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TMI Blog1971 (12) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... 57/70 arises out of a proceeding for the levy of penalty under section 221 for the default in payment of the tax in respect of the assessment year 1962-63. One Nagapotha Rao and his three sons, Seetharama Rao, Raja and Satyanarayanamurthy, constituted a Hindu undivided family. In 1947, Seetharama Rao died leaving behind him a widow, Raja Syamala. Nagapotha Rao died in 1950. Raja Syamala filed a suit O.S. No. 47 of 1954 on the file of the court of the Subordinate Judge, Masulipatnam, for partition and separate possession of her share of the family properties. The suit was decreed. There was considerable controversy whether for purposes of section 25A of the Indian Income-tax Act, 1922, there was a disruption of the Hindu undivided family i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitiated and penalties were imposed under the 1961 Act as provided by section 297(2)(g) of the 1961 Act. He submitted that under section 174(4) of the 1961 Act, notwithstanding the disruption of the family during the year of account, the total income of the family in respect of the period up to the date of partition shall be assessed as if no partition had taken place and under section 171(8), the provisions of section 171 applied to the levy of a penalty as they applied to the levy of tax in respect of the period up to the date of partition. He argued that the Tribunal was wrong in holding that penalties were not leviable because of the disruption of the family on March 5, 1961. Sri Y. V. Anjaneyulu, learned counsel for the assessee, subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinct characteristics of its own. It is not necessary to embark upon a discussion of the nature of a penalty but it is sufficient to say that penalty cannot be equated to tax, a proceeding for the levy of penalty must be initiated separately, the finding arrived at in assessment proceedings are not binding in penalty proceedings and the burden of proof is different. If this is borne in mind and if what we said, a moment ago, namely, that the appropriate stage for the levy of a penalty is after the completion of the assessment proceedings is correct, then it becomes clear that the law applicable to proceedings for penalty should be the law prevailing on the date of the completion of the assessment proceedings. Section 297(2)(g) puts the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stage at which the satisfaction is reached, the scheme of sections 274(1) and 275 of the Act of 1961, is that the order imposing penalty must be made after the completion of the assessment. The crucial date, therefore, for purposes of penalty, is the date of such completion. " It is clear from the decision of their Lordships that the effect of section 297(2)(g) is to attract all the provisions relating to penalty in the 1961 Act to cases where assessments are completed after April 1, 1962, though they relate to earlier years. Such provisions, it was pointed out later in the same decision, were not to be literally applied but mutatis mutandis. Sri Y. V. Anjaneyulu, learned counsel for the assessee relied on the decision of the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment which was already barred under the old Act. The reason is that such a construction of section 297(2)(d)(ii) would be tantamount to giving of retrospective operation to that section which is not warranted either by the express language of the section or by necessary implication. The principle is based on the well-known rule of interpretation that, unless the terms of the statute expressly so provide or unless there is a necessary implication, retrospective operation should not be given to the statute so as to affect, alter or destroy any right already acquired or to revive any remedy already lost by efflux of time ...... We consider that the language of the new section must be read as applicable only to those cases where the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the new Act. The assessee had no vested right regarding the law applicable to the levy of penalty until the date of completion of the assessment. In R.C. No. 56/70 a further argument was advanced by Sri Anjaneyulu that section 221 of the 1961 Act did not apply as the assessee could not be considered to be in default since the assessment was made under the old Act. There is no substance in this submission since section 221 and other provisions should be read mutatis mutandis, as pointed out in the case of Jain Brothers, where a similar argument that section 273 did not in terms apply was repelled by the Supreme Court. Sri Anjaneyulu also submitted that the Hindu undivided family could not be considered to be a defaulter in the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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