Income Tax Appellate Tribunal - Gauhati
Kamal Kr. Saharia vs Income-Tax Officer on 1 January, 1800
Equivalent citations: [1991]39ITD301(GAU)
ORDER
Egbert Singh, Accountant Member
1. The appeal is by the assessee contending that the learned CIT (Appeals) erred in not setting aside the penalty order as passed by the Assessing Officer under Section 271(1)(c) of the Income-tax Act, 1961, by which a penalty of Rs. 1,80,000 was imposed.
2. The case of the assessee is that considering the fact that the decision of the Tribunal have been referred to the Hon'ble High Court in respect of certain questions of law, the CIT (Appeals) should have set aside the penalty order with a direction to the Assessing Officer to take fresh evidence and even otherwise the penalty was not imposable and was bad in law and on facts and the same should have have been cancelled.
3. The Assessing Officer passed an order on 23-8-1989 under Section 271(1)(c), as according to him the assessee had concealed the particulars of income by way of furnishing inaccurate particulars of such income. He initiated proceedings under Section 271 (1)(c) accordingly. The assessee submitted written submission requesting the Assessing Officer to keep the proceedings under Section 271 (1)(c) in abeyance till disposal of the appeal filed before the CIT (Appeals). The Assessing Officer pointed out that the learned CIT(A) vide its order dated 25 -10-1985 deleted the entire addition made in the assessment amounting to Rs. 3,43,014. He noted that in further appeal before the Tribunal vide order dated 18-1-1989 in appeal No. 508 (Gau.) of 1986, the order of the learned CIT (Appeals) was reversed and the original assessment order passed under Section 143(3) was restored. He noted that the said amount of Rs. 3,43,014 was retained as income from undisclosed sources. The Assessing Officer gave the assessee further opportunity to submit any explanation. The assessee could comply and furnished a written explanation objecting to the proposed penalty. The Assessing Officer found no strong argument against imposition of penalty. He reproduced the assessee's explanation which was considered by him in the penalty order to come to the conclusion that the said amount was the assessee's income from undisclosed sources which was shown in the books of account and which was the concealed income of the assessee. The penalty order was passed and the minimum penalty was shown at Rs. 1,76,160 and the maximum was at Rs. 3,52,320. He imposed a penalty of Rs. 1,80,000 in round figure.
4. The assessee took up the matter before the learned CIT (Appeals) contending that the penalty order under Section 271(1)(c) was premature if Section 275 read with Section 254(2) was taken into consideration. The assessee's learned counsel referred to a decision in the case of CIT v. Bansi Dhar & Sons [1986] 157 ITR 665 as decided by the Hon'ble Supreme Court to the proposition that once a reference under Section 256(1) of the Income-tax Act is made by the Tribunal to the Hon'ble High Court for adjudication, the order of the Appellate Tribunal was still remained pending and was not final and the Income-tax Officer ought to have waited for the final order of the Tribunal, which in turn could have been passed only after the disposal of the reference before the Hon'ble High Court. It was, therefore, contended before the learned CIT (Appeals) that on the basis of the interim order passed by the Appellate Tribunal, the ITO was not competent to impose a penalty under the circumstances as envisaged by Section 275.
5. The learned CIT (Appeals) considered the submissions in order to see whether this situation is contemplated under Section 275. He noted that Section 275(a) provides that if an appeal has been preferred under Section 253 before the Tribunal, the penalty proceedings shall be kept pending and to dispose of within 6 months after receipt of the Appellate Tribunal's order by the CIT. According to the CIT (Appeals), once an order under Section 254 has been passed and it is sent to the CIT from the date of receipt of such order by the CIT, the Assessing Officer gets time of 6 months for disposal of the penalty matters. He, therefore, concluded that once the order has been received by the CIT from the Tribunal, the limitation starts running and not when the final order under Section 260 is received by the CIT which is not contemplated under Section 265.
6. In view of the above reasoning, the learned CIT (Appeals) was of the view that the order of the Assessing Officer was not premature and was within the spirit of Section 275 and, therefore, the argument of the assessee's learned counsel was rejected.
7. The learned CIT (Appeals) has also looked into the merits of the matter on the basis of which he found that there was justification for imposition of the penalty although a relief of Rs. 3,840 was allowed as deduction. Hence this appeal by the assessee.
8. It is vehemently urged by the assessee's learned counsel before us that the learned CIT (Appeals) went wrong in not appreciating the decision and the principle enunciated in the case of Bansi Dhar & Sons (supra). It is reiterated before us that once the Tribunal pass an order under Section 254(1), such order is final and binding on all concerned. It is reiterated also that once a reference under Section 256(1) is made in respect of a particular point to the Hon'ble High Court, the finality of that order of the Tribunal cannot be said to be in existence as the provisions of those sections are clear. The ratio and the facts as brought out in the case of Bansi Dhar & Sons (supra) are highlighted before us to support the contention of the assessee that in the circumstances of the case, the order of penalty imposed by the Assessing Officer for the alleged concealment, was premature as the issue has been taken up in a reference before the Hon'ble High Court and a statement of the case has already been drawn up in R.A. No. 68 (Gau.) of 1989 for the assessment year 1982-83. Copy of the statement of the case dated 17-11-1989 has been placed in the paper-book on behalf of the assessee in order to emphasis that once a reference is made, the appeal before the Tribunal should be taken to be pending on the basis of which the Tribunal would have jurisdiction to pass consequential order in conformity with the opinion expressed by the Hon'ble High Court on that point.
9. From the statement of the case, it is seen that the modified question as appearing at para 2 of the said statement has been referred. The same is reproduced below for ready reference:
Has not the learned Appellate Tribunal committed an error on solely basing its judgment on book adjustment entries made on 31-3-1982 after the close of the previous year to find out the financial position of that year, when the payments were actually and really made on or after 2-4-1982 on the encashment of the cheque as found by the lower appellate authority and thereby confirming the addition of Rs. 3,43,014 without any corroborative evidence in the hands of the Department that the payments were made on or before 31-3-1982?
It is, therefore, urged that in view of the decision in the case of Bansi Dhar & Sons (supra) and other subsequent decisions of other High Courts, the learned CIT (Appeals) went wrong in declining to accept the contention of the assessee that penalty order was premature in view of the provisions of law in that respect and he should have at least set aside the matter to the Assessing Officer for taking fresh evidence for fresh disposal. It has been emphasised before us that as per Section 275, the ITO shall keep the penalty proceedings pending till disposal of the connected appeal before the Appellate Tribunal and thereafter within 6 months of receipt of such order by the CIT, the ITO should pass an order of penalty under Section 271 (1) (c). The CIT (Appeals) has given a finding that the Assessing Officer has done just that. In other words, the Assessing Officer passed the penalty order after the Appellate Tribunal had disposed of the quantum appeal for this subject-matter. But the case of the assessee is that in the present situation, a reference at the instance of the assessee has been made to the Hon'ble High Court under Section 256(1), which by itself would make the order of the Appellate Tribunal not final and in such a situation, the appeal will have to be treated as pending before the Appellate Tribunal, so that consequential orders in conformity with the opinion of the Hon'ble High Court could be passed by the Appellate Tribunal. In this connection, it will be helpful to refer to a decision of the Hon'ble Allahabad High Court in the case of S.P. Kochhar v. ITO [1984] 145 ITR 255 in which the decision of the Appellate Tribunal vis a vis that of the AAC was dealt with. Amongst other things, it was noted that the word 'thereon' is significant inasmuch as it restricts the jurisdiction of the Tribunal to the subject-matter of appeal and such additional ground as may be admitted before the Tribunal. In the case of Paul Mathews & Co. v. ITO [1984] 148 ITR 629, the Hon'ble Kerala High Court on the facts of that case dealt with an order of the Tribunal passed under Section 254 in which the finality of such order was dealt with. In that decision it was held that reference to the High Court from the order of the Tribunal would not effect the finality of order passed by the Tribunal. It was observed that the Tribunal in passing order in conformity with the decision of the Hon'ble High Court under Section 260 was an order under Section 254 by reviving the appeal. It was observed on the facts of that case that the original appeal to the Tribunal cannot be deemed to be pending till order is passed under Section 260.
10. As far as the finality of the decision of the Tribunal is concerned, the Hon'ble Supreme Court in the case of CIT v. Rao Thakur Narayan Singh [1965] 56 ITR 234, has held on the facts of that case that the order of the Tribunal having become final, the finding of the Tribunal even though by mistake, the officer cannot initiate reassessment proceedings in respect of certain issues and the decision of the Tribunal was binding on the ITO on the point. It was further observed that if that was not the legal position, it would result in placing an unrestricted power of revenue in the hands of the ITO to go behind the findings given by a hierarchy of the Tribunal and even those of the High Court and the Supreme Court with the changing moods. In other words, once the order of the Tribunal is disposed of and the same is final, the same is binding on all concerned.
11. In the case of K.P. Abdul Kareem Hajee v. ITO [1983] 141 ITR 120, the Hon'ble Kerala High Court on the facts of that case held that the judicial and quasi-judicial authority is not final for the purpose of resjudicata during the time allowed for filing of an appeal or during the pendency of an appeal and in the absence of any statutory provision to the contrary or an interim stay granted by a competent authority, the order, although not final, is provisionally executable, subject to restoration. The issue in that case was regarding payment of the dues and adjustment of certain amounts seized vis a vis the tax liability. The assessment was made by the ITO in which addition was effected which order was passed by the AAC. It was noted that when the order of the AAC was finally set aside by the Tribunal and thereby affirming the order of the ITO, the finality of the order of the ITO was affirmed and, therefore, the party concerned was liable to pay interest during such period. This view was followed by the Hon'ble Kerala High Court in the case of Mohammed Essa Moosa Sait v. GTO [1987] 167 ITR 338.
12. In the case of V. Ramaswamy v. CIT [1960] 40 ITR 377, the Hon'ble Madras High Court had the occasion to deal with the jurisdiction of the AAC which was not confined to the subject-matter of appeal before him vis-a-vis the jurisdiction of the Tribunal by way of appeal in which the same principle cannot apply. It was observed that the jurisdiction of the Tribunal should be governed by the subject-matter of the appeal. The subject-matter of the appeal before us, amongst other things, is against the order of the CIT (Appeals) declining to concede the assessee's contention that the matter of imposition of penalty should have been set aside to the ITO for keeping it pending till the disposal of the reference made at the instance of the assessee before the Hon'ble High Court which is still pending. Of course, as held by the Hon'ble Supreme Court in the case of Bhopal Sugar Industries Ltd. v. ITO [1960] 40 ITR 618, the ITO is bound virtually by the order of the Tribunal and his refusal to carry out any direction given by the Tribunal was in effect a denial of justice and it was not open to the Judicial Commissioner to hold that the order was wrong. It was held in that case that as the ITO had failed to carry out the legal duty there was a failure which was destructive of a basic principle of justice. This was in connection with the writ petition pending before the Court.
13. A similar view was expressed by the Hon'ble Madhya Pradesh High Court in the case of Govindram Seksaria Charity Trust v. ITO [1987] 168 ITR 387, in which amongst other things, it was held that it may be that the revenue was aggrieved by the order passed by the Tribunal, but the ITO cannot assume jurisdiction to assess the assessee afresh by holding that the order of the Tribunal was not accepted by the revenue. It was held by the Hon'ble High Court that till the order of the Tribunal was set aside, the revenue is bound by the order of the Tribunal.
14. In the case of R.K. Sawhney, Executor of the Estate of Late R.B. Nathu Ram v. CIT [1987] 166 ITR 128, on the facts of that case, the Hon'ble Delhi High Court noted that the Tribunal passed the order that the assessment was only irregular and remand the case for fresh assessment. But there was no reference in respect of that order and, therefore, the order of the Tribunal had become final and when the fresh assessment was made, an appeal came up before the Tribunal afresh, the earlier decision of the Tribunal was binding on the Tribunal at the subsequent stage. It was held that since the order of the Tribunal was final under Section 254(4) as the matter had not been pursued and there was no reference from that order and to permit the assessee to raise the contention once again would offend the rule of finality of judicial proceedings.
15. As noted earlier, the assessee has placed heavy reliance on the decision in the case of Bansi Dhar & Sons (supra). In that decision, the Hon'ble Supreme Court has had the occasion to deal with the various situations and various decisions of the Hon'ble Supreme Court as well as of other High Courts as could be seen from the judgment. In brief, it may be stated that in the case of Bansi Dhar & Sons (supra), the decision rendered in the case of Tata Iron & Steel Co. Ltd. [1923] 50 IA 212 (PC) was followed. It was observed amongst other things that an appeal is kept pending before the Appellate Tribunal until the High Court or the Supreme Court answers the question referred to it and the appellate jurisdiction is retained by the Tribunal to dispose of the appeal in accordance with the above expressed opinion or answer by the High Court or by the Supreme Court. It was pointed out that the jurisdiction exercised by the High Courts is purely advisory and it is not that of a civil court or re visional jurisdiction. It is, thus, observed that since in a reference under the Income-tax Act, the courts merely exercise a advisory and consultative jurisdiction, while the appeals are kept pending before the Tribunal and nothing should be implied as detracting from the jurisdiction of the Tribunal. It was pointed out there that the power to grant stay is incidental and ancillary to the appellate jurisdiction and what is true of the appellate jurisdiction cannot, be predicted of the advisory or consultative jurisdiction. Amongst other things, it was observed by the Hon'ble Supreme Court that in an appropriate case, if the assessee feels that a stay of recovery pending disposal of the reference is necessary or is in the interest or justice, then the assessee is entitled to apply before the Appellate Tribunal to grant a stay until disposal of the reference by the Hon'ble High Court and until such time as the appellate authority thought fit.
16. In the case of Bansidar & Sons (supra), the earlier decision in the case of ITO v. M.K. Mohammed Kunhi [1969] 71 ITR 815 (SC) was considered. It was noted at page 675 (bottom) that the Income-tax Appellate Tribunal was not a court but exercise judicial powers. At page 682, it was observed by the Hon'ble High Court on the facts of that case that the concept of granting stay in a reference exhebit to justitiae as that concept might arise from the case of the appellate authority exercising power to grant stay where there is no express provision as this principle is to ex debito justitiae between the parties. It was, therefore, held that High Courts has no inherent power or incidental power in a matter of reference pending before it to grant stay of realisation or to grant injunction as the same remain with the jurisdiction of the appellate authority and the pendency of reference would not detract from the jurisdiction of the appellate authority.
17. In an other situation in the case of Puran Mal Kauntia v. ITO [1975] 98 ITR 39, the Hon'ble Patna High Court on. the foots of that case dealt with the issue in a writ petition matter. It is seen that an appeal to the Tribunal against the order of the AAC, the assessee applied to the Tribunal to stay of further proceedings before the AAC pending disposal of appeal before the Tribunal. In that Patna case, the Tribunal rejected the application on the ground that it did not have the power to grant stay order. The Hon'ble High Court held that the Tribunal has implied power to order the stay in a proper case and that the view taken by the Tribunal that it had no power to grant stay is erroneous and in that decision the Hon'ble High Court has considered (lie decision of the Hon'ble Supreme Court in the case of M.K.Mohammed Kunhi (supra) in which amongst other things, it was observed that the Income-tax Act does empower the Appellate Tribunal to regulate its own procedure, but it is doubtful if the power of stay can be spelt out from that provision. It was noted that the Tribunal must be held to have the power to grant stay as incidental or ancillary to its appellate jurisdiction and that it impliedly grants the power of doing all such acts, or employing such means, as are essentially necessary to its execution and that the statutory powers carries with it the duty in proper case to make such orders for staying proceedings as will prevent the appeal if successful from being rendered nugatory.
18. It would be helpful if we consider the decision in the case of Ritz Lid. v. D.D. Vyas [1990] 185 ITR 311 (Bom.), in which a similar situation has arisen. The facts of the Bombay case were that the assessment for the assessment years 1965-66 to 1967-68 etc. were completed earlier under Section 148/143(3)/] 44B of the Income-tax Act. The re-assessments were challenged on the ground that the same were beyond time limit. The CIT (Appeals) held that the same were not barred by observing that certain procedural irregularities were committed. The learned CIT (Appeals) set aside the assessments with the direction to the ITO to make fresh assessments after following certain procedures. The order of the learned CIT (Appeals) was confirmed by the Tribunal. The assessee applied to the Tribunal to stay of the reassessment proceedings till disposal of the reference by the Hon'ble High Court which was rejected by the Tribunal. The assessee took up in a writ petition to the Hon'ble High Court to quash the order of the Tribunal. It was held that the Tribunal had rejected the application on merits and that the assessment, years involved were 1965-66 to 1967-68 and 1969-70 and 1970-71 and if the reassessments were not completed now, it. would be very difficult, if not impossible, for the department to complete the assessments in accordance with the principles of natural justice, assuming the references were answered in its favour. The Hon'ble High Court considered the balance of convenience which was found to be in favour of the revenue. It was held that the Tribunal was, therefore, justified in not granting the stay of the reassessment proceedings. In this judgment, the Hon'ble High Court considered the decision in the case of Bansi Dhar & Sons (supra) and it was observed that it can now be taken as settled law that the Tribunal continues to have all powers necessary to make the right of appeal effective during the pendency of an appeal as also after the appeal is disposed of and reference is pending before the High Court.
19. Thus, from the brief narration of the different facts of the case and the different circumstances as could be ascertained from the facts of the present case before us, it is admitted that in respect of the quantum appeal for the same assessment year i.e. 1982-83, the Appellate Tribunal has sustained the additions made in the assessment order and certain question of law relating to that addition, was made before the Hon'ble High Court under Section 256(1), at the instance of the assessee. Considering the decision in the case of Bansi Dhar & Sons (supra) and other decisions, it can now be said that it is a settled law that the Tribunal continues to have all powers necessary to make the right of appeal effective from the pendency of a reference before the Hon'ble High Court. In the present case before us, a question of law had already been referred as indicated earlier in the preceding paragraph. The assessee's case is that, in such a situation the appeal before the Tribunal though disposed of by it vide its order mentioned earlier, has not become final as such in view of Section 256(1) under which a statement of the case has already been sent to the Hon'ble High Court at the instance of the assessee, the Appellate Tribunal still have the jurisdiction as if the appeal is pending before it and still possess inherent powers to give directions. In the present case before us, there is no petition or prayer from the assessee's side for stay of the recovery in respect of the tax relating to the quantum which is the subject-matter of the reference as mentioned earlier under Section 256(1). In the case of Ritz Ltd. (supra), the Hon'ble High Court has held that the Tribunal considering the ratio in the decision in the case of Bansi Dhar & Sons (supra) has taken the view that the Appellate Tribunal still possess the jurisdiction and inherent powers to give directions to stay of reassessment proceedings also which was set aside by it vide its earlier order on the point.
20. In the instant case before us, the contention of the assessee for stay of proceedings relate to the penalty matters under Section 271(1)(c) which has been disposed of by the Assessing Officer after the Tribunal has passed the order on the quantum appeal on the basis of which the penalty order was passed and agitated before the CIT (Appeals) and is now presently before the Tribunal. It can be said that the penalty proceedings are quasi-judicial proceedings and are different from the assessment proceedings which are governed by different procedural requirements. But it is seen that the ingredients of the penalty order in the present case are inter-linked and have a riexus with the findings given in the quantum matters. In view of the decision in the case of Bansi Dhar & Sons (supra), it can be said that the Tribunal has inherent powers to slay the proceedings of the reassessment as well as of penalty proceedings which are pending before the authorities below. In the present case before us, it can be seen that there is no pending proceedings before the Assessing Officer or before the learned CIT (Appeals). By way of repetition, the case of the assessee is that when the vital issue is in reference under Section 256(1) which has been allowed and is pending before the Hon'ble High Court, the order of the Tribunal has not become final, in such a situation the provisions of Section 275 would come in for consideration, in other words, the Assessing Officer could not have passed such order as it was done in the present case, as, in fact, such penalty order under Section 271 (1)(c) could be passed only after the Tribunal passes an order and six months time is added to the limitation period.
21. Thus, having regard to the entirety of the facts of the case and the rival contentions of both the sides, we sustain the contention of the assessee on this point keeping in view the decision in the case of BansiDhar & Sons (supra) which was considered by the Hon'ble Bombay High Court in the case of Ritz Ltd. (supra). But the matter does not end here as the issue is regarding a penalty matter as to whether the imposition of penalty on the facts of the case was justified. In that context, certain evidences, witnesses and other materials would have to be taken into account. True, the findings in the assessment are good evidence but they are not conclusive. In other words, more evidence etc. may have to be taken into account. In such a situation, if the penalty proceedings are stayed at some stage or the other, it could be done afresh only after a lapse of number of years till reference is disposed of finally by the Tribunal as provided under Section 260(1), it would then be difficult for either of the parties to marshal the facts, evidences, materials etc., before a penalty matter is disposed of. True, the law has provided fixed limitation period within which penally matters should be passed with a clear intention that such matters should not be kept pending for long. If disposal of an appeal particularly of penalty matters is kept pending, it would not be in the interest of administration of justice.
22. As mentioned earlier, a penalty proceeding and assessment proceedings are two separate proceedings in contents as well as in procedure. Section 275 of the Income-tax Act, 1961. deals with the time limit for passing penalty orders and not of assessment orders. It has been stated that no order of penalty under that Chapter shall be passed after the expiration of a period, as mentioned in the sub-clauses including the expended period of 6 months from the end of the month in which the order of the Tribunal was received by the Government. This section puts a limit within which penalty matters would have to be finalised. After expiration of the limitation period, no penalty order could be passed in law. Of course the initial limitation within which such order could be passed is limited only to the initial order which could be passed within the time prescribed, but such limitation would not apply to cases where such order was passed in pursuance to a direction or order passed by the Tribunal or superior authorities. In this connection, a reference may be made in the case of CIT v. National Taj Traders [1980] 121 ITR 535 (SC). As indicated above, the penalty proceedings and assessment proceedings are separate in nature. It would be helpful to refer to a decision of the Hon'ble Calcutta High Court in the case of Sikri & Co. (P.) Ltd. v. CIT [1977] 106 ITR 682 in which amongst other things and on the facts of that case it was held by the Hon'ble High Court that Section 275 provides a special period of time for completion of penalty proceedings. The provision for separate appeals is also a pointer to the conclusion that the assessment proceedings and the penalty proceedings are different. It was further held that it cannot be contended that the two proceedings should be completed simultaneously or that if penalty proceedings are not concluded before the assessment, the assessment could not be concluded thereafter. As indicated in the preceding paragraph, the Tribunal has disposed of the quantum matter which has become a subject-matter of reference under Section 256(1) on the basis of which it has been repeatedly urged on behalf of the assessee that the Tribunal in such a situation retains its appellate jurisdiction to enable it to pass a conformable order under Section 260(1) as and when such reference is disposed of by the Hon'ble High Court or the Hon'ble Supreme Court in course of lime in view of the decision in the case of Bansi Dhar & Sons (supra). But in the present case before us, as indicated earlier, the penalty order would have to be passed within the limitation period which was admittedly done in the present case as found by the learned CIT (Appeals). The case of the assessee is that the extended period should be implemented here, so that the benefits of answer which might be given by the Hon'ble High Court in a reference relating to the quantum appeal could be known at a later stage. In the instant case, the penalty order was passed by the ITO on 23-8-1989. The learned CIT (Appeals) has given a finding that the ITO has passed this penalty order after the order of the Tribunal in the quantum appeal was considered. It was thereafter that is on 17-11-1989 that a reference in the quantum appeal as stated earlier was referred. Again, as stated, the findings in the quantum matters would be a good evidence and materials for consideration while dealing with the penalty matters, but such finding cannot be treated as conclusive. For such proposition, there are various authorities which we need not mention here. It would be also not correct to say that penalty can automatically be imposed or finalised mainly on the result of the quantum proceedings.
23. Thus, from any angle we may look at, it would not be appropriate to set aside the order of penalty passed by the ITO in the present case on the ground that such penalty order was premature although at the time of passing of such order, the Assessing Officer was justified in doing so keeping in view the provisions of Section 275. This contention is being raised only after the reference being made. Having regard to the entirety of the facts and circumstances of the case, the penalty order on the ground urged by the assessee cannot be said to be premature to enable us to set aside the same for fresh disposal after reference in the quantum matters has been disposed of. Thus, this part of the contention raised on behalf of the assessee cannot be conceded. Thus, this part of the order of the learned CIT (Appeals) on this point is sustained.
24. But it is open to the assessee, if so advised, to approach the appropriate authorities for staying of recovery of the tax or penalty levied in the circumstances of the case, as could be found justified.
25. In the circumstances, the appeal which is dealt with by us on legal aspects will have to be re-fixed for hearing the point in respect of other grounds of appeal taken by the assessee on merits, as announced at the time of hearing.
26. The Assistant Registrar, will fix the case early.