Jain Brothers v. Union Of India

H. R. Khanna, J.

(1) IN this petition under Articles 226 and 227 of the Constitution of India filed by

registered firm Messrs Jain Brothers and its four partners against Union of India

respondent No. 1, Central Board of Direct Taxes respondent No. 2, Shri B. L.

Dhawan Income-tax Officer respondent No. 3 and Shri T. P. Jhunjhunwala, Appellate

Assistant Commissioner respondent No. 4, the petitioners have, inter alia,

challenged the vires of clause (g) of sub-section (2) of section 297 and sub-section

(2) of section 271 of the Income-tax Act, 1961 (43 of 1961), (hereinafter referred

to as the Act of 1961 ).

(2) PETITIONER No. 1 is a firm carrying on business in Delhi and has been

registered under section 26a of the Indian Incometax Act, 1922 (11 of 1922),

(hereinafter referred to as the Act of 1922 ). For the assessment year 1960-61

(account year ending October 31, 1959) a notice dated May 14, 1960 under subsection

(2) of section 22 of Act of 1922 was served by the Income-Tax Officer on

May 26, 1960 calling upon petitioner No. 1 to submit a return of income to be filed

within 35 days of the service of the notice. The return was thus due by June 30,

1960. The petitioner did not file the return within the time allowed in the notice.

Notice under sub-section (4) of section 22 of Act of 1922 was there

(3) ON November 23, 1964 the Income-Tax Officer issued notice , under section

271, read with section 274, of Act of 1961 calling upon petitioner No. 1 to show

cause why an order imposing penalty should not be made under section 271 of Act

of 1961 for having without reasonable cause failed to furnish the return of income

within time as required by law. The assessee submitted explanation. The Income-

Tax Officer passed an order on November 19, 1966 under clause (a) of sub-section

(1) of section 271 of Act 1961 imposing a penalty of Rs. 1,03,34. 00 for noncompliance

with notice under sub-section (2) of section 22 of Act of 1922. An

application for rectification of the said order was thereafter filed by petitioner No. 1

but the same was dismissed by the Income-Tax Officer on December 2, 1966. He

further called upon the petitioner-firm to pay the tax and penalty. The petitioners

preferred an appeal before the Appellate Assistant Commissioner respondent No. 4

challenging the imposition of penalty. The said appeal is stated to be still pending.

As, according to the petitioners, they are challenging the vires of section 297 (2) (g)

and 271 (2) of Act of 1961, the only forum which can give them relief is this Court

and not the Tribunals created by the Income-Tax Act. The present petition was filed

on August 26, 1967, and the prayer made by the petitioners is for the issuance of a

writ or an order or a direction in the nature of Certiorari, Mandamus or Prohibition

quashing the assessment made on the petitioner-firm on November 23, 1964 and

the order imposing penalty made on November 19, 1966. Prayer has also been

made for the issuance of an appropriate writ or direction to the respondents not to

make any assessment on petitioner No. 1 under the provisions of sub-section (5) of

section 23 of Act of 1922 nor to impose any penalty and to further direct them to

cancel all proceedings already taken under sub-section (5) of section 23 of Act of

1922 and section 271, read with section 274, of Act of 1961.

(4) THE petitioner has been registered by respondent No. 3 and a return has been

filed on his behalf. Notice was also ordered to be issued to the Attorney General of

India. No one has, however, appeared on behalf of the Union of India or the

Attorney General.

(5) THE main contentions, which have been raised on behalf of the petitioners,

are : (1) As the petitioners submitted their return on November 18, 1961 before the

coming into force on April i, 1962 of act of 1961, penalty could be imposed upon

the petitioners only under the provisions of section 28 of Act of 1922 and not under

Section 271 of Act of 1961. The assessment having been completed under the Act of

1922, the proceedings for imposition of penalty could also be under that Act and not

under the Act of 1961. The provisions of clause (g) of sub-section (2) of section 297

of Act of 1961, upon which the revenue relied in order to invoke the provisions of

Act of 1961, are violative of Article 14 of the Constitution. (2) The provisions of subsection (2) of section 271 of Act of 1922 too are violative of Article 14 of the

Constitution inasmuch as a discrimination is made against registered firms in the

matter of calculation of penalty. (3) Assuming that clause (g) of sub-section (2) of

section 297 and sub-section (2) of Section 271 of Act of 1961 are infra vires, the

Income-Tax Authorities cannot apply Section 271 of Act of 1961 for the imposition

of penalty as those provisions do not cover a case like the present.

(6) SO far as the assessment order made on November 23, 1964 is concerned, the

learned counsel for the petitioners has stated that though the petitioners are

content with that orders, they want to challenge the validity of the aforesaid order

also in order to seek redress against the order imposing penalty. In respect of the

last contention about the validity of the assessment order dated November 23,

1964, we have formed the view, after hearing the learned counsel for the parties,

that the petitioners should not be allowed to agitate the same in these proceedings.

The present writ petition was filed on August 26, 1967, more than 2 years after the

making of the said order, and there is no cogent explanation for the inordinate

delay. We are also not impressed by the argument that the order imposing penalty

confers a right on the petitioners to challenge the assessment order dated

November 23, 1964 even though initially they were not aggrieved against that order.

The order imposing penalty undoubtedly arises out of the assessment proceedings

culminating in the order dated November 23, 1964. We, however, fail to understand

as to how the petitioners can be said to get a fresh cause of action to assail that

assessment order because of the imposition of penalty on them. In view of the

inordinate delay we have come to the conclusion that in exercise of our discretion

we should not allow the petitioners to assail the assessment order dated November

23, 1964 in this writ petition.

(7) WE may also at this stage dispose of a preliminary objection raised by Mr.

Kirpal on behalf of the Income-Tax authorities that the remedy of the petitioners, in

case they are aggrieved with the order imposing penalty, is to seek redress through

the hierarchy of Tribunals created by the Income-Tax Act. In this connection we find

that the petitioners, while assailing the order dated November 19, 1966 imposing

penalty, has challenged the vires of clause (g) of sub-section (2) of section 297 and

sub-section (2) of Section 271 of Act of 1961. The three authorities under the

Income-Tax Act-the Income-Tax Officer, the Appellate Assistant Commissioner and

the Appellate Tribunal-are creatures of the Act and have to function thereunder. The

question of the vires of any provision of law, under which they have to function, is

outside the scope of their jurisdiction. As no question of vires of the provisions of

the Act can arise out of the Tribunals' order, the High Court cannot go into such a

question on a reference made by the Tribunal. A writ petition under Article 226 of

the Constitution can, therefore, be considered to be a proper remedy for a petitioner

who seeks to challenge an order by questioning the vires of the provisions under

which the order is made. We may in this context refer to the observations of their

lordships of the Supreme Court in the case of K. S. Venkataraman and Co. (P) Ltd.

v. State of Madras wherein it was held by the majority that an authority created by a

statute cannot question the vires of that statute or any of the provisions thereof

whereunder it functions. It must act under the Act and not outside it. Again in the

case of Car! Still G. m. b. H and another v. The State of Behar and others, it was

held :"that where proceedings are taken before a tribunal under a provision of law,

which is ultra vires, it is open to a party aggrieved thereby to move the court under

Article 226 for issuing appropriate writs for quashing them on the ground that they

are incompetent, without his being obliged to wait until those proceedings run their

full course. "

(8) THE preliminary objection raised by Mr. Kirpal must, therefore be repelled. Of

course so far as the quantum of penalty and the question whether there was

sufficient cause for the petitioners justifying the delay in the filing of the return, are

matters which cannot be gone into these proceedings but would have to be agitated

in the appeal which has been filed by the petitioners before the Appellate Assistant

Commissioner. This position has not been disputed by Mr. Karkhanis on behalf of

the petitioners.

(9) BEFORE dealing with the contentions advanced on behalf of the petitioners, it

would be appropriate to reproduce the relevant provisions of law. Section 22 of Act

of 1922 dealt with the return of income. Sub-section (2) of that section, with which

we are concerned, read as under :-" (2) In the case of any person whose total

income is, in the Income-tax Officer's opinion of such an amount as to render such

person liable to income-tax, the Income-tax Officer may serve a notice upon him

requiring him to furnish, within such period, not being less than thirty days, as may

be specified in the notice, a return in the prescribed form and verified in the

prescribed manner setting forth (along with such other particulars as may be

provided for in the notice) his total income and total world income during the

previous year: Provided that the Income-Tax Officer may "in his discretion extend

the date for the delivery of the return. "

(10) SECTION 23 of the Act made provision for assessment. Section 28 made

provision for penalty, infer aha, for failure to furnish the return within the time

allowed. The operative part of subsection (1) of that section reads as under :-" (1) If

the Income-tax Officer, 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 section 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, or (b)

has without reasonable cause failed to comply with a notice under sub-section (4) of

section 22 or sub-section (2) of section 23, or (c) has concealed the particulars of

his income or deliberately furnished inaccurate particulars of such income,, 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, and in the cases

referred to in clauses (b) and (c), in addition to any tax payable by him, a sum not

exceeding one and a half times the amount of the income-tax and super-tax, if any,

which would have been avoided if the income as returned by such person had been

accepted as the correct income :"

(11) THERE follows as proviso, clause (d) of which reads as under :" (D) when the

person liable to penalty is a registered firm or an unregistered firm which has been

assessed under clause (b), of sub-section (5) of section 23, then, notwithstanding

anything contained in the other provisions of this Act, the amount of incometax and

super-tax payable by the firm itself shall be taken to be an amount equal to the tax

which would have been payable by an unregistered firm on an income equal to the

firm's total income, and, in the cases referred to in clauses (b) and (c),. the amount

of the income-tax and super-tax which would have been avoided if the income as

returned had been accepted as the correct income, shall be taken to be the

difference between the amount of the tax which would have been payable by an

unregistered firm on an income equal to the firm's total income and the amount of

the tax payable by an unregistered firm on an income equal to the income of the

firm as actually returned by the firm. "

(12) SUB-SECTION (6) of the section provides :" (6) The Income-tax Officer shall

not impose any penalty under this section without the previous approval of the

Inspecting Assistant Commissioner. "

(13) IT may be stated that sections 22,23 and 28 in the Act of 1922 are all

contained in one Chapter which comprises sections 18 to 39, and is entitled

"deductions and Assessment. "

(14) IN the act of 1961 chapter 14 provides for procedure for assessment. Section

139, which is contained in that Chapter, deals with the return of income. Subsection

(2) of that section provides :" (2) In the case of any person who, in the

Income-tax Officer's opinion, is assessable under or on the total income of any other

person during the previous year, the Income-tax Officer may, before the end of the

relevant assessment year, serve a notice upon him requiring him to furnish, within

thirty days from the date of service of the notice, a return of his income or the

income of such other person during the previous year, in the prescribed form and

verified in the prescribed manner and setting forth such other particulars as may be

prescribed: Provided that on an application made in the prescribed manner the

Income-tax Officer may, in his discretion, extend the date for the furnishing of the

return, and when the date for furnishing the return, whether fixed originally or on

extension, falls beyond the 30th day of September or, as the case may be, the 31st

day of December of the assessment year, the provisions of sub-clause (iii) of the

provisio to sub-section (1) shall apply. "

(15) SECTION 141 of the Act deals with provisional assessment, section 143 with

regular assessment and section 144 with best judgment assessment. Chapter 21 of

Act of 1961 deals with penalties imposable under the Act and comprises sections

270 to 275 Sub-section (1) and (2) of section 271 of the Act provide (After reading

sub-section (1) and (2) of Section 271, His Lordship proceeded:

(16) ACCORDING to section 275 no order can be passed after the expiration of two

years from the date of the completion of the proceedings in the course of which the

proceedings for imposition of penalty have been commenced. Section 297 of Act of

1961 has a material bearing. Sub-section (1) as well as clauses (a) to (g) of subsection (2) of section 297, with which we are concerned, reads as under :-[after

reading sub-section I and relevant clauses of sub-section (2), His Lordship farther

proceeded as under :]

(17) PLAIN persual of the provisions of clauses (f) and (g) of sub-section (2) of

section 297 shows that where an assessment has been completed before the 1st

day of April, 1962, any proceeding for the imposition of penalty may be initiated and

the penalty imposed under the Act of 1922. Where, however, an assessment is

completed on or after the 1st day of April, 1962, even though it relates to the year

ending on the 31st day of March, 1962, or any earlier year, the proceedings for

imposition of penalty would have to be initiated and the penalty imposed under the

provisions of Act of 1961.

(18) MR. Karkhanis on behalf of the petitioners has urged that as the return of

income was filed by the petitioners before the commencement of Act of 1961,

proceedings for imposition of penalty can only be taken under the Act of 1922 in

accordance with clause (a) of sub-section (2) of section 297. The proceedings about

the imposition of penalty, it is submitted, are a continuation of proceedings of

original assessment order. Reference in this connection is made to the observations

in the case of Commissioner of Income-Tax, Madras v. S. Sivaramakrishna lyer to

the effect that penalty proceedings are merely a continuation of the original

assessment orders. Reference has further been made to the case of C. A. Abraham

v. Income tax Officer, Kottayam, and another wherein it was held by their Lordships

of the Supreme Court that penalty under section 28 of Act of 1922 is the liability to

pay additional tax in view of the dishonest contumacious conduct of the assessee.

Although there can be no dispute so far as the proposition is concerned that penalty

is the liability to pay additional tax for dishonest contumacious conduct of the

assessee, we are unable to accept the contention advanced on behalf of the

petitioners that as the petitioners had filed their return before the coming into force

of the Act of 1961 the proceedings for imposition of penalty can only be under the

Act of 1922. Clause (a) of sub-section (2) of section 297, on which reliance has been

placed on behalf of the petitioners, deals with proceedings for assessment of a

person, while clauses (f) and (g) specifically deal with proceedings for imposition of

penalty. Clause (g) make it clear that if the assessment is completed on or after the

1st day of April, 1962, the proceedings would have to be initiated and the penalty

imposed under the Act of 1951 even though the penalty relates to an assessment

for a year preceding the 1st day of April, 1962. It is a well established rule of the

interpretation of statutes that a general provision must yield to a special provision

providing for particular cases. As clause (g) makes a specific provision for

proceedings for imposition of penalty in respect of assessments completed on or

after the 1st day of April, 1962 no resort, in our opinion, can be made to the

provisions of clause (a ). For the same reason the provisions of clause (c), to which

also reference has been made on behalf of the petitioners, would not be applicable.

(19) WE may at this stage refer to the difference in the provisions of the Act of

1922 and those of Act of 1961 in respect of nonfurnishing or late furnishing of the

return. According to section 28 of Act of 1922 penalty could be imposed by Incometax

Officer, the Appellate Assistant Commissioner or the Appellate Tribunal. In the

case of Income-tax Officer, it was provided that he could impose penalty only with

the previous approval of the Inspecting Assistant Commissioner. In the Act of 1961

the only two authorities, which can take action for imposition of penalty, are the

income-tax Officer and the Appellate Assistant Commissioner. The power, which was

vested in the Appellate Tribunal, has been taken away. The requirement of previous

approval of the Inspecting Assistant commissioner in the case of orders made by

Income-Tax Officer has been dispensed with. Although the Act of 1922 did not

provide any limitation for an order imposing penalty, the Act of 1961 prescribed a

period of two years from the date of completion of proceedings for the purpose. So

far as the quantum of penalty is concerned, the Act of 1922 prescribed that it should

not exceed one and a half times the amount of income-tax and super-tax. The Act

of 1961 fixes it "at a sum equal to two per cent. of the tax for every month during

which the default continued, but not exceeding in the aggregate fifty per cent. of

the tax. "

(20) COMING to the main contention advanced on behalf of the petitioners that

clause (g) of sub-section (2) of section 297 of Act of 1961 is violative of Article 14 of

the Constitution, we may observe that the following principles are now well established

: (1) Article 14 forbids class legislation but does not forbid classification.

Permissible classification must be founded on an intelligible differentia which

distinguishes persons or things that are grouped together from others left out of the

group, and the differentia must have a rational relation to the object sought to be

achieved by the statute in question. (2) In permissible classification mathematical

nicety and perfect equality are not required. Similarity, not identity of treatment, is

enough. (3) There is always a presumption in favour of the constitutionality of an

enactment and the burden is upon him who attacks it to show that there has been a

clear transgression of the constitutional principles. (SEE Ram Krishna Dalmia v. Shri

Justice S. R. Tendolkar and others') (4) If there is equality and uniformity withineach group, the law will not be condemned as discriminative, though due to some

fortuitous circumstances arising out of a peculiar situation some included in a class

get an advantage over others, so long as they are not singled out for special

treatment. Taxation law is not an exception to this doctrine. But in the application f

the principles, the Courts in view of the inherent complexity of fiscal adjustment of

diverse elements, permit a larger discretion to the Legislature in the matter of

classification, so long it adheres to the fundamental principles underlying the said

doctrine. The power of the Legislature to classify is of wide range and flexibility so

that it can adjust its system of taxation in all proper and reasonable ways. (SEE

Khandige Sham Bhat v. Agricultural Income-tax Officer, Kassaragod and another.

(21) KEEPING the above principles in view, we find no violation of Article 14 by

enactment of the provisions of Clause (g) of subsection (2) of section 297 of Act of

1961. As stated above, penalty has to be calculated and imposed according to the

tax assessed and its quantum is linked with the amount of tax. The imposition of

penalty, in the circumstances, must necessarily follow the assessment. The question

of imposition of penalty would thus arise only after the assessment has been

completed. The legislature in clause (f) and (g) has put, for the purpose of

imposition of penalty, cases in which the assessment had been completed before the

coming into force of Act of 1961 under one classification. So far as the former cases

are concerned, it is provided that they would be governed by Act of 1922, while the

latter cases would be governed by Act 1961. The above classification is founded on

an intelligible differentia and has a rational relation to the object sought to be

achieved by the statute in question, and in our opinion it satisfies the conditions of

permissible classification. It cannot be disputed that so far as the cases are

concerned in which assessment was made after the coming into force of Act of 1961

they have been all treated alike.

(22) IN the case of Rao Shiv Bahadur Singh v. State of Vindhya Pradesh it was

observed-". . . . . . . . . . BUT there is no reason why pending proceedings cannot be

treated by the legislature as a class by themselves having regard to the exigencies

of the situation which such pendency itself calls for. There can arise no question as

to such a saving provision infringing Article 14 so long as no scope is left for any

further discrimination inter se as between persons affected by such pending

matters. "

(23) IF pending cases can be treated as a class by themselves, we fail to

understand as to how cases, in which the assessment is completed after the coming

into force of Act of 1961, cannot be treated as a class different from those in which

assessment is completed before the coming into force of that Act. A case more in

point is M/s. Hathishing Manufacturing Co. , Ltd. v. Union of India and another

wherein the constitutional validity of section 25 FFF of Industrial Disputes Act, 1947,

was assailed. According to that section a distinction was made between employers,

who closed their undertakings on or before November 27 (28), 1956, and those,

who close their undertakings after that date. ft was urged that the above provision

was violative of Article 14 of the Constitution. Repelling this contention. Shah,. , who

spoke for the Court, observed-"Article 14 of the Constitution is not violated by

making by law a distinction between employers who closed their undertakings on or

before November 27, (28) 1956, and those who close their undertakings after that

date. The State is undoubtedly prohibited from denying to any person equality

before the law or the equal protection of the laws, but by enacting a law which

applies generally to all persons who come within its ambit as from the date on which

it becomes operative, no discrimination is practiced. When Parliament enacts a law

imposing a liability as flowing from certain transactions prospectively, it evidently

makes a distinction between those transactions which are covered by "act and those

which are not covered by the Act, because they were completed before the date on

which the Act was enacted. This differentiation, however, does not amount to

discrimination, which is liable to be struck down under Article 14. The power of the

legislature to impose civil liability in respect of transactions completed even before

the date on which the Act is enacted does not appear to be restricted. If, as is

conceded-and in our judgment rightly-by a statute imposing civil liability in respect

of post enactment transactions, no discrimination is practised, by a statute which

imposes liability in respect of transaction which have taken place after a date fixed

by the statute, but before its enactment, it cannot be said that discrimination is

practised. Article 14 strikes at discrimination in the application of the laws between

persons similarly circumstanced; it does not strike at a differentiation which may

result by the enactment of a law between transactions governed thereby and those

which are not governed thereby. "

(24) IT is, however, contended on behalf of the petitioners that the above

classification would depend upon the sweet-will of the Income-tax Officer because

an Income-tax Officer may complete assessment in some cases before April 1, 1962

and in other cases after that date. This argument, in our opinion, would not detract

from the validity of the above classification. The Income- tax officers are expected to

dispose of cases with expedition and promptness. If on the facts of a case it is

proved that an Income-tax Officer has deliberately delayed the completion of

assessment proceedings in order to bring the case within the ambit of clause (g),

the assessment itself would be struck down as mala fide. The bare possibility of

some Income-tax Officer deliberately delaying the disposal of a case would not

induce us to hold clause (g) as violative of Article 14 of the Constitution. We,

therefore, reject the contention that clause (g) of sub-section (2) of section 297

contravenes Article 14 of the Constitution.

(25) THE next contention of the petitioners relates to the vires of sub-section (2) of

Section 271 of Act of 1961. It is urged that in the case of assessees other than

registered firms the maximum penalty cannot exceed in the aggregate fifty percent.

of the tax of the assessee, while in the case of registered firms the maximum

penalty is not linked with the tax assessed on the registered firms. On the contrary,

it is provided, the penalty imposable for registered firm shall be the same as would

be imposable on that firm if that firm were an unregistered firm. The registered

firms are thus stated to have been discriminated against, and it is urged that this is

violative of Article 14 of the Constitution. There is no force in the above contention.

It is well established that a firm is a compendious name of the partners constituting

it. For the purpose of Income-tax Act, a registered firm has however, been treated

as an entity liable to tax. Although the legislature has provided a special reduced

rate of tax for the registered firms ,in the matter of penalty the legislature has

directed that the penalty imposable on a registered firm shall be the same amount

as would be imposable on that firm if it were an unregistered firm. We are unable to

subscribe to the view that the above provision contravenes Article 14 of the

Constitution. There can be nothing to prevent the legislature from giving the benefit

of a reduced rate to a registered firm for the purpose of tax but not in the matter of

penalty.

(26) COMING to the last contention advanced on behalf of the petitioner that

Section 271 of Act of 1961 cannot apply to a case like the present, we may observe

that if the section had stood by itself it could have been argued that the provisions

of this section are not strictly applicable to a case like the present because the

section talks of non-compliance with a notice under subsection (2) of section 139 of

Act of 1961 and not of notice under sub-section (2) of section 22 of 1922. The fact,

however, remains that the two provisions are pri materia. Clause (g) of subsection

(2) of section 297 appears to have been enacted with a view to overcome the above

difficulty. To accede to the submission made on behalf of the petitioners would have

the effect of rendering the provisions of clause (g) of sub-section (2) of section 297

of Act of 1961 otiose and nugatory. The contention advanced on behalf of the

petitioners is similar to that advanced in the case of Income-Tax Officer, A-Ward,

Agra, and others v. Firm Madan Mohan Damma Mal and another. The contention

was repelled by Bishambhar Dayal. in following words:-"in this connection another

contention of the learned counsel may be considered. The contention is that on the

words of section 271, failure to file "a return must be under section 139 of the new

Act. Butin the case of a return for previous years before the 1st day of April, 1962,

S. 139 was not applicable. This argument does not appeal to me because section

297 (2) (g) expressly provides that procedure under the new Act will be applicable.

Section 271 of the Act, therefore, although does not apply by its own force but is

made applicable by virtue of section 297 (2) (g) and that being so, section 271 must

be taken to be applicable in spite of its specific language being inapplicable. If the

provisions of section 271 had been applicable by their own force, section 297 (2) (g)

would have been unnecessary. The very purpose of inserting that provision is to

make section 271 applicable when by its own language it does not apply. I,

therefore, see no force in this argument either. "

(27) WE are in respectful agreement with the above observations.

(28) WE are also fortified in the view we have taken in the matter by the decision

of Madhya Pradesh High Court in the case Kishanlal v. Commissioner of Income-Tax,

M. P. The head note of that case, which is based upon the body of the judgment,

reads as under :-"an assessee is liable to penalty under section 271 (1) of the Act of

1961 for defaults referred to in section 28 (1) of the Act of 1922 in respect of any

assessment, for the year ending on March 31, 1961, or any earlier year, which is

completed on or after April 1, 1962. Since section 271 (1) of the Act of 1961 applies

to defaults of an assessee committed before April 1, 1962, the period during which

the default continued in clause (i) of section 271 (1) would include a period prior to

April 1, 1962. "

(29) RELIANCE on behalf of the petitioners has been placed upon two cases-Shakti

Offset Works v. Inspecting Assistant Commissioner of Income-Tax, Nagpur, and

another decided by Nagpur Bench of Bombay High Court, and S. C. Magavi, Haven

v. Commissioner of Income-Tax decided by Mysore High Court, in which a contrary

view was taken. For the reasons stated above, we are unable to agree with the view

expressed by the learned Judges in these two cases.

(30) REFERENCE has also been made on behalf of the petitioners to a case Sheth

Gunvantalal Mangoldas and others v Commissioner of Income-fax, Gujarat decided

by Gujarat High Court. The facts of that case are clearly distinguishable and the

petitioners, in our view, cannot derive any assistance from the above authority. The

said case related to a demand for advance payment under section 18a of Act of

1922 and an order or provisional assessment under section 23b of that act. It was

held in that case that the demand of advance payment of tax under section 18a and

the passing of an order of provisional assessment under section 23b are different

stages in the comprehensive procedure for imposing the tax liability upon the

assessee. Where a notice of demand of advance tax was issued prior to the 1st day

of April. 1962, penalty for non-payment of installment can be imposed only under

Act of 1922.

(31) AS a result of the above, the petition fails and is dismissed, but, in the

circumstances of the case, we leave the parties to bear their own costs.