JUDGMENT MANCHANDA J. - This is a case stated under section 6(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act). The question referred is :
"Whether it is legal to levy a composite penalty for more than one offence under section 28 of the Act ?"
The material facts are these : the assessee is a Hindu undivided family. The relevant assessment year is 1959-60. The assessee did not comply with the notices under sections 22(2) and 22(4) of the Act and the assessment was completed under section 23(4) of the Act on an income of rs. 45,560 resulting in an assessment and demand of Rs. 13,778. For the default under sections 22(2) and 22(4) of the Ac t, the assessee became liable for penalty under section 28(1)(a) up to the maximum limit of Rs. 20,667, being one and a half times of the amount of tax assessed (i.e., one and a half times of Rs. 13,778).
Apart from the above defaults, the assessee was required by a notice under section 18A(1) of the Act, dated 30th May, 1958, to deposit advance tax in the sum of Rs. 6,907 on the basis of the last completed assessment when the notice was issued. The assessee, however, did not comply with the demand and instead exercised his option by filing his own estimate on the 17th of December, 1958, showing his income at Rs. 15,000 with a tax liability of Rs. 1,042 only. As already noticed, the tax finally determined in the regular assessment was Rs. 13,778. The assessee, therefore, rendered himself liable for penalty under section 18A(9) of the Act for having filed an incorrect estimate of income for purposes of advance tax. The maximum penalty leviable was Rs. 4,576, being one and a half times of the difference between 80% of the tax actually levied and the tax already paid by the assessee.
The Income-tax Officer initiated proceedings under section 28(1)(a) and 18A(9) of the Act for failure to comply with the notice under section 22(2) of the act and also for filing an incorrect estimate of its income under section 18A(2) of the Act, respectively. For this purpose a notice under section 28(3) read with section 18A(9) of the Act was served upon the assessee to show cause why penalties be not levied for defaults under sections 22(2) and 18A(9) of the act read with section 28 of the Act. No explanation was submitted by the assessee. He merely brought to the notice of the Income-tax Officer the fact that he had filed an appeal against the assessment order and, therefore, required the penalty proceedings to be stayed. The Income-tax Officer rejected the prayer for stay and agianst the maximum penalties leviable of Rs. 20,668 under section 28(1)(a) and of Rs. 910 under section 18A(9) of the act imposed a composite penalty of Rs. 6,889 under these two sections. On appeal to the Appellate Assistant Commissioner, no objection seems to have been taken as to the levy of a composite penalty but only on the merits. The Appellate assistant Commissioner, in the circumstances of the case, reduced the penalty by Rs. 1,000. Therefore, the finally determined penalty stood at rs. 5,889 for both the defaults under sections 22(2) and 18A(9) of the Act. The matter was carried in second appeal to the Tribunal and there, for the first time, inter alia, the objection to the levy of a composite penalty was taken. The Tribunal pointed out : "No authority had been cited for th proposition that the levy of a composite penalty for two offences is not permissible under the law. In fact a composite penalty has in this case worked out to the benefit and advantage of the assessee. If separate penalties were imposed upon the assessee for different offences, the quantum of penalties would have been much more and would have been prejudicial to the assessee. We, therefore, find no force in this contention and reject it." Hence, this reference at the instance of the assessee.
Even before us, it is conceded that there is no decision of any court bearing upon the question which has been referred. Therefore,t he matter being res integra it will have to be approached and decided on first impressions. There cannot be must doubt that the levy of a penalty is a part of the assessment proceedings. The Supreme Court has pointed out in C. A. Abraham v. Income-ax Officer, Kottayam, though in a different context, that : "By section 28, the liability to pay additional tax which is designated penalty is imposed in view of the dishonest contumacious conduct of the assessee. It is true that this liability arises only if the Income-tax Officer is satisfied about the existence of the conditions, which give him jurisdiction and the quantum thereof depends on the circumstances of the case. The penalty is not uniform and its imposition depends upon the exercise of discretion by the taxing authorities; but it is imposed as a part of the machinery for assessment of tax liability." Proceeding further, the view of the Chief Justice Subba Rao (as he then was), in Mareddy Krishna Reddi v. Income-tax Officer, Tenal, at page 681-682, was approved. That view was : "Section 28 is one of the sections in Chapter IV. It imposes a penalty for the concealment of income or the improper distribution of profits. The defaults made in furnishing a return of the total income, in complying with a notice under sub-section (4) of section 22 or sub-section (2) of section 23 and in concealing the particulars of income or deliberately furnishing inadequate particulars of such income are penalised under that section. The defaults enumerated therein relate to the process of assessment. Section 28, therefore, is a provision enacted for facilitating the proper assessment of taxable income and can properly be said to apply to an assessment made under Chapter IV." The law laid down by the Supreme Court has been followed by this court in Lal Chand Gopal Das v. Commissioner of Income-tax, where it was held : "From this it seems to follow that there is no essential difference between he tax and the penalty. The liability for payment of both is imposed as a part of the machinery of assessment and the penalty is merely an additional tax imposed in certain circumstances on account of the assessees conduct."
after the aforesaid decision of the Supreme Court, the Madras High court, in A. V. Thomas & Co. (India) Ltd. v. Commissioner of income-tax, would appear to have agreed with the view taken by this court in Lal Chand Gopal Das v. Commissioner of Income-tax and to have held that there was no essential difference between a tax and a penalty, that penalty was merely an additional tax imposed upon the assessee for his contumacious conduct, and that penalty proceedings were not criminal in nature. In support thereof the practice in England and the United States was cited where penalties are civil actions recoverable in a civil court and the normal rules as to pleadings in civil actions apply and the taxpayer is required to furnish the particulars.
Undoubtedly, there still exists a sharp clavier of opinion between various High courts as to whether penalty proceedings are quasi-judicial (sic) in nature and the standard of proof required for the levy of penalty. It is however, unnecessary in these proceedings to attempt to resolve that conflict. Even if it be assumed for the sake of argument that penalty proceedings are quasi-criminal in nature that would not mean that the provisions of the Criminal Procedure Code which required that separate offences in certain circumstances should be separately tried and there should be no joinder of charges, would have application to proceedings under the Income-tax Act. The Income-tax Act is a code by itself and the proceedings have to be conducted in accordance therewith, subject always to the rules of natural justice. Similarly, the provisions of th Indian Evidence Act are also not applicable. The only question, therefore, which would require to be considered is whether penalty proceedings for a default under section 22(2) and for furnishing incorrect estimate of income for the purpose of section 18A(2) could have been considered together and a composite penalty levied ? Penalty proceedings cannot possibly be equated to formal charges under the Penal or the Criminal Procedure Code. The tax file of the assessee is one continuing from year to year and at th time when the Income-tax Officer comes to levy a penalty, it would be asking the impossible of him to treat the two defaults in separate water-tight compartments and to forget what is contained in the file regarding the default under section 22(2) or the previous history of the assessee when levying penalty under section 18A(9) read with section 28 of the Income-tax Act and vice versa. In some cases it may be advisable to take separate proceedings but it cannot be laid down as a matter of law that proceedings for two or more defaults must invariably be taken separately and can never be disposed of by one penalty order. That apart, in the present case, as pointed out by the Income-tax Tribunal, there has been no prejudice whatsoever to the assessee. The maximum penalty leviable for the two defaults was well over Rs. 20,000 and the penalty that was levied was far below that amount. The levy of a composite penalty in these circumstances was not at all prejudicial to the assessee, and, therefore, it is difficult, if not impossible, to say that any principle of natural justice has even been violated in the present case.
For the reasons given above, the question referred is answered in the affirmative and against the assessee. In the circumstances of the case parties are left to bear their own costs. Counsels fee is assessed at Rs. 250. The reference is answered accordingly.