TMI Blog1974 (9) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... e filed an appeal before the Appellate Assistant Commissioner of Gift-tax who reduced the penalty to Rs. 1,000. The department preferred an appeal before the Appellate Tribunal and contended that the Appellate Assistant Commissioner of Gift-tax erred in reducing the penalty, as the penalty levied under section 17(1)(a) by the Gift-tax Officer was the minimum leviable in the case. The Tribunal rejected the said contention holding that the provisions regarding minimum penalty came into force only on April 1, 1963, by virtue of the Gift-tax (Amendment) Act of 1962, that the default in filing the return having taken place on 30th June, 1962, the provisions insisting on minimum penalty cannot be applied to the assessee's case and that, therefore, there was nothing wrong in law in the action of the Appellate Assistant Commissioner reducing the penalty to Rs. 1,000. Aggrieved against the order of the Tribunal the revenue has sought this reference. Before its amendment in 1962, section 17(1) provided a maximum limit for the levy of penalty, but after the amendment the section lays down both the minimum and maximum limits for penalties for various offences, including the failure to furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) can be applied only if the default is committed after the amending Act came into force and it cannot be applied to defaults cornmited earlier, and the Tribunal has not kept in mind the distinction between a law which is retrospective and a law which is retroactive. In support of the above submissions reference has been made to the following three English decisions : In Director of Public Prosecutions v. Lamb, certain persons were charged on an information dated August 17, 1940, with certain currency offences committed between September 3, 1939, and May 11, 1940, and they pleaded guilty. The regulation in force at the time of the commission of the offence limited the penalty for each offence to a fine of pound 100 or imprisonment for a term not exceeding three months or both. On June 11, 1940, the regulation was altered providing for a further alternative penalty of a maximum fine equal to three times the value of the currency in question. It was contended in that case that the amendment could not affect the punishment for an offence which was complete in other respects before the amendment was made and that if the conviction had taken place immediately after the offences had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffence, nor is it, for that matter, a regulation providing for some different kind of penalty or punishment altogether. It is merely increasing the amount of the monetary fine. In my view, the words are clear, and although I do not altogether like the idea of punishments being increased after the offences have been completed, none the less, if the language is clear, and if that is the result, I think that it is impossible to escape from the consequences of the language which has been used." In Buckman v. Button, one Buckman was charged with certain offences under the Defence (General Regulations) and was convicted. After the commission of the offences but before the hearing of the case the regulations were amended by increasing the penalties for such offences. The question arose as to whether the increased penalties provided for in the amended regulation could be imposed. It was held that the imposition of higher penalties provided by the amended regulation which was in force at the time of the hearing was right in law. This case confirms the decisions in Lamb's case, referred to above, in so far as it deals with the position where the penalty is increased after the offence is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that article 20(1) of the Constitution of India cannot stand attracted to the penalty proceedings. Before the learned judge it was contended that as no person shall be subject to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence, the imposition of a greater penalty under the Income-tax Act of 1961 than the one provided under the 1922 Act violated article 20(1) of the Constitution of India. This contention was rejected on the ground that article 20 of the Constitution does not deal with penalties imposable by quasi-judicial tribunals giving administrative decisions, and that it deals with only conviction for offences. Krishnaswami Reddy J. in S. Sannana Chetty Sons v. Third Income-tax Officer considered the import of section 271(1)(c) of the Income-tax Act, 1961, and observed that the institution of proceedings for penalty is not tantamount to prosecution in a criminal court and equally the punishment on a conviction, which is criminal, cannot be equated with the punishment of penalty which is either civil or quasi-criminal and that, therefore, section 271 is not violative of article 20(1) of the Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at the remedy sought to be applied, and consider what was the former state of law, and what it was that the legislature contemplated." The following passage at page 292 of Odgers' Construction of Deeds and Statutes, 5th edition, has also been referred to : "A new class of legislation, namely, legislation against tax evasion, which may be free from any presumption against retrospective effect is indicated by the judgment of the Court of Appeal delivered by Lord Greene in Lord Howard de Walden v. Inland Revenue Commissioners ." In Lord Howard de Walden v. Commissioners of Inland Revenue, the court considered the scope of section 18 of the Finance Act of 1936. It was argued for the assessee in that case that the said section is penal in its nature and, therefore, it should have a restricted meaning. While meeting that contention Lord Greene M.R. stated : "The section is a penal one and its consequences, whatever they may be, are intended to be an effective-deterrent which will put a stop to practices which the legislatures consider to be against the public interest. For years a battle of manoeuvre has been waged between the legislature and those who are minded to throw t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the amendment. For the revenue it was urged that the quantum of penalty must be regulated with reference to the law actually in force at the time of the imposition of the penalty or in any case at the time when the Income-tax Officer decides to initiate proceedings for imposition of penalty. The court, however, held that the provisions relating to penalty are of a penal character and their object is to punish an assessee so as to deter him from transgressing the law in future, and, therefore, the quantum of penalty must be determined with reference to the law prevailing on the day when the act of concealment in that case was committed and not when the penalty proceedings are initiated or the order was passed. The court also held that the principle underlying article 20 of the Constitution would apply to the case and its reasoning is as follows: "We may here refer to the provisions of article 20(1) of the Constitution which provides that no person shall be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence. Although imposition of penalty under the Income-tax Act is not a punishment for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by notice, the new scale of penalty will be operative where the default occurs on or after April 1, 1969." These circulars show that if the infringement of the law has taken place before the amendment came into force, the law before the amendment should apply and if the transgression is a later one then the law as amended has to apply. The Delhi High Court in Commissioner of Income-tax v. Maya Rani Punj dealt with the question whether the enhanced penalty under section 271(1)(a) of the Income-tax Act, 1961, can be levied in respect of a default in filing the return, in respect of the assessment year 1961-62, which had to be filed on September 28, 1961. In that case the return was actually filed after a delay of 7 months on 3rd May, 1962, that is, after the Income-tax Act of 1961 came into force. The Income-tax Officer held that the penalty should be levied as per section 271(1)(a) of the Act of 1961. The Tribunal had held that though the penalty could be levied under the new Act the quantum of penalty had to be determined with reference to section 28 of the Act of 1922. The court took the view that the minimum penalty provided in section 271(1)(a) of the Act of 1961 has to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 97(2)(g) only deals with cases of imposition of penalty in respect of any assessment which is completed on or after the first day of April, 1962, and it does not deal with the cases of imposition of penalty in respect of assessments completed before the first of April, 1962. It is not, therefore, possible to construe the decision of the Supreme Court in Jain Brothers v. Union of India as throwing any light on the question arising in this case. The case decided by the Delhi High Court in Commissioner of Income-tax v. Maya Rani Punj is also one which is covered by section 297(2)(g) and, therefore, the levy of penalty under the new Act could be legally justified. There is no specific provision as section 297(2)(g) in the Gift-tax Act indicating as to in what cases the minimum penalty has to be levied. We have to, therefore, proceed only on the basis of the general principles for interpretation of statutes. We are not inclined to agree with the learned counsel for the revenue that where a provision is intended to arrest tax evasion a different rule of interpretation has to be applied, giving retroactive or retrospective effect to the provisions even if the words of the provision are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or tax. According to the learned counsel normally the law as on the first of April of the assessment year should be taken to apply in respect of assessment to tax and that the same law has to apply even in respect of penalties, they being only additional tax. The learned counsel refers to the decision in C. A. Abraham v. Income-tax Officer, wherein penalty leviable under section 28 of the Indian Income-tax Act, 1922, has been held to be an additional tax which is imposed as a part of the machinery for assessment of tax liability. The relevant observations of the Supreme Court are these: "By section 28, the liability to pay additional tax which is designated penalty is imposed in view of the dishonest contumacious conduct of the assessee. It is true that this liability arises only if the Income-tax Officer is satisfied about the existence of the conditions which give him jurisdiction and the quantum thereof depends upon the circumstances of the case. The penalty is not uniform and its imposition depends upon the exercise of discretion by the taxing authorities, but it is imposed as a part of the machinery for assessment of tax liability." But these observations have been expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 13(1), 13(2) and under section 16; (2) failure without reasonable cause to comply with a notice under section 15(2) ; (3) concealing the particulars of any gift or deliberately furnishing inaccurate particulars thereof. If the penalty is for failure to furnish a return under section 13(1) or 13(2) or under section 16 the offence or the infringement consists in not filing the return within the time allowed under the relevant provision. If the offence or infringement is one of assessee's failure to comply with a notice under sub-section (2) of section 15, the date of non-compliance will be taken as the date when the infringement has taken place. In the matter of concealment of particulars of gift or deliberately furnishing inaccurate particulars thereof the infringement takes place on the date when the return is filed in which the concealment of gift or furnishing inaccurate particulars thereof, has taken place. Therefore, the date when the offence or infringement takes place will be different in each case depending upon the nature of the infringement which is taken as the basis for levying the penalty. It has already been stated that the law as on the first day of April of the as ..... 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