TMI Blog1969 (11) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm calling upon it to submit a return of its income for the assessment year 1960-61 (accounting year ending October 31, 1959). The return had to be filed within 35 days of the service of the notice. It was not filed. Further notices were served on two occasions. It filed a return on November 18, 1961, showing income of Rs. 3,55,566. The Income-tax Officer completed the assessment on November 23, 1964, computing the total income of the firm at Rs. 4,75,368. In view of the amendment made by the Finance Act of 1956 in section 23(5) of the Act of 1922 the tax payable by the firm as also the amount to be included in the income of each partner was determined. On the same date, i.e., November 23, 1964, the Income-tax Officer issued a notice under section 271 read with section 274 of the Income-tax Act, 1961, calling upon the firm to show cause why an order imposing a penalty should not be passed on account of its failure to furnish the return with time. After considering the explanation submitted by the assessee the Income-tax Officer made an order on November 19, 1966, under clause (a) of section 271(1) of the Act of 1961, imposing a penalty of Rs. 1,03,434 for non-compliance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income, profits and gains of the previous year, shall be assessed and the sum payable by him on the basis of such assessment shall be determined. " After the amendment a registered firm was liable to pay income-tax independently of the tax payable by the individual partners of the firm on their share of profits. Prior to the amendment of 1956 where the firm was unregistered the tax payable by the firm was computed as in the case of any other entity and the firm itself had to pay the tax. If the firm was registered under section 26A it did not pay the tax and there was no assessment of its liability. Each partner's share in the firm's profits was added to his income and after determination of the total income of each partner the levy was made on him individually. After 1956, tax at low rate become assessable on a registered firm though it was not liable to pay super-tax. The partners of the registered firm remained liable for being charged on their individual assessment to both income-tax and super-tax in respect of their share in the profits of the firm. The partner, however, was entitled to certain rebate under section 14(2)(aa). The position of the appellants is that the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viduals whether incorporated or not ". For the purpose of assessment at all crucial stages under sections 22 and 23 it is the firm which is treated as an assessee. Thus even before the amendment of section 23(5) in 1956 the character of the firm as a separate entity was well established. The firm, however, did not pay any tax itself and the assessment was made on the individual partners in accordance with the provisions of that section. After 1956 the firm did not cease to be an assessee ; on the contrary it was recognised as a separate entity and was subjected to tax as such. Murlidhar Jhawar's case can hardly be of much assistance as it related to an unregistered firm and to an assessment of the accounting year ending November 6, 1933. The provisions which came up for consideration had no parallel to those made in respect of a registered firm by an express amendment of section 23(5) by the Finance Act of 1956. The facile analogy of passage of money given by Rowlatt J. will not carry the matter further where the statute had made an express provision for the income of the firm and the income in the hands of the partners being both liable to tax. It is not disputed that there can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) where a return of income is filed after the commencement of the Act of 1961 the assessment has to be made in accordance with the procedure specified in the Act of 1961. Clauses (f) and (g) are in these words : " (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 as 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 the 1st day of April, 1962, may be initiated and any such penalty maybe imposed under this Act. " The submission on behalf of the appellants has been that clause (g) of section 297(2) is violative of article 14 inasmuch as it creates a discrimination between two sets of assessees with reference to a particular date, namely, completion of assessment proceedings on or after the first day of April, 1962. In other words, the assessees have been classified into two groups for imposition of penalty ; the first group is of those assessees whose assessments have been completed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as satisfied that any person had, without reasonable cause, failed to furnish the return of his total income which he was required to furnish by notice given under section 22 it could be directed that such person shall pay by way of penalty, in addition to the amount of income-tax and super-tax payable by him, a sum not exceeding 1 1/2 times that amount. Sub-section (4) provided that no prosecution for an offence could be instituted in respect of the same facts on which penalty had been imposed under the section. Sub-section (6) made it obligatory for the Income-tax Officer to obtain the previous approval of the Inspecting Assistant Commissioner before imposing any penalty. In the Act of 1961, the provisions relating to penalties are contained in Chapter XXI. Section 271(1)(a) deals with the failure to furnish a return. If the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under the Act is satisfied that such a default has been committed without reasonable cause, he may direct that such person shall pay by way of penalty, in addition to the amount of tax payable by him, a sum equal to 2% of the tax for every month during which the defaul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of limitation has been prescribed for passing a penalty order which is of distinct advantage to a defaulting assessee. 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. Now the Act of 1961 came into force on 1st April, 1962. It repealed the prior Act of 1922. Whenever a prior enactment is repealed and new provisions are enacted the legislature invariably lays down under which enactment pending proceedings shall be continued and concluded. Section 6 of the General Clauses Act, 1897, deals with the effect of repeal of an enactment and its provisions apply unless a different intention appears in the statute. It is for the legislature to decide from which date a particular law should come into operation. It is not disputed and no reason has been suggested why pending proceedings cannot be treated by the legislature as a class for the purpose of article 14. The date, 1st April, 1962, which has been selected by the legislature for the purpose of clauses (f) and (g) of section 297(2) cannot be characterised as arbitrary or fanciful. It is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to assessment where a return has been filed. The majority decision in Jalan Trading Co. (P.) Ltd. v. Mill Mazdoor Union hardly affords any parallel. There the retrospective operation of the Payment of Bonus Act, 1965, which came into force on May 29, 1965, was made by section 33, the provisions of which were held to be violative of article 14, to depend on the pendency on that date of any dispute regarding payment of bonus relating to any accounting year from 1962 onwards. The year 1962 had apparently no connection with the date on which the Act came into operation which was May 29, 1965. It is well-settled that in fiscal enactments the legislature has a larger discretion in the matter of classification so long as there is no departure from the rule that persons included in a class are not singled out for special treatment. It is not possible to say that while applying the penalty provisions contained in the Act of 1961 to cases of persons whose assessments are completed after 1st April, 1962, any class has been singled out for special treatment. It is obvious that for the imposition of penalty it is not the assessment year or the date of the filing of the return which is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 assessee 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). We may usefully refer to this court's decision in Third Income-tax Officer, Mangalore v. Damodar Bhat 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 mutatis mutandis. Similarly, the provision of section 271 of the Act of 1961 will apply mutatis mutandis to proceedings relating to penalty in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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