Judgment

SABYASACHI MUKHARJI, J. :- The assessee is in appeal by special leave challenging the decision of the Delhi High Court reported in (1973) 92 ITR 394.

2. The year of assessment is 1961-62. The return was due by September 28,1961, but the same was neither filed within that time, nor was any extension asked for. The assessee filed the return on May 3, 1962 - beyond more than seven months of the due date. With effect from April 1, 1962, the Income-tax Act of 1961 (1961 Act for short) had come into force. The Income-tax Officer took proceedings under section 271(1)(a) of the 1961 Act and imposed a penalty of Rs. 4,060/- for failure to furnish the return within the time on a finding that the assessee had not been prevented by any reasonable cause for not complying with the statutory obligation to make the return. The assessee challenged the imposition of penalty by preferring an appeal to the Appellate Assistant Commissioner who refused to interfere and dismissed the appeal. On further appeal, the Appellate Tribunal held that penalty was leviable under the 1961 Act but the amount of penalty had to be quantified according to the provisions of section 28 of the Income-tax Act, 1922 (1922 Act for short). Applying the provisions of the 1922 Act, the Tribunal reduced the penalty to Rs. 400/-. At the instance of the Revenue the following question was referred to the High Court under section 256(1) of the 1961 Act :

"Whether on the facts and in the circumstances of the case, the Tribunal was in law competent to reduce the penalty levied under S. 271(1)(a) to a figure lower than the sum equal to 2% of the tax for every month during which the default continued but not exceeding the aggregate 50% of the tax?"

The High Court answered the reference in favour of the Revenue and against the assessee.

3. Though the quantum of penalty is small, the question of law is of substantial importance, and covers an aspect which often arises for determination before the tax authorities and the High Courts.

4. Provisions of three sections, one of the 1922 Act and two of the 1961 Act, are relevant for the decision of the point at issue. Section 28 of the 1922 Act, as far as relevant, provided :

"Penalty for concealment of income or improper distribution of profits :-

(1) If the Income-tax Officer, or the Appellate Assistant Commissioner or the Appellate Tribunal, in the course of any proceedings under this Act, is satisfied that any person -

(a) has without reasonable cause failed to furnish the return of his total income which he was required to furnish, by notice given under sub-section (1) or sub-section (2) of S. 22 or section 34, or has without reasonable cause failed to furnish it within the time allowed and in the manner required by such notice.

(b) & (c) X X X X

he or it may direct that such person shall pay by way of penalty in the case referred to in clause (a) in addition to the amount of the income-tax and super tax, if any, payable by him, a sum not exceeding one and a half times that amount............"

5. The two sections relevant to the point of the 1961 Act are sections 271 and 297. Section 271 is the corresponding provision of section 28. Sub-section (1)(a). thereof is the relevant provisions. It provides :

"If the Income-tax Officer.... is satisfied that any person :

(a) has without reasonable cause failed to furnish the return of total income which he was required to furnish under sub-section (1) of section 139 or by notice given under subsection (2) of section 139 or section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by sub-section (1) of section 139 or by such notice, as the case may be, or

(b) & (c) X X X X

he may direct that such person shall pay by way of penalty :

(a) X X X X

(b) in any other case, in addition to the amount of the tax, if any, payable by him, a sum equal to 2% of the assessed tax for every month during which the default continued."

Section 297(1) repealed the 192