LexMAYA RANI PUNJ versus COMMISSIONER OF INCOME TAX, DELHI,
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827 MAYA RANI PUNJ v. COMMISSIONER OF INCOME TAX, DELHI, DECEMBER 11, 1985 [V ,0, TULZAPURKAR, SABYASACHI MUKHARJI AND RANGANATH MISRA, JJ ·] Income Tax Act 1922 : Section 28, Income Tax Act 1961: Sections 271 (l)(a), 297(1) and 297(2)(j). lJelay in f illng return for assessment year under 1922 Act - Penalty - Quantum of - Determination - 1961 Act coming into effect - Discretion to reduce penalty fixed under new Act - Provision of new Act -·Availability of. Imposition of penalty - Assessment year or date of filing return - Not material - Satisfaction of assessing authority that default occurred - Importance of. Return - Non-filing of -whether a continuing default. A B c D The appellant is the ·assessee. The year of assessment was 1961-62. The return was due by September 28, 1961 but the same was neither. filed within that time, nor was any extension asked E for. The assesses 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 had come into force, The . Income Tax Officer finding that the assessee had not been prevented by any reasonable cause for not complying with the statutory obligation to make the return, took proceedings under section 27l(l)(a) of the 1961 Act and imposed a penalty of Rs.4,060 for failure to F furnish the return within time. The assessee challenged the imposition of penalty by preferting an appeal to the Appellate Assistant Collmissioner 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 and applying the provisions of the said Act reduced the penalty to Rs. 400. G The question whether 'the Tribunal was in law competent to H reduce.the penalty levied under section 27l(l)(a) to a figure 828 SUPREME COURT REPORTS [1985J SUPP. 3 s.c.R. A lower than the Slllll equal to 2% of the tax for every month during which the default continued' , was referred at the instance of the Revenue to the High Cour~ which answered the reference in favour of the Revenue and against the assessee by relying upon section 297(2)(j) of the 1961 Act and holding that section 271(1) of the Act was applicable to the levy of penalty for defaults comnitted B under the 1922 Act, and that the word 'may 1 used in section 297(1) of the 1961 Act vested in the Income Tax Officer discretion either to levy or not to levy a 'penalty but if he did decide to levy one, he had no option but to levy the penalty at the prescribed rate. c Dismissing the appeal of the assessee, this Court, HELD: 1. The assessment was made on June 30, 1964 and proceedings for imposition of penalty were directed to be initiated that day. Provisions of section 27l(l)(a) of the 1961 Act were fully applicable and the demand of penalty was thus justified being within the limits of law. [842 CJ D 2. Under the 1922 Income Tax Act liability to make a return was contingent upon service of notice under section 22, while under the 1961 Income Tax Act every person having a taxable income has under section 139 the liability to make a return within the time provided by the Act. [833 DJ B In the instant case, clause (£) of section 297(2) of the 1961 Act is not attracted because the return was filed on May 3, 1962 and assessment was made subsequent to April 1, 1962. [833 DJ 3. For the imposition of penalty it was not the assessment year or the date of the filing of the return that was important F but it was the satisfaction of the income tax authorities that a default had been comnitted by the assessee which attracted the provisions relating to penalty. Whatever be the stage at which the satisfaction was reached, the scheme of section 274(1) and 275 of the Act of 1961 was that the order imposing penalty mw!t be made after the completion of the assessment. The crucial date, G therefore, for the purpose of penalty is the date of such completion, and the satisfaction of the authority that proceedings for levy of penalty be initiat.ed. [834 F-GJ In the instant case, though the default occurred in September 1961 the date relevant for the purpose of initiating H proceedings for imposition of penalty is when, following the MAYA RANI v. c.I.T. 829 assessment made, the Income Tax Officer decided to i
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