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TMI Blog1985 (12) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... er took proceedings under section 271(1)(a) of the 1961 Act and imposed a penalty of Rs. 4,060 for failure to furnish the return within the time on a finding that the assessee had not been prevented by any reasonable cause for not complying with the statutory obligation to make the return. The assessee challenged the imposition of penalty by preferring an appeal to the Appellate Assistant Commissioner who refused to interfere and dismissed the appeal. On further appeal, the Appellate Tribunal held that penalty was leviable under the 1961 Act, but the amount of penalty had to be quantified according to the provisions of section 28 of the Indian Income-tax Act, 1922 (" 1922 Act " for short). Applying the provisions of the 1922 Act, the Tribunal reduced the penalty to Rs. 400. At the instance of the Revenue, the following question was referred to the High Court under section 256(1) of the 1961 Act : " Whether, on 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% of the tax for every month during which the default continued but not exceeding the aggregate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reinafter referred to as the repealed Act),-... (f) 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 is if this Act had not been passed ; (g) 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 I St day of April, 1962, may be initiated and any such penalty may be imposed under this Act..." It is sufficient to take note of the position that under the 1922 Act, liability to make a return was contingent upon service of notice under section 22 while under the 1961 Act, every person having a taxable income has under section 139, the, liability to make a return within the time provided by the Act. On the facts of the case before us, clause (f) of section 297(2) of the 1961 Act is not attracted because the return was filed on May 3, 1962, and the assessment was made subsequent to April 1, 1962. The Income-tax Officer found that there was default for a little more than seven months. He imposed penalty at the rate of 2% as provided in sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... force and with the repealing of the 1922 Act, Parliament was fully competent and it was within its legislative jurisdiction to fix April 1, 1962, as the date of commencement of the 1961 Act. The validity of section 297(2) and in particular clauses (f) and (g) thereof was upheld. The court held that penalty proceedings were not necessarily a continuation of the assessment proceedings. It was well settled that in fiscal enactments, the Legislature has a larger discretion in the matter of classification, so long as there was no departure from the rule that persons included in a class are not singled out for special treatment. It was not possible to say that while applying the penalty provisions contained in the Act of 1961 to cases of persons whose assessments were not completed after April 1, 1962, any class has been singled out for special treatment. It was obvious that for the imposition of penalty, it was not the assessment year or the date of the filing of the return that was important but it was the satisfaction of the income-tax authorities that a default had been committed by the assessee which attracted the provisions relating to penalty. Whatever be the stage at which the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as taken the stand that the observations in Damodar Bhat's case [1969] 71 ITR 806 (SC), which were approved by the five judges Bench in Jain Brothers case [1970] 77 ITR 107 (SC), related only to the procedural part of it and this court did not decide the question of quantum. The contention of Mr. Dholakia that in providing a prescribed rate of penalty for imposition under section 271(1)(a) of the 1961 Act, there has been breach of article 20(1) of the Constitution cannot be accepted. A five judges Bench of this court in K. Satwant Singh v. State of Punjab [1960] 2 SCR 89; AIR 1960 SC 266, 276, examined a similar submission at great length keeping article 20 of the Constitution in view. In the matter before the Constitution Bench, this question arose for consideration in view of the fact that no minimum sentence of fine had been provided under section 420 of the Indian Penal Code which was the law in force at the time of the occurrence but the provisions of Ordinance No. 29 of 1943 made imposition of a minimum fine compulsory. Imam J., who spoke for the Constitution Bench, at page 113 of [1960] 2 SCR, stated : " In the present case even if it be assumed that section 10 of the Ordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Officer decided to initiate penalty proceedings. (b) The proper provision to apply for dealing with the situation relating to penalty is as provided in section 271(1)(a) of the 1961 Act. The question that remains for consideration now is as to whether the default of non-filing of the return within the time stipulated by law is not a continuing offence. This aspect is relevant in the matter of imposition of penalty and its quantification. In the decision of this court in CWT v. Suresh Seth [1981] 129 ITR 328 (SC), the default related to non-filing of the return under section 18(1)(a) of the Wealth-tax Act. The law relating to penalty under that Act was amended in 1964 and again in 1969. These amendments were not retrospective. With reference to the application of these amendments, the question as to whether the default was a single one or a continuing one fell for consideration. The amended Wealth-tax Act provided for imposition of penalty with reference to every month during which the default continued. This court took the view that such a provision indicated the legislative intention that a multiplier had to be adopted for determining the quantum of penalty and did not h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e but whose effect may continue to be felt even after its completion is, however, not a continuing wrong or default. It is reasonable to take the view that the court should not be eager to hold that an act or omission is a continuing wrong or default unless there are words in the statute concerned which make out that such was the intention of the Legislature. In the instant case, whenever the question of levying penalty arises, what has to be first considered is whether the assessee had failed without reasonable cause to file the return as required by law and if it is held that he has failed to do so, then penalty has to be levied in accordance with the measure provided in the Act. When the default is the filing of a delayed return, the penalty may be correlated to the time lag between the last day for filing it without penalty and the day on which it is filed and the quantum of tax or wealth involved in the case for purposes of determining the quantum of penalty but the default, however, is only one which takes place on the expiry of the last day for filing the return without penalty and not a continuing one. The default in question does not, however, give rise to a fresh cause of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to file the return and there was no case of a continuing default. We are inclined to agree with counsel for the Revenue that the conclusion reached in Suresh Seth's case [1981] 129 ITR 328 (SC) is contrary to law. Jain Brothers' case [1970] 77 ITR 107 (SC) was not referred to at all in Suresh Seth's case. On the facts found in Suresh Seth's case where the returns for the assessment years 1964-65 and 1965-66 had been filed on March 18, 1971, and for which assessment was made on March 22, 1971, the ratio of Jain Brothers' case [1970] 77 ITR 107 (SC) would have been fully applicable. Though Jain Brothers' case was with reference to the Income-tax Act, 1961, the provisions of section 18(1)(a) of the Wealth-tax Act, as amended, brought in similar provision and a sum equal to 2% of the tax for every month during which the default continued with an optimum of 50% of the tax due becomes payable. As rightly pointed out in Jain Brothers' case [1970] 77 ITR 107 (SC), the question of imposition of penalty would arise only after assessment of tax is made and, therefore, in Suresh Seth's case, [1981] 129 ITR 328 (SC) on the analogy of the ratio accepted by this court in Jain Brothers' case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exposes himself to the penalty provided by law. There are several statutory provisions where such default is stipulated to be visited with daily penalty. For instance, see Ajit Kumar Sakrar v. Assistant Registrar of Companies [1979] 49 Comp Cas 909 (Cal) where the Calcutta High Court, dealing with the provisions of sections 159 and 162 of the Companies Act of 1956, held the liability to be continuous one; In United Savings and Finance Co. Pvt. Ltd. v. Deputy Chief Officer, Reserve Bank of India [1980] Crl LJ. 607, while referring to section 58B(2) of the Reserve Bank of India Act, it was held that refusal to comply with the terms of the said section created an offence and continued to be an offence so long as such failure or refusal persisted ; In Oriental Bank of Commerce v. Delhi Development Authority [1982] Crl LJ. 2230, while referring to the provisions of the Delhi Development Act of 1957, the court held that the offence was a continuous one. In G.D. Bhattar V. State, AIR 1957 Cal 483, it was pointed out that a continuing offence or a continuing wrong is after all a continuing breach of the duty which itself is continuing. If a duty continues from day to day, the non-performa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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