K.L.Roy, J. - (1.) A series of reported judgments of the Bombay and the Gujarat High Courts and four unreported decisions of this court have in effect been unruled by a very recent decision of the Supreme Court as yet unreported, a copy of which has been supplied to me in the course of hearing of the present petition. In this petition the petitioner challenges the validity of a notice for imposing penalty issued by the respondent, the Income-tax Officer, under Sections 271 and 274 of the Income-tax Act, 1961. The assessment of the petitioner for the assessment year 1960-61 was completed under Section 23(3) of the Income-tax Act, 1922, on 27th February, 1965. Subsequently, a notice dated the 26th February, 1965, under Section 274/271 of the Income-tax Act, 1961, was received by the petitioner to show cause why penalty should not be levied for concealing particulars of income or deliberately furnishing inaccurate particulars of such income in respect of the assessment year 1960-61 and this rule was obtained on the 15th February, 1968.
(2.) The Indian Income-tax Act, 1922, was repealed by Section 297(1) of the Income-tax Act, 1961, which came into operation on 1st April, 1962. Certain saving provisions were made for continuation of proceedings under the repealed Act during the interregnum in Sub-section (2) of the aforesaid section of which the following clauses are material: "(a) where a return of income has been filed before the commencement of this Act by any person for any assessment year, proceedings for the assessment of that person for that year may be taken and continued as if this Act had not been passed; . . . (f) any proceeding for the imposition of a penalty in respect of any assessment completed before the 1st day of April, 1962, may be initiated and any such penalty may be imposed as if this Act had not been passed; (g) any proceeding for the imposition of a penalty in respect of any assessment for the year ending on the 31st day of March, 1962, or any earlier year, which is completed on or after the 1st day of April, 1962, may be initiated and any such penalty may be imposed under this Act;..." The provisions for penalty in the new Act are contained in Chapter XXI. Section 271(1) which provides that, if the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act is satisfied that any person has without reasonable cause failed to furnish the return of total income as required under Section 139 or has without reasonable cause failed to comply with the notices under Section 142 or Section 143 or has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty--certain amounts are provided for--in each of the aforesaid cases of default according to certain percentages of the income that might have escaped assessment. Section 274 provides that no penalty should be, imposed without giving the assessee an opportunity of being heard, while Section 275 provides a period of limitation of two years from the date of completion of the assessment proceedings for imposing penalty. The corresponding provisions in the repealed Act are in Section 28, more or less similar to the provisions in the aforesaid Sections 271 and 274, the substantial difference being that there was no bar of limitation in imposing a penalty, and that there was also a prohibition against prosecution where penalty has been imposed under the provisions of the section in the repealed Act.
(3.) Two contentions were raised by Dr. Pal on behalf of the petitioner in this court, viz., (1) that the provisions of Section 297(2)(g) were ultra vires being violative of Article 14 of the Constitution, and (2) that, in any event, even assuming that the 1961 Act was applicable, no penalty could be imposed under Section 271 as the Income-tax Officer could not have been satisfied that there had been any non-disclosure by the assessee in the course of any proceedings under that Act. Reliance was placed by Dr. Pal on a decision of the Bombay High Court in Shakti Offset Works v. Inspecting Assistant Commissioner of Income-tax, [1967] 64 I.T.R. 637 (Bom) where both the aforesaid, contentions of Dr. Pal have been upheld. In other words, the Bombay High Court held in that case that Section 297(2)(g) was ultra vires the Constitution and also that no penalty could be imposed under Section 271 where proceedings for assessment were taken under the repealed Act. So far as the second contention of Dr. Pal is concerned there are two decisions of the Gujarat High Court upholding that contention. On the other hand, there are two decisions of the Madhya Pradesh High Court and a decision of the Allahabad High Court which have held that the provisions of Section 297(2)(g) were intra vires the Constitution and that penalty proceedings could be initiated under Section 271 of the new Act even in cases where the assessment had been made under the provisions of the repealed Act. In three unreported decisions of this court in Narendra Sharma v. Income-tax Officer, Since, In re Sardarmull Kankaria (unreported) and In re Bansidar Durgadutt (unreported) T.K. Basu J., while expressing no opinion on the constitutional validity of Section 297(2)(g), had accepted the second contention of Dr. Pal, viz., that no penalty proceedings could be initiated under Section 271 of the 1961 Act, where the assessment had been made under the provisions of the repealed Act of 1922. I am told that P. K. Banerji J. has also followed the aforesaid decision of T. K. Basu J.;