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High Court Of Delhi
COMMISSIONER OF INCOME TAX - Appellant
Versus
MAYA RANI PUNJ - Respondent
I.T.R. 50 of 1968
Decided On : 12/21/1972
INCOME TAX - PENALTY - LEVY - DEFAULT UNDER OLD ACT - PENALTY UNDER NEW ACT - COMPETENCY OF TRIBUNAL TO REDUCE PENALTY BELOW MINIMUM PRESCRIBED - SECTION 271 (1) (A), 297 (2) (G) - INCOME TAX ACT, 1961.
Fact of the Case:
The assessee failed to file the return of income within the prescribed time. The Income-tax Officer levied a penalty of Rs. 4,060 under section 271 (1) (a) of the Income-tax Act, 1961. The assessee appealed to the Appellate Assistant Commissioner, who confirmed the penalty. The assessee then appealed to the Tribunal, which reduced the penalty to Rs. 400. The Revenue challenged the reduction of penalty by the Tribunal.
Finding of the Court:
The Tribunal was not competent to reduce the penalty levied under section 271 (1) (a) to a figure lower than the sum equal to 2/g of the tax for every month during which the default continued but not exceeding the aggregate 50^ of the tax.
Issues: Whether the Tribunal was competent to reduce the penalty levied under section 271 (1) (a) to a figure lower than the sum equal to 2/g of the tax for every month during which the default continued but not exceeding the aggregate 50^ of the tax?
Ratio Decidendi: 1. Section 297 (2) (g) of the Income-tax Act, 1961, which makes the provisions of section 271 (1) (i) of the new Act applicable to the levy of penalties for defaults committed under the old Act, is not violative of Article 20 (1) of the Constitution. 2. The provisions of section 271 (1) (i) of the new Act should be interpreted as not to conflict with Article 20 (1) of the Constitution, namely, that a penalty below the minimum prescribed under clause (i) could be levied in cases of default occurring under the old Act. 3. The words "such penalty" occurring in clauses (f) and (g) of sub-section (2) of section 297 of the new Act mean the penalty which is REFERRED TO to in the earlier part of the clauses (f) and (g) and they do not mean a penalty which is imposable under section 28 of the old Act. 4. The use of the word "may" in section 271 (1) of the new Act implies that the Income-tax Officer has a discretion to levy a penalty or not to levy a penalty. But if he decides to levy a penalty, then he has to levy it in accordance with the provisions of clause (i). The discretion does not extend to levying a penalty at a rate other than the rate prescribed in clause (i). 5. The rate prescribed under clause (i) of section 271 (1) is the minimum penalty prescribed under the said clause.
Final Decision: The question REFERRED TO to the Court is answered in the negative, i.e., in favour of the Revenue and against the assessee.
( 1 ) THE following question has been REFERRED TO to this Court by the Income-tax Appellate Tribunal (hereinafter REFERRED TO to as the Tribunal) under section 256 (1) of the Income-tax Act, 1961 (hereinafter REFERRED TO to as the new Act):
"whether en the facts and in the circumstances of the case, the Tribunal was in law competent to reduce the penalty levied undersection 271 (1) (a) to a figure lower than the sum equal to 2/g of the tax for every month during which the default continued but not exceeding the aggregate 50^ of the tax?"
( 2 ) THE relevant facts may be briefly stated. The income tax return of the respondent herein, who will be REFERRED TO to hereinafter as the assessee, for the assessment year 1961-62 was due to be filed on or before z8-9-1961. The assessee did not file the return by that date nor did she apply for extension of time for filing the return. The return was filed en 3-5-1962, i. e. , after a delay of about 7 months. When the Income-tax Officer proposed to levy a penalty for the late filing of the return, the assessee pleaded that her husband was ill and that she had to leave the station for a long period. She also stated that she was a regular tax-payer and the sources of income were salary on which tax was already deducted at source and share from registered firm for which returns were filed by the firms themselves. The Income-tax Officer held that the assessee was not prevented by a reasonable cause from filing the return of income within the prescribed time. He, therefore, levied a penalty of Rs. 4,060. 00 under section 271 (1) (a) of the new Act.
( 3 ) THE assessee preferred TO an appeal before the Appellate Assistant Commissioner against the order of the Income-tax Officer levying the penalty and raised two contentions, namely,-
" (I) that as the default had been made under the previsions of the Indian Income-tax Act, 1922 (hereinafter REFERRED TO to as the old Act), the penalty could no- be levied under the provisions of the new Act, (ii) that the notice issued by the Income-tax Officer proposing to levy the penalty was not issued in the course of the assessment proceedings and was, therefore, in contravention of section 274 of the new Act. "
( 4 ) THE Appellate Assistant Commissioner did not accept either of these contentions and confirmed the penalty levied by the Income-tax Officer.
( 5 ) THE assessee thereupon preferred TO a second appeal before the Tribunal and raised the following contentions, namely:-
" (I) that the default being under the provisions of the old Act, no panalty could be levied under the provisions of the new Act, (ii) that even if the penalty could validly be levied under the new Act, the quantum of the penalty was to be determined with reference to ihe provisions of section 28 of the old Act and that in view of the extenuating circumstances pleaded by the assessee, the penalty levied by the Income-tax Officer may be suitably reduced, and (iii) that the penalty notice was not in conformity with the provisions of section 274 of the new Act. "
( 6 ) THE Tribunal did not accept the first and the third contentions mentioned above and held that penalty could be levied under the provisions of the new Act even though the default occurred under the provisions of the old Act and also that there was no contravention of the provision of section 274 of the new Act. The Tribunal, however, accepted the second contention of the assessee mentioned above and following an order of the Tribunal in another case held that though the penalty was levied under section 271 (l) (a) of the new Act, the quantum of the penalty had to be determined with reference to the provisions of section 28 of the old Act. Taking into consideration the extenuating circumstances pleaded by the assessee, the Tribunal reduced the penalty to Rs. 400. This reduction of the penalty is being challenged by the Department.
( 7 ) BEFORE proceeding to consider the contention urged on behalf of the assessee a
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