Chinnappa Reddy, J.:— R.C No. 55/1970 arises out of a proceeding for the levy of penalty under S. 27 3(a) of the Income Tax Act, 1961 in respect of an estimate of the advance tax payable by the assessee for the assessment year 1961–1962. R.C No. 56/70 arises out of a proceeding for the levy of penalty under S. 221 for default in payment of tax in respect of the assessment year 1961–1962. R.C No. 57/70 arises out of a proceeding for the levy of penalty under S. 221 for default in payment of tax in respect of the assessment year 1962–1963.

2. One Nagapotha Rao and his three sons, Settharama Rao, Raja and Satyanarayanamurthy constituted a Hindu Undivided family. In 1947, Seetharama Rao died leaving behind him a widow. Raja Syamla, Nagapotha Rao died in 1950. Raja Syamala filed a suit O.S No. 47 of 1954 on the file of the Court of the Subordinate Judge, Masulipatnam for partition and separate possession of her share of the family properties. The suit was decreed. There was considerable controversy whether for purposes of S. 25-A of the Income-tax Act, 1922, there was a disruption of the Hindu Undivided Family in June, 1955 when Raja Syamala was put in possession of certain properties tentatively, or on 16-3-1961 when a final decree was passed in the suit allotting the very properties to her finally or on 9-3-1962 when the rest of the properties were divided between the remaining members of the family. The controversy was set at rest by the Income Tax Appellate Tribunal in the assessment proceedings where it was held that there was a disruption of the Hindu Undivided family on 16-3-1961. That finding was also confirmed by us in R.G No. 27/1970. The three penalty proceedings which are the subject matter of the three cases now before us were initiated on the basis that the Hindu Undivided Family, was the assessee. The Tribunal was of the view that the penalties were not leviable as the Family had become disrupted on 16-3-1961. The Tribunal is patently right in regard to the alleged default in payment of tax for the assessment year 1962–63. The Family had become disrupted before the commencement of the year of account and there could therefore be no question of assessing the non-existent Hindu Undivided Family or treating it as a defaulter. The question referred to us in R.C No. 57/1970 has therefore to be answered against the department. In R.C No. 55 of 1970 Sri P. Rama Rao, learned counsel for the Department, urged that the assessment for the assessment year 1961–62 was completed on 28-2-1966 and therefore penalty proceedings were initiated and penalties were imposed under the 1961 Act as provided by S. 297(2)(g) of the 1961 Act. He submitted that under S. 174(4) of the 1961 Act, notwithstanding the disruption of the Family during the year of account, the total income of the Family in respect of the period upto the date of partition shall be assessed as if no partition had taken place and under S. 171(8), the provisions of S. 171 applied to the levy of a penalty as they applied to the levy of tax in respect of the period upto the date of partition. He argued that the Tribunal was wrong in holding that penalties were not leviable because of the disruption of the family on 16-3-61.

3. Sri Y.V Anjaneyulu, learned counsel for the assessee, submitted that in the present case the Family had become disrupted before the coming into force of the 1961 Act, that under the 1922 Act no penalty could be levied after the disruption of the Family and that S. 297(2)(g) did not have the effect of interfering with that vested right. Sri Anjaneyulu urged that S. 297(2)(g) applied only to a situation where penalty was leviable under the 1922 Act; otherwise, he submitted, it would amount to giving retrospective effect to the provisions of S. 297(2)(g).

4. Under the Income-Tax Act of 1922, the law was well settled that no order imposing a penalty could be passed against a Family, once a partition was recognised under S. 25-A of the Act. Section 171(8) of the 1961 Act, however, provides for the imposition of a penalty as if there was no partition, in respect of the period upto the date of the partition. The question is whether the provisions of S. 171(8) are attracted to a case where there was disruption of the Family before the 1961 Act came into force but where the assessment was completed after the Act came into force. Now, the appropriate stage for the levy of a penalty is after the completion of the assessment proceedings. Though in a certain sense penalty is considered to be additional tax and for certain purposes the word ‘assessment’ is considered to mean the whole procedure for the imposition of liability on the tax-payer including the levy of penalty, it is well known that a penalty has certain distinct characteristics of its own. It is not necessary to embark upon a discussion of the nature of a penalty but it is sufficient to say that penalty cannot be equated to tax, A proceeding for the levy of penalty must be initiated separately, the finding arrived at in assessment proceedings are not binding in penalty proceedings and the burden of proo is different. If this is borne in mind and if what we said, a moment ago namely, that the appropriate stage for the levy of a penalty is after the completion of the assessment proceedings, is correct, then it becomes clear that the law applicable to proceedings for penalty should be the law prevailing on the date of the completion of the assessment proceedings. S. 297(2)(g) puts the matter beyond doubt by enacting that any proceeding for the imposition of a penalty in respect of any assessment for the year ending on 31-3-1962, or any earlier year, which is completed on or after 1-4-1962 may be initiated and any such penalty may be imposed under the 1961 Act. Their Lordships of the Supreme Court in Jain Brothers v. Union of India held]1 that the crucial date for purposes of penalty was the date of the completion of the assessment, They said,

“There can be no manner of doubt that penalty has to be calculated and imposed according to the tax assessed. It follows that imposition of penalty can take place only after assessment has been completed. For this reason there was every justification for providing in clause (f) and (g) that the date of the completion of the assessment would be determinative of the enactment under which the proceedings for penalty were to be held.

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Although penalty has been regarded as an additional tax in a certain sense and for certain purposes it is not possible to hold that penalty proceedings are essentially a continuation of the proceedings relating to assessment where a return has been filed.

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It is obvious that for the imposition of penalty it is not the assessment year or the date of the filing of the return which is important but it is the satisfaction of the Income-tax authorities that a default has been committed by the assessee which would attract the provisions relating to penalty. Whatever the stage at which the satisfaction is reached, the scheme of Sections 274(1) and 275 of the Act of 1961 is that the order imposing penalty must be made after the completion of the assessment. The crucial date, therefore, for purposes of penalty, is the date of such completion.”

5. It is clear from the decision of their Lordships that the effect of S. 297(2)(g) is to attract all the provisions relating to penalty in the 1961 Act to case where assessments are completed after 1-4-1962 though they relate to earlier years. Such provisions it was pointed out later in the same decision, were not to be literally applied but mutatis mutandis.

6. Sri Y.V Anianeyulu, learned counsel for the assessee relied on the decision of the Supreme Court in Jani v. Indu Prasad Dev Shanker Bhutt]2 The facts of that case were as follows: For the assessment year 1947–48 an assesment order was made on 31-1-1952. On 27-3-1956 the Income tax officer issued a notice under S. 34(1)(a) of the Income-tax Act of 1922 and proceeded to asses the assessee. The assessment was, however, set aside by the Appellate Assistant Commissioner on 5-1-1963 on the ground that there was no proper service of notice on the assessee. By that time the 1922 Act had been repealed and the Income Tax Act, 1961 had come into force with effect from 1-4-1962. The provisions of the new Act enlarged the time for taking action for assessment or re-assessment in the case of certain escaped income from eight to sixteen years. Taking advantage of the provision of the new Act the Income Tax Officer once again issued a notice on 4-1-1963 purporting to be under S. 147(a) of the new Act. The assessee objected to the issue of the notice under the 1961 Act and claimed that action under the old Act had become barred and such action could not be revived under; the provisions of the new Act. The objection of the assessee was upheld by the Supreme Court who observed.

“It is admitted in this case that the right was barred under the old Act before the new Act came into force. In our opinion, it is not permissible to construe S. 297(2)(d)(ii) of the new Act as reviving the right of the Income Tax Officer to reopen the assessment which was already barred under the old Act. The reason is that such a construction of S. 297(d)(ii) would be tantamount to giving of retrsopective operation to that section which is not warranted either by the express language of the section or by necessary implication. The principle is based on the well known rule of the statute expressly so provide or unless there is a necessary implication, retrospective operation should not be given to the statute so as to affect, alter or destroy any right already acquired or to revive any remedy already lost be efflux of time.

We consider that the language of the new section must be read as applicable only to those cases where the right of the Income. Tax Officer to reopen the assessment was not barred under the repealed section.”

7. Sri Anjaneyulu submitted that S. 297(2)(d)(ii) was analogous to S. 297(2)(g) and, just as a right already lost under the 1922 Act could not be revived by virtue of the 1961 Act, a right which did not exist under the provisions of the 1922 Act could not be exercised taking advantage of the provisions of the new Act. The argument of Sri Anjaneyulu is not without attraction, nor devoid of any force. We have given our thought to it. Not without some hesitation, we have arrived at the conclusion that we cannot accept it. We think that S. 297(2)(g) has the effect of attracting the provisions of S. 171(8) even to cases where the family became disrupted before 1-4-1962 but the assessment was completed after 1-4-1962. Our reason is that proceedings for the levy of penalty are independent proceedings and the appropriate stage for the levy of a penalty is after the completion of the proceedings. Therefore, the crucial date which determines the applicability of the law is the date of completion of the assessment. The distinction between the case before the Supreme Court and the present case is: there the right to reopen the assessment arose and became extinguished under the old Act, whereas in the present case the occasion for the levy of penalty arose after the new Act had come into force, and the penalty proceeding had there fore to be intitiated under the new Act. The assessee had no vested right regarding the law applicable to the levy of penalty until the date of completion of the assessment.

8. In R.C No. 56/76 a further argument was advanced by Sri Anjaneyulu that S. 221 of the 1961 Act did not apply as the assessee could not be considered to be in default since the assessment was made under the old Act. There is no substance in this submission since Section 221 and other provisions should be read mutatis mutandis, as pointed out in the case of Jain Brothers where a similar argument that S. 273 did not in terms apply was repelled by the Supreme Court, Sri Anjaneyulu also submitted that the Hindu Undivided Family could not be considered to be a defaulter in the present case as no notice of demand was served on the family.

9. The order of the Income Tax Officer shows that a notice of demand, was served on the assessee presumably meaning thereby the family. The question in the form now raised by Sri Anjaneyulu was not raised before any of the subordinate Tribunals and we do not think that we will be justified in going into the question.

10. In the result, the question referred to us in R.C Nos. 55 and 56/1970 are answered in favour of the Department while the question referred to us in R.C No. 57/1970 is answered against the Department. The assessee will pay the costs in R.C No. 55 and 56/70. The Department will pay the costs in R.C No. 57/1970. Advocate's fee Rs. 250/- in each case.

11. Answered Accordingly.