TMI Blog1978 (3) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... n 1965, the ITO imposed a penalty of Rs. 25,000 under s. 221 of the I.T. Act, 1961. The assessee preferred an appeal before the AAC. It was held by the AAC that the penalty under s. 221 of the I.T. Act, 1961, was clearly untenable in law in view of the provisions of s. 297(2)(f) of the I.T. Act, 1961, as the assessment was completed on 30th November, 1960, under the Indian I.T. Act, 1922. The AAC did not go into the question as to whether the imposition of penalty was justified in view of the restrictions on remittances of foreign profits as claimed by the assessee. Both the ITO and the assessee filed appeal and cross-objection respectively before the Tribunal against the order of the AAC. The revenue contended before the Tribunal that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of a continuing default such further amount or amounts as the ITO may from time to time direct, so, however, that the total amount of penalty does not exceed the amount of tax in arrears. It further provides that if the default was for good and sufficient reasons, no penalty shall be levied under this section. Sub-section (1) of s. 297 repeals the Indian I.T. Act, 1922. The assessment in question was in respect of the assessment year 1956-57, and was made on 30th November, 1960. But as the assessee had defaulted in making the payment of tax assessed in 1965, that is to say, after the coming into operation of the I.T. Act, 1961, the order under s. 221 had been passed. Sub-section (2) of s. 297 of the I.T. Act, 1961, provides for certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular class of penalties in respect of assessments which were completed on or after 1st April, 1962. The existence of that sub-clause in our opinion does not in any way affect the consideration of the question whether cl. (f) or cl. (j) covers a situation of the present type. We are, however, unable to see any logic in the bifurcation of two types of penalties as suggested by counsel for the revenue in cls. (f), (g) and (j) of s. 297 of the Act. But that by itself in our opinion does not conclude the controversy. It has to be borne in mind that sub-s. (1) of s. 297 repeals the Indian I.T. Act, 1922. The sub-s. (2) manifests an intention to save certain proceedings taken under the old Act and for providing the machinery under the new Act for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed as due for a certain year, it is not in law so due. It is calculated and assessed by reference to the income of the assessee for a given year, but it is due when the demand is made under s. 29 and s. 45 of the 1922 Act. It then becomes, according to the judicial Committee, a debt due to the Crown, but not for any particular period. Similarly, after a notice of demand has been given in respect of a penalty imposed for a particular year, it becomes a sum recoverable from the assessee and, therefore, it may be recovered in our opinion in view of the clear language of sub-cl. (j) of sub-s. (2) of s. 297. Counsel for the revenue, however, drew our attention to the observations of the Division Bench of the Punjab Haryana High Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id different provisions of the different clauses of subs. (2) of s. 297 in the background of the manifest intention of Parliament to provide for all contingencies arising from the repeal of the Indian I.T. Act, 1922, we are inclined to think that cl. (j) of s. 297 would cover the imposition of penalty in the present case under s. 221 of the Act. Counsel for the assessee, however, drew our attention to a decision in the case of V. Damodaran v. CIT [1974] 96 ITR 335 (Ker). That was really a converse case. But there the Division Bench of the Kerala High Court held that the assessment should be held to have been completed when the ITO made his assessment order and s. 297(2)(f), which made the Act of 1922 applicable for levying the penalty, woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 156 of the new Act, and in this context referred to the provisions of section 297(2)(j). In these circumstances, it seems to us that the imposition of penalty under section 221 and that too without being preceded by a notice of demand under the Act cannot be saved by the provisions of section 297(2)(j)." It is not manifest whether the Tribunal found as a fact that there was no notice of demand served pursuant to the order under s. 221 of the Act. If no notice was served, as one reading of the order of the Tribunal suggests, then of course there cannot be any question of recovering the penalty by virtue of cl. (j) of sub-s. (2) of s. 297. Therefore, the answer that we will give in this case is subject to the Tribunal's further ..... X X X X Extracts X X X X X X X X Extracts X X X X
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