TMI Blog1969 (2) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... unt year ending October 31, 1959), a notice dated May 14, 1960, under sub-section (2) of section 22 of the Act of 1922 was served by the Income-tax Officer on May 26, 1960, calling upon petitioner No. 1 to submit a return of income to be filed within 35 days of the service of the notice. The return was thus due by June 30, 1960. The petitioner did not file the return within the time allowed in the notice. Notice under sub-section (4) of section 22 of the Act of 1922 was thereafter served upon petitioner No. 1 on two occasions. The return of income was filed on November 18, 1961, showing an income of Rs. 3,55,566. Assessment for 1960-61 was completed on November 23, 1964, and the total income of petitioner No. 1 was computed at Rs. 4,47,368. The shares of petitioners Nos. 2 to 5 were allotted therein. On November 23, 1964, the Income-tax Officer issued notice under section 271, read with section 274, of the Act of 1961 calling upon petitioner No. 1 to show cause why an order imposing penalty should not be made under section 271 of the Act of 1961 for having without reasonable cause failed to furnish the return of income within the time as required by law. The assessee submitted an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could also be under that Act and not under the Act of 1961. The provisions of clause (g) of sub-section (2) of section 297 of the Act of 1961, upon which the revenue relied in order to invoke the provisions of the Act of 1961, are violative of article 14 of the Constitution. (2) The provisions of sub-section (2) of section 271 of the Act of 1922 too are violative of article 14 of the Constitution inasmuch as a discrimination is made against registered firms in the matter of calculation of penalty. (3) Assuming that clause (g) of sub-section (2) of section 297 and sub-section (2) of section 271 of the Act of 1961 are intra vires, the income-tax authorities cannot apply section 271 of the Act of 1961 for the imposition of penalty as those provisions do not cover a case like the present. So far as the assessment order made on November 23, 1964, is concerned, the learned counsel for the petitioners has stated that though the petitioners are content with that order they want to challenge the validity of the aforesaid order also in order to seek redress against the order imposing penalty. In respect of the last contention about the validity of the assessment order dated November 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext refer to the observations of their Lordships of the Supreme Court in the case of K. S. Venkataraman and Co. (P.) Ltd. v. State of Madras, wherein it was held by the majority that an authority created by a statute cannot question the vires of that statute or any of the provisions thereof where under it functions. It must act under the Act and not outside it. Again in the case of Carl Still G.m.b.H. v. State of Bihar, it was held " that when proceedings are taken before a Tribunal under a provision of law, which is ultra vires, it is open to a party aggrieved thereby to move the court under article 226 for issuing appropriate writs for quashing them on the ground that they are incompetent, without his being obliged to wait until those proceedings run their full course." The preliminary objection raised by Mr. Kirpal must, therefore, be repelled. Of course so far as the quantum of penalty and the question whether there was sufficient cause for the petitioners justifying the delay in the filing of the return, are matters which cannot be gone into in these proceedings but would have to be agitated in the appeal which has been filed by the petitioners before the Appellate Assistant C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... half times the amount of the income-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. " There follows a proviso, clause (d) of which reads as under: "(d) when the person liable to penalty is a registered firm or an unregistered firm which has been assessed under clause (b) of sub-section (5) of section 23, then, notwithstanding anything contained in the other provisions of this Act, the amount of income-tax and super-tax payable by the firm itself shall be taken to be an amount equal to the tax which would have been payable by an unregistered firm on an income equal to the firm's total income, and, in the cases referred to in clauses (b) and (c), the amount of the income-tax and super-tax which would have been avoided if the income as returned had been accepted as the correct income, shall be taken to be the difference between the amount of the tax which would have been payable by an unregistered firm on an income equal to the firm's total income and the amount of the tax payable by an unregistered firm on an income equal to the income of the firm as actually returned by the firm." Sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice, as the case may be, or (b) has without reasonable cause failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143, or (c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,- (i) in the cases referred to in clause (a), in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the tax ; (ii) in the cases referred to in clause (b), in addition to any tax payable by him, a sum which shall not be less than ten per cent. but which shall not exceed fifty per cent. of the amount of the tax, if any, which would have been avoided if the income returned by such person had been accepted as the correct income ; (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than twenty per cent. but which shall not exceed one and a half times the amount of the tax, if any, which would have been avoided if the income as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome are pending at the commencement of this Act, a notice under section 148 may, subject to the provisions contained in section 149 or section 150, be issued with respect to that assessment year and all the provisions of this Act shall apply accordingly; (e) Subject to the provisions of clause (g) and clause (j) of this sub-section, section 23A of the repealed Act shall continue to have effect in relation to the assessment of any company or its shareholders for the assessment year ending on the 31st day of March, 1962, or any earlier year, and the provisions of the repealed Act shall apply to all matters arising out of such assessment as fully and effectually as if this Act had not been passed; (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 may be imposed under thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty imposed under the Act of 1961 even though the penalty relates to an assessment for a year preceding the 1st day of April, 1962. It is a well established rule of the interpretation of statutes that a general provision must yield to a special provision providing for particular cases. As clause (g) makes a specific provision for proceedings for imposition of penalty in respect of assessments completed on or after the 1st day of April, 1962, no resort, in our opinion, can be made to the provisions of clause (a). For the same reason the provisions of clause (c), to which also reference has been made on behalf of the petitioners, would not be applicable. We may at this stage refer to the difference in the provisions of the Act of 1922 and those of the Act of 1961 in respect of non-furnishing or late furnishing of the return. According to section 28 of the Act of 1922, penalty could be imposed by the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal. In the case of the Income-tax Officer, it was provided that he could impose penalty only with the previous approval of the Inspecting Assistant Commissioner. In the Act of 1961 the only two authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diverse elements, permit a larger discretion to the legislature in the matter of classification, so long as it adheres to the fundamental principles underlying the said doctrine. The power of the legislature to classify is of wide range and flexibility so that it can adjust its system of taxation in all proper and reasonable ways. (See Khandige Sham Bhat v. Agricultural Income-tax Officer, Kasaragod.) Keeping the above principles in view, we find no violation of article 14 by enactment of the provisions of clause (g) of sub-section (2) of section 297 of the Act of 1961. As stated above, penalty has to be calculated and imposed according to the tax assessed and its quantum is linked with the amount of tax. The imposition of penalty, in the circumstances, must necessarily follow the assessment. The question of imposition of penalty would thus arise only after the assessment has been completed. The legislature in clauses (f) and (g) has put, for the purpose of imposition of penalty, cases in which the assessment had been completed before the coming into force of the Act of 1961 under one classification, and the cases, in which assessment was completed after the coming into force of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it becomes operative, no discrimination is practised. When Parliament enacts a law imposing a liability as flowing from certain transactions prospectively, it evidently makes a distinction between those transactions which are covered by the Act and those which are not covered by the Act, because they were completed before the date on which the Act was enacted. This differentiation, however, does not amount to discrimination which is liable to be struck down under article 14. The power of the legislature to impose civil liability in respect of transactions completed even before the date on which the Act is enacted does not appear to be restricted. If, as is conceded--and in our judgment rightly--by a statute imposing civil liability in respect of post-enactment transactions, no discrimination is practised, by a statute which imposes liability in respect of transactions which have taken place after a date fixed by the statute, but before its enactment, it cannot be said that discrimination is practised. Article 14 strikes at discrimination in the application of the laws between persons similarly circumstanced; it does not strike at a differentiation which may result by the enactment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the above provision contravenes article 14 of the Constitution. There can be nothing to prevent the legislature from giving the benefit of a reduced rate to a registered firm for the purpose of tax but not in the matter of penalty. Coming to the last contention advanced on behalf of the petitioners that section 271 of the Act of 1961 cannot apply to a case like the present, we may observe that, if the section had stood by itself, it could have been argued that the provisions of this section are not strictly applicable to a case like the present because the section talks of non-compliance with a notice under sub-section (2) of the section 139 of the Act of 1961 and not of notice under sub-section (2) of section 22 of the Act of 1922. The fact, however, remains that the two provisions are pari materia. Clause (g) of sub-section (2) of section 297 appears to have been enacted with a view to overcome the above difficulty. To accede to the submission made on behalf of the petitioners would have the effect of rendering the provisions of clause (g) of sub-section (2) of section 297 of the Act of 1961 otiose and nugatory. The contention advanced on behalf the petitioners is similar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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