COMMISSIONER OF INCOME-TAX Vs. ROSHAN LAL KUTHIALA

JUDGEMENT

(1.) THE assessee is a registered firm with its head office at Yamunanagar. It is engaged in the business of exploitation of forests. For the assessment year 1960-61 (account year ending on March 31, 1960), the Income-tax Officer served a notice under Section 22 (2) of the Indian Income-tax Act, 1922 (hereinafter referred to as "the 1922 Act"), to the assessee on October 7, 1960, requiring it to furnish its return of income by November 11, 1960. On the request of the assessee, this time was extended to April 20, 1961. The return was, however, filed on January 1, 1963, that is, after a delay of little more than twenty months. The assessment order was passed on March 24, 1965, and the income liable to tax was assessed at Rs. 81,346. As the assessee could not prove that the delay in filing the return of income was for a sufficient cause, the Income-tax Officer took proceedings for imposition of penalty under the provisions of the Income-tax Act, 1961 (hereinafter referred to as "the 1961 Act" ). The penalty was calculated in accordance with the provisions of Clause (i) of Section 271 (1) (a) of the said Act, that is, at the rate of 2 percent. of the income-tax for each month of delay, the total being 40 per cent. of the income-tax assessed as the delay was of more than twenty completed months. This order was passed by the Income-tax Officer on March 20, 1967. The assessee filed an appeal against that order which was dismissed by the Appellate Assistant Commissioner of Income-tax on November 23, 1967. A further appeal was filed before the Income-tax Appellate Tribunal, Chandigarh Bench, which was accepted in part. The Tribunal held that the penalty at the rate of 2 per cent. as provided under Section 271 (1) (a) (i) could be imposed for the period from April 1, 1962, to December 31, 1962, only, that is, for nine months because the 1961 Act had come into force with effect from April 1, 1962, and the provisions of Section 271 thereof could not be made applicable to the defaults that had occurred before that date. For the period of eleven months prior to April 1, 1962, the Tribunal exercised its discretion in imposing only 7 per cent. of the tax assessed as penalty under Section 28 of the 1922 Act on the ground that that provision applied to that period. The Tribunal accordingly reduced the quantum of penalty from 40 per cent. to 25 per cent. of the tax assessed. Not being satisfied with that order, the Commissioner of Income-tax asked for a reference of the following question of law being made to this court : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in reducing the penalty from 40% to 25% under Section 271 (1) (a) of the Income-tax Act, 1961 ?"

(2.) THE Tribunal, however, changed the form of the question and has referred the following question of law to this court for opinion : " Whether the substantive portion of Section 271 (1) (a) of the Income-tax Act, 1961, that creates the charge of the penalty has a retrospective operation in the absence of a clear statement or clear implication ? "

(3.) THE reference came up for hearing before my learned brothers, Mahajan and Sodhi JJ. , and the learned judges were pleased to direct that the reference may be placed for decision before a Full Bench as the learned counsel for the assessee had doubted the correctness of a Division Bench judgment of this court in Commissioner of Income-tax v. Kirpa Ram Radha Kishan, [1971] 81 I. T. R. 623 (Punj.) (Income-tax Reference No. 11 of 1968) which is printed as Appendix to Commissioner of Income-tax v. Munshi Ram Tilak Raj, [1971] 81 I. T. R. 620 (Punj.) and that is how this case has been placed before this Bench for decision.