Commissioner of Income-Tax, Delhl (Central) New Delhi v. M/S. Singh Engineering Works (P) Ltd. Kanpur

Grover, J, The respondent company which is an assessee was required by the Incom'! tax Officer by 110tices issued under s. l 8A (1) of the Indian Income .tax Act 1922, hereinafter called the "Old Act" to make an advance payment . ·of tax amounting to Rs. 3,17 077 for the assessment year 1960 .. 61 and Rs. 3,54,911 for the ~ssessment year 1961-62. The assessee chose to file its own estimate of tax under s. l 8A(2) and in accordance therewith it paid two instalments of advance tax of Rs. 38,333/- each for the assessment year 1960-61 and three mslalments of Rs. 12,875/- each for the assessment year 1961-62. Thereafter the assessee filed revised estimates of tax in the month of March 1960 and March 1961 respectively estimating the tax at Rs. 1,80,000/- for each of the assessment years on a total income of Rs. 4 lakhs. The balance of advance tax as per its revised estimate was paid in time after deducting the instalments which had already been paid. The a.ssessee subsequently filed its returns of income for the aforesaid two years declaring the total income of Rs. 4,53,942/- and Rs, 7,02,383/- respectively. The Income tax Officer completed L the assessment of total income of Rs. 5,35,000/- ancJ Rs. 8,99,029/- for the assessment years 1960-61 and 1961-62 on January 21, 1963 after the Income tax Act 1961, hereinafter call-ed the "New Act" had come into force. The Income tax Officer took the view that the assessee had furnished inaccurate and untrue estimates of tax and had not given any satisfactory explanation in respect of them. He imposed penalties under s. 273 of the new Act amom:Hing to Rs. 13 .700:' - and Rs. 12.342/ _for the assessment years 1960-61 and 1961-62 respectively. Appeals to the Appel-late Assistant Commissioner i11 the matter of imposition of penalty were tejected. The Appellate Tribunal held that the penalties could not have been imposed under the provisions of s. 273 of th' new Act in respect of the two assessment years in question. It was said inter alia, that in the absence of any deeming provision in the new Act the default under s. 18A of the old Act could not be treated as a default under s. 212 of the new Act and thats. 297(2) (g) of the new Act did not save the proceedings under s. 18A of the old Act. A question of law was referred directly tci this Court under the provisions of s. 257 of the new Act owing to the conflict between the decisions of the various High Courts.

Section l 8A of the. old Act makes provision for advance pay-ment of tax. .Sub-section (9) provides, inter a!ia, for the imposi-tion of penalty if the Income tax Officer is satisfied that the asses-see has furnished estimates of the tax payable by him which he knew. or had reason to believe to be untrue. In the new Act s. 212 makes provision for the estimate by the assessee and payment of tax in accordance wilh ilia! estimate. Section 273 of .the new Act empowers the Income tax Oflicei: to levy penalty on an assessee where he finds at the time of regular assessment that the assessee had furnished, under ~. 212, an estimate of the advance tax payable by hiin which he knew or had reason to believe to be untrue.

As stated before the Tribunal was of the opinion that s. 297 (2) (g) of the new Act did not save proceedings under s. IBA of the old Act. According to that provision any proceeding for the imposition of a penalty in respect of any assessment for the year ending on 31st day of March 1962 or any earlier year which is completed on or after the first day of. April 1962 may be initiated and ~ny such penalty may be imposed under' the new Act.

In M/ s. Jain Bros. & Others v. The Union of India(') this Court examined the provision of s. 271 which also appears in Chapter XXI under which s. 273 is to be found and the provision of s.297(2)(g) of the new Act. This is what was stated in that case:

"We are further unable to agree that the language ot s. 271 does not warrant the taking of proceedings under that section when a default has been committed by fai-lure to comply with a notice issued under s. 22(2) of the I Act of 1922. It is true that cl. (a) of sub-s. (1) of s. 271

mentions the corresponding provisions of the Act of 1961 but that will not make the part relating to payment of penalty inapplicable once it is held that s. 297(2)(g) governs the case. Both ss. 271(1) and 297(2)(g) have to be read together and in harmony and so read the only conclusion possible is that for the imposition of a penalty in respect of any assessment for the year ending on March 31, 1962 or any earlier year which is completed after first day of April 1962 the proceedings have to be initiated and the penalty imposed in accordance with the provisions of s. 271 of the Act of 1961. Thus the as-sessee would be liable to a penalty as provided by s. 27'(1) for the default mentioned in s. 28(1) of the Act of 1922 if his case falls within the terms of s. 297(2)(g). We may usefully refer to this Court's decision in Third Income tax Officer, Manga/ore v. Damodar Bhat (71 I.T.R. 806) with .reference to s. ?.97(2)(j) of the Act of 1961. According to it in a case falling within that sec-tion in a proceeding for recovery of tax and penalty im-posed under the Act of 1922 it is not required that all the s~chons of the new Act relating to recovery or collec-t~on should be literally applied but only such of the sec-tmns will apply as are appropriate in the particular case

and subject, if neecssary, to suitable modifications. In other worcis, tiie procedure of the new Act will apply to cases contemplated bys. 297(2) (j) of the new Act mu-tatis mutandis. Similarly the provision of s. 271 of the A.:t of 1961 will apply mutatis mutandis to proceedings relating to penalty initiated in accordance with s. 297 (/.)(g) of that Act".

In our judgment s. 297(2)1 gJ is clearly applir.able to the present case inasmuch as the assessment was completed on or after the first day of April l 962. The ~rovisions of the new Act contained in s. 273 will apply mutatis mutandis to proceedings relating to penalt) initiated iu accordance with s. 297(2)(g) of the new Act. The question which has been referred to us is answered in the affirmative and in favour of the Commissione" of Income tax who will be entitleu to his costs in this Court.