P.C. Balakrishna Menon, J.
1. The Income-tax Appellate Tribunal, Cochin Bench, has referred the following question as arising out of I.T.A. Nos. 460 and 461 of 1977-78 :
'Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that there was no minimum penalty statutorily imposable in terms of Section 140A of the Income-tax Act, 1961, in the present case for the assessment year 1975-76?'
2. The Tribunal has referred the following two questions as arising out of I.T.A. Nos. 650 and 651 of 1977-78 :
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was no statutory minimum penalty imposable in the present case for the assessment year 1975-76? And
(2) If the answer to question No. 1 is in the negative, whether the Tribunal was right in holding that there was no mistake which the Appellate Assistant Commissioner could rectify as a mistake apparent from the record?'
3. The sole question referred as arising out of I.T.A. Nos. 460 and 461 of 1977-78 and question No. 1 arising out of I.T.A. Nos. 650 and 651 of 1977-78 are the same. If the answer to these questions is in the affirmative, question No. 2 in the latter reference does not arise.
4. These references relate to the assessment year 1975-76 with respect to two assessees, one a firm and the other a partner of the firm. I.T.R. Nos. 356 and 357 of 1980 relate to the firm and I.T.R. Nos. 358 and 359 of 1980 relate to the partner. The firm submitted its return for the accounting year ending on August 16, 1974 (Malayalam year 1149), on January 28, 1976, disclosing an income of Rs. 1,85,840. The balance tax payable after adjusting advance tax paid as per the return was Rs. 26,662. The tax as per the return on self-assessment was not paid within the period of thirty days as required by Section 140A of the Income-tax Act as it stood on the date on which the return was filed. The Income-tax Officer by his order dated February 5, 1977, imposed a penalty of Rs. 4,000 for the default in compliance with the requirements of Section 140A and for the continuing default until payment was made on issue of notice to the assessee. In appeal, at the instance of the assessee, the Appellate Assistant Commissioner by his order dated June 30, 1977, found that there was no wilful default on the part of the assessee and hence reduced the penalty to Rs. 1,000. The Income-tax Officer by his letter dated September 6, 1977, informed the Appellate Assistant Commissioner that he had overlooked the amended provision of Section 140A in imposing penalty for default of payment of tax on self-assessment and, hence, it is necessary to rectify his order and enhance the penalty. The Appellate Assistant Commissioner treating this letter as an application under Section 154 of the Act, rejected the same on the ground that the mistake, if any, pointed out by the Income-tax Officer cannot be treated as an error apparent on the face of the record. In two separate appeals at the instance of the Revenue, the Appellate Tribunal confirmed the orders of the Appellate Assistant Commissioner. The Tribunal has taken the view that the default, even though a continuing one, cannot be equated to a default under the amended provision of Section 140A. In that view of the matter, the Tribunal further held that the question of rectification does not arise and even if it arises, taking a different view on the interpretation of the amended provision of Section 140A, it cannot be considered as an error apparent on the face of the record, capable of rectification under Section 154 of the Act.
5. The partner of the firm filed a return for the same assessment year on February 22, 1976, as per which the balance tax payable by him was Rs. 9,937. The balance tax due on self-assessment was not paid within thirty days after the filing of the return as required by Section 140A as it stood at the relevant time. As in the case of the firm, the balance tax was paid promptly after a notice proposing penalty proceedings was received by the partner. The Income-tax Officer imposed a penalty of Rs. 1,500 for the default in making the payment within thirty days after the filing of the return and for the continuing default thereafter. In appeal, the Appellate Assistant Commissioner by his order dated June 30, 1977, reduced the penalty to Rs. 500. There was an application by the Income-tax Officer for rectification and enhancement as required by the amended provision of Section 140A. The Appellate Assistant Commissioner, on the same view as he had expressed in the connected case relating to the firm, dismissed the application as not falling within the scope of Section 154 of the Act. In two separate appeals by the Department, the Income-tax Appellate Tribunal confirmed the decision of the Appellate Assistant Commissioner.
6. Sub-sections (1) and (3) of Section 140A of the Income-tax Act as they stood on the date on which the return was filed are extracted below :
'140A. Self-assessment.--(1) Where a return has been furnished under Section 139 and the tax payable on the basis of that return as reduced by any tax already paid under any provision of this Act exceeds five hundred rupees, the assessee shall pay the tax so payable within thirty days of furnishing the return...
(3) If any assessee fails to pay the tax or any part thereof in accordance with the provisions of Sub-section (1), he shall, unless a regular assessment under Section 143 or Section 144 has been made before the expiry of the thirty days referred to in that sub-section, be liable, by way of penalty, to pay such amount as the Income-tax Officer may direct, and in the case of a continuing failure, such further amount or amounts as the Income-tax Officer may, from time to time, direct, so, however, that the total amount of penalty does not exceed fifty per cent. of the amount of such tax or part, as the case may be :
Provided that before levying any such penalty, the assessee shall be given a reasonable opportunity of being heard.'
7. Section 140A was amended by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976. The amended Sub-sections (1) and (3) of Section 140A are extracted below :
'140A. (1) Where any tax is payable on the basis of any return required to be furnished under Section 139 or Section 148, after taking into account the amount of tax, if any, already paid under any provision of this Act, the assessee shall be liable to pay such tax before furnishing the return and the return shall be accompanied by proof of payment of such tax...
(3) If any assessee fails to pay the tax or any part thereof in accordance with the provisions of Sub-section (1), the Income-tax Officer may direct that a sum equal to two per cent. of such tax or part thereof, as the case may be, shall be recovered from him by way of penalty for every month during which the default continues :
Provided that before levying any such penalty, the assessee shall be given a reasonable opportunity of being heard.'
8. There cannot be any doubt that the default in payment of tax within thirty days after the filing of the return was a continuing default on the date on which the amendment as per the Taxation Laws (Amendment.) Act, 1975, came into force. The default continued until actual payment was made on receipt of notice of penalty proceedings. The defaults in respect of which the assessee is liable to penalty are not the same under Section 140A(1) as it stood prior to the amendment on April 1, 1976, and thereafter. The requirement of Sub-section (1) prior to its amendment was the payment of the tax due as per the return within thirty days after the filing of the return. Sub-section (1), as amended, requires the tax to be paid prior to the filing of the return and proof of such payment to be furnished along with the return. Under the amended Sub-section (3), penalty at the rate specified therein is to be imposed for the default of compliance with the requirement of the amended Sub-section (1). There was no such requirement prior to the amendment and it cannot be said that the assessee in these cases had committed default of compliance to the amended provision of Sub-section (1) of Section 140A. Sub-section (3) did not, prior to its amendment, prescribe any fixed penalty and the imposition of penalty at the relevant time was within the discretion of the Income-tax Officer. It is open to the appellate authority to reduce the penalty especially in a case like this where it has been found that the default was not wilful.
9. Counsel for the Revenue relies on the decision of a Full Bench of this court in Saidit Muhammad v. Bhanukuttan [1967] KLT 947, in support of his proposition that the assesses are liable to penalty under the amended provisions of Section 140A of the Income-tax Act. The Full Bench decision related to the default in payment of profession tax. The Travancore-Cochin Panchayats Act provided for the recovery of arrears of tax by resort to the Revenue Recovery Act. It did not, however, provide any other mode of recovery, nor did the act make non-payment an offence. The Travancore-Cochin Panchayats Act was repealed by the Kerala Panchayats Act, 1960, as per which wilful omission for payment of tax was made a punishable offence. Raman Nayar J. (as he then was) stated on behalf of himself and Sadasivan J. at page 953 :
'An omission to do a thing is, by its very nature, a continuing act and it continues so long as the obligation to do the thing lasts--this is recognised by the proviso to Section 119 of the Act as also by Section 117 of the Act which fixes the starting point for limitation for a prosecution (as for a distrait or suit) for non-payment of dues as the date when the proceedings might first have been commenced, not as the date of the commission of the offence. Unless, therefore, the offence is the omission to do the thing by a particular time, the act constituting the offence continues to be done so long as the obligation to do the thing continues. In this particular case, it is no longer disputed that the obligation to pay the tax subsists. Therefore, the omission to pay it, which began when the tax first became due, has continued up to now.'
10. The offence charged in that case was of a continuing nature subsisting even after the Kerala Act had come into force. True, there was only a default and not an offence under the repealed Travancore-Cochin Act; but the default that continued after the commencement of the Kerala Act was an offence under the later Act and it is, in that context, the Full Bench had expressed the above view with respect to a continuing offence. The passage cited above has no application to the present case. The ingredients of a default under Section 140A as it stood prior to the amendment in 1976 and after the amendment are totally different. May be that the default continues even after the amendment; but such a default is not one in respect of which a penalty as contemplated by the amended Sub-section (3) of Section 140A can be imposed.
11. Counsel for the Revenue relies also on the decision of the Supreme Court in Maya Rani Punj v. CIT : [1986]157ITR330(SC) . In that case, the assessee had filed the return seven months after the due date as required by the Indian Income-tax Act, 1922. The 1922 Act was repealed by the Income-tax Act, 1961, which came into force on April 1, 1962, during the pendency of the assessment proceedings. The question arose whether the penalty for default in submitting the return within the time fixed should be imposed under Section 28 of the repealed Indian Income-tax Act, 1922, or under Section 271(1)(a) of the 1961 Act. The Supreme Court held that the penalty proceedings are not necessarily a continuation of the assessment proceedings and the scheme of Sections 274(1) and 275 of the Act was that the order imposing penalty must be made after the completion of the assessment. Counsel relies on the following observations of the Supreme Court (at page 341) :
'The imposition of penalty not confined to the first default but with reference to the continued default is obviously on the footing that non-compliance with the obligation of making a return is an infraction as long as the default continued. Without sanction of law, no penalty is imposable with reference to the defaulting conduct. The position that penalty is imposable not only for the first default but as long as the default continues and such penalty is to be calculated at a prescribed rate on monthly basis is indicative of the legislative intention in unmistakable terms that as long as the assessee does not comply with the requirements of law, he continues to be guilty of the infraction and exposes himself to the penalty provided by law.'
12. The Supreme Court in that case relied on the express provisions of section 297(2)(g) of the 1961 Act, under which any proceedings for imposition of penalty in respect of any assessment for the year ending on the 31 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 the 1961 Act. That apart, the observations of the Supreme Court quoted above have no application to the facts of the present case. The default that can be dealt with under Sub-section (3) of Section 140A, after its amendment, as per the Taxation Laws (Amendment) Act, 1975, is different from the default contemplated in Sub-section (1) prior to its amendment.
13. We are, therefore, clearly of the view that the default of compliance with the requirements of Sub-section (1) of Section 140A of the Income-tax Act as it stood prior to its amendment even though a continuing default is not the same as a default under Sub-section (1) after its amendment dealt with under the amended provisions of Sub-section (3).
14. Counsel for the assessee has placed considerable reliance on the decision of a Division Bench of this court in CWT v. Smt. V. Pathummabi : [1977]108ITR689(Ker) , wherein it is stated at page 693 :
'Whether an act or omission is an offence or not should be determined with reference to the state of affairs that obtained at the time of the commission of the act or at the time the omission took place. This had been succinctly stated by Sir Lionel Leach, Chief Justice of Madras, in the decision in Commissioner of Income-tax v. Vedlapatla Veera Venkataramiah : [1943]11ITR308(Mad) and in the Full Bench decision of this court in Commissioner of Income-tax v. K. Ahamed : [1974]95ITR599(Ker) , we stated the same principle and also referred to the decision in Commissioner of Income-tax v. Vedlapatla Veera Venkataramiah : [1943]11ITR308(Mad) with approval. So, the normal rule is that an amendment which took effect subsequent to an act or omission should not be applied for punishing or penalising the person who committed the act or was guilty of the omission.'
15. The default, in the present case, was the failure to pay the tax on self-assessment within thirty days after the filing of the return, and that was a continuing default until the payment was actually made. The default as contemplated by amended Section 140A(1) is of a different nature as the sub-section requires payment prior to the filing of the return and supported by proof of such payment. The amended Sub-section (3) deals with only default of compliance of the requirements of the amended Sub-section (1) and cannot be resorted to for a default of a different nature as has happened in the present case.
16. We, therefore, answer the question arising out of I.T.A. Nos. 460 and 461 of 1977-78 in the affirmative, i.e., in favour of the assessee and against the Revenue. Question No. 1 in I.T.A. Nos. 650 and 651 of 1977-78 is covered by our answer to the above question and, in that view of the matter, question No. 2 does not arise for decision in these references.
17. A copy of this judgment under the seal of the court and the signature of the Registrar will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.