COMMISSIONER OF INCOME TAX Vs. SHANKERLAL NARAINDAS

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Delhi, Bench "C" (hereinafter called "the Tribunal"), has made this reference under Section 256(1) of the Indian Income-tax Act, 1961 (hereinafter called the "new Act").

(2.) NOTICE under Section 23(2) of the Income-tax Act, 1922 (hereinafter called the "old Act"), was served on Messrs, Shankerlal Naraindas (hereinafter called "the assessee") on 24th October, 1958, for filing the return for the assessment year 1958-59. The assessee, however, filed the return on 25th September, 1961, and the assessment was completed on 24th August, 1962. No extension of time for filing the return was sought by the assessee and as such the Income-tax Officer, Pali, initiated proceedings under Section 271(1)(a) of the new Act for imposing penalty. In response to this notice, the assessee filed an application giving grounds for filing the return late, but the same were held as not showing any justifiable or reasonable cause for the delay in filing the return and the said officer imposed a penalty of 50% of the tax assessed and this amount came to Rs. 4,781.12. The appeal to the Appellate Assistant Commissioner filed by the assessee failed. In the second appeal by the assessee, the Tribunal held that, though the penalty was to be levied in accordance with the provisions of Section 27I(1)(a) of the new Act, yet the default was committed at the time when the old Act was in force, and, therefore, the Tribunal was not bound to impose the penalty in accordance with the rigid formula laid down in Section 271(1)(a)(i) of the new Act and after pointing out some redeeming features in the case, it reduced the penalty to a sum of Rs. 1,000 only. On the application of the Commissioner of Income-tax, the Tribunal has referred the following question for the opinion of this court:

(3.) NOW we take up the second argument urged for not applying Section 271 of the new Act. The Gujarat High Court has taken the view that under Section 271(1) it has been provided that for imposing penalty, the Income-tax Officer or the Appellate Assistant Commissioner should be acting "in the course of any proceedings under the new Act" and that the proceedings for imposing penalty in respect of any assessment for the year ending on 31st March, 1962, or for any earlier year was not a proceeding under the new Act and therefore Section 271(1) was inapplicable for imposing a penalty for that year. But, such proceedings become proceedings under the new Act by virtue of Clause (g) of Sub-section (2) of Section 297 of the new Act Had this sub-section been not on the statute book, then, perhaps, on the repeal of the old Act, no proceedings for the imposition of a penalty for those years could be taken under the new Act. But Clause (g) of Sub-section (2) of Section 297 lays down that proceeding for penalty is to be initiated under the new Act and penalty is to be imposed under that Act. The expression "in the course of any proceedings" under Section 271 (1) of this Act is to be construed in the light that proceedings become proceedings under the new Act even if they are taken by virtue of Section 297(2)(g). This view was taken by the Madhya Pradesh High Court in Gopichand Sarjuprasad v. Union of India. We are in respectful agreement with this view.