COMMISSIONER OF GIFT TAX Vs. C MUTHUKUMARASWAMY MUDALIAR

JUDGEMENT

(1.) THE following question has been referred to this court under section 26(1) of the Gift-tax Act, 1958 :"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that section 17(1) (a) of the Gift-tax Act, 1958, as amended by the Gift-tax (Amendment) Act, 1962, would not apply to the levy of penalty in this case ?" *THE assessee made a gift of certain properties to his sister on July 14, 1961. THE gift attracted tax liability and the gift-tax return was due on June 30, 1962. But the return was actually filed only on October 22, 1963. THE Gift-tax Officer completed the gift-tax assessment on March 31, 1964, and as he found that the assessee had no reasonable cause for not filing the return within the time allowed under the Act, he initiated penalty proceedings under section 17(1) (a) of the Gift-tax Act and levied a penalty of Rs. 2, 605.THE assessee filed an appeal before the Appellate Assistant Commissioner of Gift-tax who reduced the penalty to Rs. 1, 000.

(2.) 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 levied 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 their 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 furnish the return in time. Section 17(1) as amended provides for a penalty of 2% of the tax for every month during which the default continued but not exceeding in the aggregate 50% of the tax.THE contention of the revenue is that it is the amended provision that has to be applied in relation to the assessee's default as that was the law in force on the date when the Gift-tax Officer levied the penalty and that, therefore, the reduction of the penalty by the Appellate Assistant Commissioner as confirmed by the Tribunal cannot legally be justified.

(3.) THE fact that the section has to some extent a retroactive effect again appears to us of no importance when it is realised that the legislation is a move in a long and fiercely contested battle with individuals who well understand the rigour of the contest." *Thus, the submission of Mr. Balasubrahmanyan is that so long as the language of the statute is clear, the language should be given full effect without reference to the time of the commission of the offence, that as the transgression of the law has no reference to the assessment year the penalty for non-submission of the return can only be under the law that was in force on the date when the penalty is imposed and it cannot have any reference to the law in force during the assessment year a contended for by the assessee, that the levy of penalty can only be after the completion of the assessment, and the proceedings for the assessment and levy of penalty are independent of each other and that, therefore, the law during the assessment year cannot be taken to govern the penalty proceedings.In Commissioner of Income-tax v. Ramchand Kundanlal Saraf the Madhya Pradesh High Court dealt with a somewhat similar question. Section 271 of the Income-tax Act, 1961, was amended on April 1, 1968. THE question arose whether the quantum of penalty for concealment of income leviable in respect of there assessment years 1961-62 and 1962-63 would have to be regulated with reference to the provisions of the amended section. It was contended for the assessee that the amendment of section 271 with effect from April 1, 1968, specifying that the amount of penalty shall not be less than the amount of concealed income would not be applicable to his case as it could not be given retrospective operation and that the penalty, if any, must be computed in accordance with the provisions in section 271 as it stood before 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.