TMI Blog1964 (9) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... they were served with a notice under section 22(2) of the Income-tax Act, hereinafter to be referred as the " old Act ", on May 30, 1961, for the assessment year 1961-62. The petitioners, however, did not file the returns in compliance with the notice till the Income-tax Act, 1961, came into force on April 1, 1962. The 1961 Act will, hereinafter, be referred as the "new Act ". Eventually, they filed their returns on December 28, 1962. The Income-tax Officer, " A " Ward, completed the assessment on April 19, 1963, in accordance with the provisions of the new Act, but while doing so, he issued a notice to the petitioners under section 274 read with section 271 of the new Act, to show cause why penalty be not imposed on them for their failure to submit the returns in time in pursuance of the notice dated May 30, 1961, issued under the old Act. On receipt of the notice the petitioners made a representation to the Income-tax Officer wherein they pointed out their difficulties in submission of their returns in due time, and also raised a legal objection that it was not competent to the Income-tax Officer to invoke the provisions of the new Act for initiating any action for the impositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. Eventually, the case can be brought before this court on a reference under section 256 of the new Act. The exceptional circumstances under which the High Court may be persuaded to interfere at the inception of the proceedings pursuant to the notice dated April 19, 1963, have not been made out in the present case. We are not satisfied that the provisions of section 297(2)(g) of the new Act either violate the provisions of article 14, or those of article 20(1) of the Constitution. While under section 28 of the old Act, a sum not exceeding one and a half times the amount of tax due could be imposed by way of penalty on account of the default in the filing of return of total income, under the provisions of section 271 of the new Act, the maximum penalty that could be imposed will be only up to 50% of the tax due. It is not disputed by Mr. Joshi appearing for the petitioners that the maximum limit of penalty under the new Act is lower than that provided under the old Act, but he contends that inasmuch as a minimum penalty at the rate of 2% of the tax for every month of the default is prescribed under the new Act that increases the overall burden by way of penalty in case of defaul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax and super-tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income. In the first place, having considered the import of the above provisions, we are not satisfied that the overall burden of penalty is increased retrospectively in respect of defaults committed prior to the commencement of the new Act so as to infringe article 20(1) of the Constitution. In this we have to look to the maxima prescribed in this behalf by the two Acts and also to examine the above penalty provision in its proper perspective. 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 by the Income-tax Officer by providing a criterion when there was no such corresponding criterion prescribed under the old Act. Under the old Act the Income-tax Officer was fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valid. In all cases where the material adduced before the court in matters relating to article 14 is unsatisfactory, the court may have to allow the State to lean on the doctrine of initial presumption of constitutionality (vide Rani Ratnaprova Devi v. State of Orissa). In this behalf we have referred only to the latest decision of the Supreme Court and not to the long string of earlier cases as the principles about the application of article 14 of the Constitution are at this date well-settled. In the present case no material has been placed before us to show that this provision has been abused or is capable of being abused in any manner by the taxation authorities. We are also not satisfied that the legislature has not made a valid classification in drawing a line between assessments which had been completed before the coming into force of the new Act, and those which were completed thereafter. It is to be borne in mind that penalties prescribed under the Income-tax Act for failure to submit returns of income in time are not in the nature of punishment imposed for conviction of an offence. Such penalties are more or less compensatory in character to make good the loss that may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act No. 27 of 1952 were valid and the amounts due thereunder could be recovered notwithstanding the disappearance of the Orissa Act by virtue of the superior legislation of Act No. 67 of 1957 by the Union Parliament. Mr. Joshi argues that what are saved by section 297(2)(k) are only the statutory notifications, orders, rules or notices and not any notice issued by Income-tax Officers under the provisions of section 22(1) of the old Act. We, however, are not satisfied that the ambit of section 297(2)(k) is so narrow. It takes, in its sweep, agreements, appointments, approval given, recognition granted, direction and instructions, besides the notification, orders or rules issued under any provision of the old Act. These provisions will, therefore, cover administrative orders and notices and to our mind the words " order or rule issued under any provision " will cover a notice issued under section 22(1) of the old Act. Thus we are satisfied that the notice issued under the provisions of the old Act can legitimately be considered as good as a notice issued under the new Act for purposes of invoking sections 271 and 274 of the new Act. In view of all the facts and circumstances of ..... 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