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TMI Blog1964 (9) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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 imposition of the penalty under the new Act. But, as this representation was not accepted, they have filed the present writ petition. It is urged by the petitioners that, as no notice under section 139(2) of the new Act was issued, the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 default. The relevant provisions of section 271 of the new Act are reproduced below : "271. Failure to furnish returns, comply with notices, concealment of income, etc.---(1) If the Income-tax Officer or the Appellate Assistant Commissioner, in the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 free to determine any penalty within the maximum limit prescribed. In the circumstances we, by no means, feel satisfied that article 20(1) of the Constitution has, in any manner, been infringed. Then, in the second place, on a plain reading of article 20(1) of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 caused to the State revenues on account of late submission of returns of income and in consequence late realisation of the tax. Therefore, the provision relating to imposition of penalties can be said to form integral parts of the proceedings relating to assessment. It ..... X X X X Extracts X X X X X X X X Extracts X X X X
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