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Seth Lunidaram Tikamdas Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case Nos. 131 to 137 of 1975 (Reference Nos. 114 to 120 of 1975)
Judge
Reported in(1979)10CTR(Mad)186; [1980]121ITR824(Mad)
ActsIncome Tax Act, 1961 - Sections 297(2); General Clauses Act, 1897 - Sections 6
AppellantSeth Lunidaram Tikamdas
RespondentCommissioner of Income-tax
Appellant AdvocateN.V. Balasubramaniam, Adv.
Respondent AdvocateA.N. Rangaswami and ;Nalini Chidambaram, Advs.
Cases ReferredJain Brothers v. Union of India
Excerpt:
direct taxation - penalty - section 297 (2) of income tax act, 1961 and section 6 of general clauses act, 1897 - assessee filed return for assessment year - whether levy of penalty under section 271 (1) and 297 (2) of act of 1961 for contraventions taken place before 01.04.1962 valid - on basis of precedents held that under section 271 (1) and 297 (2) (g) penalty can be imposed for default or concealment of income in respect of assessment year ending on 31.03.1962 or any other previous assessment year - held, levy of penalty valid. - .....which were completed on october 22, 1970, and for the assessee's deliberate concealment of the income penalty was levied under section 271(1)(c). the levy of penalty was challenged before the tribunal and , the tribunal held on the question of quantum that the law as it stood prior to april 1, 1968, alone is applicable as the original returns concealing-income were filed prior to april 1, 1968. the learned judges, after dealing with the relevant decisions on the point, held that as the concealment of income took place on the date when the return was filed by the assessee the law applicable, for levy of penalty for the concealment of income under section 271(1)(c) is the law as itstood when the return was filed by such assessee, and, therefore, the penalty has to be levied only on the.....
Judgment:

Ramanujam, J.

1. The assessee is the same in all the above cases and, therefore, they are dealt with together.

2. The assessee is a firm carrying on banking business. The original assessments for the assessment years 1954-55 to 1960-61 were completed accepting the returns filed by the assessee. Subsequently it came to light that the assessee had been indulging in issuing bogus hawalas to some of the traders which had not been taken note of in the assessments, and that, as such, there had been under-assessments. On January 12, 1967, and February 20, 1969, the assessee filed settlement petitions and on the basis of those petitions, the assessment for those' seven years had been reopened,and reassessments had been made. As a result of the reassessments, additions have been made to the income as originally assessed.

3. Thereafter, proceedings were initiated by the ITO for levy of penalty under Section 271(1)(c) of the I.T. Act, 1961, and as the minimum penalty imposable exceeded Rs. 1,000, the cases were referred to the IAC. The IAC held that the appellant is guilty of concealment of income by giving inaccurate particulars of income in its original returns and, in that view, imposed minimum penalty under Section 271(1)(c) for all the assessment years. Aggrieved by the said order imposing penalty, the assessee went in appeal before the Income-tax Appellate Tribunal. Before the Tribunal the assessee contended that the offence of concealment is with reference to the original returns and as the original assessments were completed before April 1, 1962, the date of commencement of the 1961 Act, the penalty proceedings must have been initiated and penalty levied under the provisions of the 1922 Act, in view of Section 297(2)(f). The stand taken, by the revenue before the Tribunal, however, was that as the reassessment proceedings were completed after April 1, 1962, the penalty proceedings have been rightly initiated and penalty levied under the I.T. Act, 1961, in view of Section 297(2)(g).

4. Dealing with the above rival contentions, the Tribunal held that as the reassessment proceedings were completed after April 1, 1962, the original default committed by an assessee in not filing a return or filing a return giving inaccurate particulars of income can be penalised under the 1961 Act, and that the rate of penalty to be imposed will also be at the rate prescribed in the 1961 Act, under Section 271(1)(c) in view of Section 297(2)(g) of the Act. The Tribunal specifically rejected the plea of the assessee that as the original assessments had been made long before April 1, 1962, the date of coming into force of the 1961 Act, Section 297(2)(f) alone will apply, and not Section 297(2)(g), on the ground that though the original assessment had been completed before April 1, 1962, the concealment of income from the original returns filed by the assessee was detected only at the time of the reassessment proceedings, and, therefore, the material date will be the date when the reassessments came to be made for the purpose of determining the application of Section 297(2)(f) and (g). Having held that Section 297(2)(g) has rightly been invoked to initiate proceedings and impose penalty under Section 271(1)(c) in the case of the assessee, the Tribunal felt that the reassessment proceedings made after April 1, 1962, had resulted in an unfortunate situation in which the assessee had to pay a higher penalty under Section 271(1)(c) of the 1961 Act than the one leviable under Section 28(1) of the 1922 Act. Taking note of this hardship, the Tribunal satisfied its judicial conscience by expressing a pious hope that ' the department should consider the case of the assessee sympathetically if and when any application for sympathetic consideration is made to it '. Aggrieved by the decision of the Tribunal, the assessee hassought a reference to this court, and the following question has been referred to us for opinion :

' Whether, on the facts and in the circumstances of the case, the levyof penalty under Section 271(1)(c) for the assessment years 1954-55 to 1960-61 is valid and justified '

5. The facts are not in controversy. The original assessments have been completed on the basis of the returns filed by the assessee for the various assessment years before April 1, 1962. The reassessment proceedings were completed after April 1, 1962, and it is only thereafter that penalty proceedings were initiated to impose penalty as per Section 271(1)(c). On these facts the question for consideration is whether the initiation of penalty proceedings and imposition of penalty are to be governed in the present case by the provisions of the Indian I.T. Act, 1922, as contended by the assessee, or whether they are to be governed by the I.T. Act, 1961, as contended by the revenue.

6. The learned counsel for the assessee refers to the following decisions as supporting his contention that the penalty proceedings in this case have to be initiated and penalty imposed under the provisions of the 1922 Act, and not under the 1961 Act.

7. CGT v. C. Muthukumaraswamy Mudaliar : [1975]98ITR540(Mad) is a decision of a Division Bench of this court to which one of us was a party. That case arose under the G.T. Act. The assessee in that case filed a gift-tax return for the assessment year 1962-63 on October 22, 1962, though the due date was June 30, 1962. The GTO felt that the assessee had no reasonable cause for not filing the return within the specified time and, therefore, levied a penalty of Rs. 2,605 on the completion of the G.T. assessment on March 31, 1964, on the basis of Section 17(1)(a) of the G.T. Act, as amended by the G.T. Amend. Act, 1962, which came into force from April 1, 1963. ' On appeal by the assessee, the AAC reduced the penalty to Rs. 1,000. On a further appeal by the department, the Tribunal justified the reduction of the penalty on the ground that as the default for which the penalty has been levied was committed before Section 17(1)(a) was amended, the unamended provision alone can be applied, and not the amended provisions which came into force on April 1, 1963, long after the default was committed by the assessee. The view taken by the Tribunal was challenged before this court by the revenue. While upholding the view taken by the Tribunal this court, after referring to the general principle that the law as on the date of the contravention alone should apply and not the law which, came into force subsequent to the contravention, unless the subsequent law has been given retrospective effect expressly or by necessary intendment by the legislature, observed as follows (p. 552) :

' We have to, therefore, proceed only on the basis of the general principles for interpretation of statutes. We are not inclined to agree with, the learned counsel for the revenue that where a provision is intended to arrest tax evasion a different rule of interpretation has to be applied, giving retroactive or retrospective effect to the provisions even if the words of the provision are not clear. We are, however, inclined to agree with him when he says that the words of the statute have to be given its full scope and effect and that if the words of the statute are of sufficient amplitude to cover the infringements that took place before the amendment, their operation cannot be curtailed or restricted so as to apply only to infringements after the amendment on the ground that an amendment is normally prospective. The decisions in Lamb's case [1941] 2 All ER 499 , Buckman's case [1943] 2 All ER 82 and Oliver's case [1943] 2 All ER 800 also proceed on the basis that if the language of the statute is clear, it is impossible for any one to escape from the consequences of the language which has been used. '

8. The observations extracted above will indicate that the words of the statute have to be given their fullscope and effect, and that if the words of the statute are of sufficient amplitude to cover the infringements that took place before the amendment, their operation cannot be curtailed or restricted so as to apply only to infringements after the amendment on the ground that an amendment is normally prospective. Therefore, the decision in that case does not support the case of the assessee in this case for there was no provision like Section 297(2)(g) of the I.T. Act, in the G.T. Act, and this has been clearly pointed out in the judgment and in fact it is only on that basis that the earlier decision of the Supreme Court in Jain Brothers v. Union of India : [1970]77ITR107(SC) has been distinguished.

9. CWT v. Sundarapandian : [1978]114ITR367(Mad) arose under the W.T. Act, wherein the decision in CGT v. C. Muthukumaraswamy Mudaliar : [1975]98ITR540(Mad) has been followed. There also there was a change in the law brought about by an amendment to the W.T. Act. A question arose whether the amended provision under Section 18(1)(a) will apply to a contravention that had taken place before the amendment. The Division Bench observed that the penalty has to be imposed as per the law in force on the date of the contravention or commission of the default, and not on the basis of the amended law which came into force after the commission of the default. While amending Section 18(1)(a) by Clause 24(c) of the Finance Act, 1969, the Legislature has not introduced a provision similar to the one contained in Section 297(2)(g) of the I.T. Act. Therefore, the court had no occasion to deal with the scope and ambit of Section 297(2)(f) or (g) of the Act. In an un-reported judgment of another Division Bench of this court in T.C. No. 255of 1975 the decisions in CGT v, C, Muthukumaraswamy Mudaliar : [1975]98ITR540(Mad) and CWT v. Sundarapandian [197'] 114 ITR 367 had been followed imespect of proceedings for the levy of penalty under the W.T. Act. In Addl. CIT v. Medlsetty Ramarao : [1977]108ITR318(AP) , wherein the principle laid dow by this court in CGT v. C. Muthukumaraswamy Mudaliar : [1975]98ITR540(Mad) has been applied to a case of levy of penalty under the I.T. Act. In that case, the: assessee filed a return under the I.T. Act, 1961, for the assessment years 1965-66, 1966-67 and 1967-68 on June 30, 1965, August 1, 1966, and September 4, 1967, repec-tively, and the assessments have been completed on the basis of the returns prior to April 1, 1968. Subsequently the assessee was called upon to file revised, returns and the revised returns filed by the assessee disclosed certain concealed income. This led to reassessments which were completed on October 22, 1970, and for the assessee's deliberate concealment of the income penalty was levied under Section 271(1)(c). The levy of penalty was challenged before the Tribunal and , the Tribunal held on the question of quantum that the law as it stood prior to April 1, 1968, alone is applicable as the original returns concealing-income were filed prior to April 1, 1968. The learned judges, after dealing with the relevant decisions on the point, held that as the concealment of income took place on the date when the return was filed by the assessee the law applicable, for levy of penalty for the concealment of income under Section 271(1)(c) is the law as itstood when the return was filed by such assessee, and, therefore, the penalty has to be levied only on the basis of the law that was in force on the date of the filing of the returns. Having regard to the facts in that case, the court had no occasion to consider the scope of Section 297(2)(f) or (g). That was a case where even the original returns were filed long after April 1, 1962, when the 1961 Act came into force. Therefore, the question of applicability of Section 297(2) did not come up for consideration. The only question that arose in that case was whether the law as on the date of the commission of the contravention of the particular provision of the statute is to be applied, or the law which came into force at a later date when the reassessments were made, is to apply. The court naturally applied the general principle of law that a penalty to be levied in respect of an offence should be as per the law which was in force on the date when the commission of the offence and not the law which was in force on the date when the offender was actually punished for the offence. In that case also the decision of the Supreme Court in fain Brothers v. Union of India : [1970]77ITR107(SC) has been distinguished on the ground that the decision in that case was with reference to Section 297(2)(g) of the I.T. Act.

10. CIT v. Data.Ram Satpal : [1975]99ITR507(All) is also on facts similar to the case in Addl. CIT v. Medisetty Ramarao : [1977]108ITR318(AP) . In that case also returns had been filed before April 1, 1964, and the onlyquestion was whether the unamended Section 271(1)(c) before its amendment by the Finance Act of 1964, on April 1, 1964, was applicable or whether the said section as amended was to be applied in respect of concealment of income arising out of the returns filed by the assessee. The Division Bench of the Allahabad High Court held that ' on a plain reading of the amended provisions of Section 271, it is clear that anyone who filed an incorrect return after April 1, 1964, is liable to be dealt with according to the amended provisions regardless of the year to which the return relates, and, therefore, the said amended provision is not applicable to a case where the incorrect return has been filed before that date.'

11. All the cases referred to by the learned counsel for the petitioner and dealt with above lay down a general proposition of law that in respect of an offence committed the penalty can be levied only as per the law which was in force on the date of the commission of the offence and not on the basis of the law which came into existence subsequent to that date, unless the subsequent law is made to apply to offences committed earlier either expressly or by necessary intendment. We are, therefore, of the view that those decisions may not be of any help to the assessee against whom penalty has been levied under Section 271(1)(c) in respect of concealment of income which took place before April 1, 1962, on the basis of the provision in Section 297(2)(g) of the Act. As has been pointed out in CGT v. C. Muthukumaraswamy Mudatiar : [1975]98ITR540(Mad) , the question as to what is the law that has to be applied in respect of the commission of a particular offence or contravention will have to be determined with reference to the provisions which bring about a change in law. It is true that in this case the concealment of income can be said to have taken place on the date when the returns are filed which was before April 1, 1962, the date of the coming into force of the 1961 Act. On the date of the concealment of the income, the Act that was in force was the 1922 Act. The 1922 Act stood repealed by the 1961 Act. Normally, when an Act is repealed by a subseqbent enactment, the provisions of Section 6 of the General Clauses Act will apply, if the 1961 Act has not provided for acts or things done under the 1922 Act. But the 1961 Act specifically provided for certain savings in Section 297 of the Act. Section 297(2)(f) provided that notwithstanding the repeal of the Indian I.T. Act, 1922, any proceeding for the imposition of a penalty in respect of any assessment completed before the 1st day of April, 1962, may be initiated and any such penalty may be imposed as if the 1961 Act had not been passed. Clause (g) of Section 297(2) stated that notwithstanding the repeal of the Indian I.T. Act, 1922, any proceeding for the imposition of a penalty in respect of any assessment for the year ending on the 31st day of March, 1962, or any earlier year, which is completed on or after the 1st day of April, 1962, may be initiated and any such penalty may be imposed under the 1961 Act.

12. Thus Section 297(2) makes a distinction between assessments completed before the 1st day of April, 1962, and assessments made after the 1st day of April, 1962. In respect of the former category of cases, the penalty proceedings are to be initiated and penalty imposed only under the 1922 Act treating the 1961 Act as not having been passed. In respect of the latter cases where the assessments have been completed after the 1st April, 1962, penalty proceedings have to be initiated and penalty should be imposed only under the provisions of the 1961 Act. These provisions do not contemplate the idea of the time when the contravention had taken place. In view of these statutory provisions in Section 297(2)(f) and (g), one has to proceed on the basis of the date of completion of the assessment and not on the basis when the offence was committed. When Section 297(2) has provided for certain savings, the principle contained in Section 6 of the General Clauses Act cannot be imported in respect of acts done or offences committed under the 1922 Act.

13. Dealing with the scope of Section 297(2)(g) in relation to the imposition ofpenalties under Section 271(1)(c), the Supreme Court for the first time in JainBrothers v. Union of India : [1970]77ITR107(SC) expressed the view that aconjoint reading of Section 271(1) and Section 297(2)(g) will clearly lead to the onlyconclusion that for the imposition of penalty in respect of an assessment for the year ending 31st March, 1962, or any earlier year whichis completed after the 1st day of April, 1962, the proceedings have tobe initiated and penalty imposed in accordance with the provisions of Section 271 of the Act of 1961 and the assessee would be liable to pay penaltyas provided by Section 271(1) for the default mentioned in Section 28(1) of the Act of1922 if his case falls within the terms of Section 297(2)(g) and, in such cases, theprovisions of Section 271 of the Act of 1961 will apply mutatis mutandis to proceedings relating to penalty initiated in accordance with Section 297(2)(g). InCIT v. Singh Engineering Works P. Ltd. : [1970]78ITR90(SC) the SupremeCourt again reiterated the same principle. In that case, the assessmentwas completed for the year ending 31st March, 1962, after 1st April, 1962.Penalty was imposed under Section 273 of the Act against the assessee forfurnishing inaccurate and untrue estimate in relation to payment of advancetax for the assessment year in question. The contention urged before theSupreme Court by the assessee was that penalty could be levied only underthe 1922 Act as the assessment year was before the commencement of the1961 Act, and not under the provisions of the 1961 Act. The SupremeCourt, following its earlier decision in Jain Brothers v. Union of India : [1970]77ITR107(SC) , held that in view of the clear language in Section 297(2)(g), Section 273 will apply mutatis mutandis to proceedings relating to the levy ofpenalty initiated.

14. These two decisions of the Supreme Court have been taken as conclusive on the question of the applicability of the provisions dealing with thepenalty in the 1961 Act to the contraventions which had taken place before 1st April, 1962, in the following cases : CIT v. V. G. Panneerdas and Co. [1978] 112 ITR 225 is a case where the assessments for the years 1959-60, 1960-61 and 1961-62 were completed under Section 23(3) of the Indian I.T. Act, 1922, on February 29, 1964, and for concealment of income in the returns filed by the assessee, penalty proceedings were initiated under the 1961 Act and penalty was levied under Section 271(1)(c) of that Act. The levy of penalty under the new Act was justified by the Division Bench in that case on the basis that the question is concluded by the decision of the Supreme Court in Jain Brothers v. Union of India : [1970]77ITR107(SC) . When the attention of the Division Bench was drawn to the earlier decision of this court in CIT v. C. Muthukumaraswamy Mudaliar : [1975]98ITR540(Mad) arising out of the imposition of penalty under Section 17 of the G.T. Act, it was pointed out that the said decision related to an amendment of a particular provision and the applicability of that provision was to an individual case when it was not in terms made retrospective, and that such a general principle decided in that case cannot be made applicable to the interpretation of Section 297(2)(g) which specifically mentions that the applicability of the penal provision is to be with reference to the completion of the assessment, and not the date of filing of the returns of concealment of the income. Questions identical to the facts arising in this case were dealt with by the Madhya Pradesh High Court in CIT v. Khubchand Meghraj : [1973]91ITR498(MP) , the Delhi High Court in CIT v. Maya Rani Punj : [1973]92ITR394(Delhi) and the Punjab and Haryana High Court in CIT v. National Exhibitors . In all these cases, the decision of the Supreme Court in Jain Brothers v. Union of India : [1970]77ITR107(SC) has been taken as conclusive on the question of applicability of Section 271(1)(c) to the concealment of income which had taken place before April 1, 1962, with reference to the specific provision contained in Section 297(2)(g) of the Act.

15. The learned counsel for the petitioner would say that the principle laid down by this court in CGT v. C. Muthukumaraswamy Mudaliar : [1975]98ITR540(Mad) and in CWT v. Sundarapandian : [1978]114ITR367(Mad) should be applied to cases arising under the I.T. Act as well. But, as already pointed out, the validity of the penalty proceedings under the I.T. Act has to be tested with reference to the provisions of the I.T. Act, and when the I.T. Act specifically provides under Section 297(2)(g) that in respect of assessments that are completed after April 1, 1962, the concealment of income can be penalised under Section 271(1)(c) of the 1961 Act, there is no scope for the application of the general principle of law dealt with in those cases which arose under the G.T. Act and the W.T. Act. We are, therefore, of the viewthat the imposition of penalty under the 1961 Act in this case should be taken as valid and justified.

16. The learned counsel for the assessee would submit that if such an interpretation that the provisions of the Act of 1961 were to apply in the matter of imposition of penalty for concealment of income that had taken place before April 1, 1962, it will cause considerable hardship to the assessees in that the 1961 Act contemplates a minimum penalty while that was not the case under the 1922 Act. But it is well established that the scope of the statutory provisions cannot be whittled down taking into account the hardship that is caused to the assessees. As pointed out by the Supreme Court in Smt. Tarulata Shyam v. CIT : [1977]108ITR345(SC) , there is no scope for importing into the statute words which are not there, and such importation would be not to construe, but to amend the statute, and that the court has no justification to depart from the normal rule of construction according to which the intention of the legislature is to be gathered from the words used in the statute, and not to interpret the statute in such a way as not to cause hardship contrary to the intention or the language of the statutory provision. While construing a taxing enactment, there is no scope for considerations such as hardship, inconvenience, etc. As pointed out by Rowlatt J. in Cape Brandy Syndicate v. IRC [1921] 1 KB 64 :

'...in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.'

17. Therefore, merely on the basis of hardship, we cannot interpret Section 297(2)(g) in a manner inconsistent with the language used therein.

18. In the result, we answer the reference in the affirmative and against the assessee. The revenue will have its costs, one set. Counsel's fee Rs. 500.

19. The learned counsel for the assessee says that he has already filed apetition for settlement before the Central Board of Direct Taxes. If thatis so, the Board will consider the case of the assessee sympathetically, andwe endorse the observation made by the Tribunal in its order which hasbeen extracted earlier.


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