SOHANI J. - By this reference under s. 27(1) of the W.T. Act, 1957, hereinafter called the Act, the Income-tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the eight penalties for the Wealth-tax assessment years 1957-58 to 1964-65 by holding that the law governing these penalties will be as contained in section 18(1)(a) before its amendment by the Wealth-tax (Amendment) Act, 1964 (Act 46 of 1964) w.e.f. April 1, 1965, which required the prior approval of the Inspecting Assistant Commissioner of Wealth-tax before the Wealth-tax Officer could impose a penalty and not the provisions of section 18(1)(a) as amended by the Finance Act, 1969 ?'
The material facts giving rise to this reference, as set out in the statement of the case, briefly are as follows : By an order dated December 15, 1971, the WTO imposed a penalty on the assessee for default in submitting the returns for the assessment years 1957-58 to 1964-65. The assessee preferred appeals before the AAC, but those appeals were dismissed. The assessee then preferred further appeals before the Tribunal, and it was contended on behalf of the assessee that the order of penalty was passed by the WTO without obtaining the prior approval of the IAC aDBIC a requirement prescribed by sub-s. (4) of s. 18 of the Act, which was in force on the date when the alleged defaults were committed. On behalf of the Department, it was contended before the Tribunal that the provision, regarding the prior approval of the IAC to be obtained before imposing a penalty, was removed by an amendment to s. 18 by the W.T. (Amend.) Act, 1964 (Act 46 of 1964), which came into force with effect from April 1, 1965. The Tribunal, however, upheld the contention advanced on behalf of the assessee and quashed the order of penalty. At the instance of the Department, the Tribunal has referred the aforesaid question of law to this court.
Before we appreciate the contention advanced on behalf of the Department, it would be useful to refer to the necessary provisions of the Act. Prior to the amendment of s. 18 with effect from April 1, 1965, sub-s. (4) of that section provided as follows :
'(4) The Wealth-tax Officer shall not impose any penalty under this section without the previous approval of the Inspecting Assistant Commissioner of Wealth-tax.'
The aforesaid provision was deleted by the amending Act No. 46 of 1964, which came into force from April 1, 1965. The orders of assessment were passed by the WTO on December 19, 1969, when notice was directed to be issued to the assessee under s. 18(1)(a) of the Act, the impugned orders imposing penalty were passed by the WTO on December 15, 1971. On December 19, 1969, when notice under s. 18(1)(a) of the Act was issued by the WTO or on December 15, 1971, when penalty was imposed, the requirement about obtaining the prior approval of the IAC before passing an order imposing penalty had been dispensed with. The short question for consideration, therefore is whether the Tribunal was justified in holding that the order of penalty passed by the WTO was vitiated on account of failure to obtain the previous approval of the IAC before passing an order imposing the penalty.
It is now well settled that in the case of a penalty, it is the law operating on the date on which the wrongful act is committed that determines the penalty (see (Brij Mohan v. CIT : [1979]120ITR1(SC) . There can, therefore, be no manner of doubt that the question as to whether the act complained of amounts to a wrongful act, for which a penalty is provided, would be governed by the law in force on the date when the wrongful act is alleged to have been committed. But then the further question for consideration is whether the forum where the aforesaid question is to be tried and the manner in which that question is to be tried are matters which are to be determined in accordance with the law in force on the date when the wrongful act is alleged to have been committed. Now, it is well settled, as observed by the Supreme Court in Kapur Chand Pokhraj v. State of Bombay : 1958CriLJ1558 , that there is an essential distinction between an offence and the prosecution for an offence. The former forms part of the substantive law and the latter of procedural law. The following passage in Maxwells Interpretation of Statutes has been quoted with approval by the Supreme Court 9p. 464 of 9 STC) :
'Although to make a law punish that which, at the time when it was done, was not punishable is contrary to sound principle, a law which merely alters the procedure may, with perfect propriety, be made applicable to past as well as future transactions.'
The provision for obtaining approval of the IAC before passing an order imposing penalty is procedural and the Tribunal, in our opinion, was not justified, in holding that the old s. 18(4) of the Act would govern the procedure even after a repeal of that provision. The Tribunal. In our opinion, was also not justified in holding that there was a vested right in an assessee to have his case considered by the IAC prior to the passing of an order imposing penalty by the WTO. The Andhra Pradesh High Court has held in CWT v. K. Butchaiah : [1977]108ITR324(AP) that the provisions of old s. 18(4) of the Act did not confer any vested right on the assessee. We are in respectful agreement with that view. On the date, when the order imposing the penalty was passed by the WTO, there was no provision of law requiring him to obtain the prior approval of the IAC. The Tribunal, in our opinion, was not justified in holding that that the order of imposition of penalty passed by the WTO was vitiated as the previous approval of the IAC was not obtained.
For all these reasons, our answer to the question referred to us is in the negative and against the assessee. In the circumstances of the case, parties shall bear their own costs of this reference.