act of 1961 the consequences of the application of the provisions of that Act have to follow. The penalty has to be calculated in accordance with the provisions of Section 271(1) of the Act. There is no warrant for calculating the penalty taking the default as if it arose on 1st day of April, 1962. The 1st day of April, 1962, is only the date on which the Act of 1961 came into force. But as far as the penalty leviable is concerned, it has to be calculated from the date of the default. Therefore, the second question has to be answered against the assessee and in the negative. The Commissioner's fee is Rs. 250.