Madhya Pradesh High Court
Commissioner Of Income Tax vs Sardarilal Bhasin on 24 March, 1989
Equivalent citations: [1989]179ITR307(MP)
JUDGMENT
G.G. Sohani, Actg. C.J.
1. By this reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the Income-tax Appellate Tribunal, Jabalpur Bench, Jabalpur, has referred the following question of law to this court for its opinion :
"Whether, on the facts and circumstances of the case, the Tribunal was legally correct in holding that the order of penalty was barred by limitation or unnecessary delay ?"
2. The material facts giving rise to this reference, briefly, are as follows : The assessee derives income from forest contracts. For the assessment year 1964-65, the assessee filed his return of income showing total income of Rs. 4,085. The Income-tax Officer, however, determined the total income of the assessee at Rs. 19,000. The Income-tax Officer also initiated penalty proceedings under Section 271(1)(c) of the Act and as the minimum penalty imposable exceeded Rs. 1,000, the Income-tax Officer referred the case to the Inspecting Assistant Commissioner under Section 274(2) of the Act. On March 2, 1971, the Inspecting Assistant Commissioner passed an order imposing penalty of Rs. 15,000 on the assessee under Section 271(1)(c) of the Act. Aggrieved by that order, the assessee preferred an appeal before the Tribunal. The Tribunal held that the assessee was not given proper opportunity of hearing. In this view of the matter, the Tribunal set aside the order passed by the Inspecting Assistant Commissioner and remanded the case to the Inspecting Assistant Commissioner for deciding the question of levy of penalty afresh on merits, in the light of the order passed by the Tribunal. In pursuance of that order, the Inspecting Assistant Commissioner passed a fresh order on September 22, 1979, imposing penalty on the assessee. Aggrieved by that order, the assessee preferred an appeal before the Tribunal. The Tribunal held that the order imposing penalty should have been passed within two years of March 7, 1969, the date of the assessment order, and that after the period of limitation, the Inspecting Assistant Commissioner was not justified in levying penalty under Section 271(1)(c) of the Act. The Tribunal, therefore, set aside the order imposing penalty and allowed the appeal filed by the assessee. Aggrieved by the order passed by the Tribunal, the Revenue sought reference and it is at the instance of the Revenue that the aforesaid question of law has been referred to this court for its opinion.
3. Now, from the facts found by the Tribunal, it is clear that though the initial order of penalty was passed within the period of limitation prescribed therefor by Section 275, the subsequent order by the Inspecting Assistant Commissioner after the case was remanded by the Tribunal, was undoubtedly passed after the expiry of the period of limitation prescribed by Section 275. The short question for consideration, therefore, is whether the period of limitation prescribed by Section 275 of the Act applies not only to the initial penalty order, but also to the penalty order passed after the case is remanded by the appellate authority.
4. Before we proceed to appreciate the contentions advanced on behalf of the parties, it would be useful to refer to the provisions of Section 275 of the Act which are as under :
"275. No order imposing a penalty under this Chapter shall be passed--,
(a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Inspecting Assistant Commissioner or the Commissioner (Appeals) under Section 246 or an appeal to the Appellate Tribunal under Sub-section (2) of Section 253, after the expiration of a period of-
(i) two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or
(ii) six months from the end of the month in which the order of the Appellate Assistant Commissioner or the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Commissioner, whichever period expires later ;
(b) in any other case, after the expiration of two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed.
Explanation.--In computing the period of limitation for the purposes of this section,--
(i) the time taken in giving an opportunity to the assessee to be reheard under the proviso to Section 129 ;
(ii) any period during which the immunity granted under Section 245H remained in force ; and
(iii) any period during which a proceeding under this Chapter for the levy of penalty is stayed by an order or injunction of any court."
5. On behalf of the assessee, it was contended that in the instant case, Clause (a) of Section 275 of the Act would be attracted. The contention cannot be upheld. Clause (a) is attracted in cases where the relevant assessment or other order which has given rise to imposition of a penalty, is the subject-matter of an appeal. In the instant case, it is not disputed that no appeal had been preferred by the assessee from the order of assessment passed by the Income-tax Officer. Therefore, as held by this court in CIT v. Dr. Manoranjan Mohanty [1988] 171 ITR 95, Clause (b) of Section 275 would be applicable in such a case. The initial order levying penalty was passed by the Inspecting Assistant Commissioner within the time prescribed therefor by Clause (b) of Section 275. It is, however, contended on behalf of the assessee that Clause (b) of Section 275 is attracted when an order imposing penalty, subsequent to remand, is passed.
6. The clause "No order imposing a penalty under this Chapter shall be passed" came up for consideration before the Gujarat High Court in Vasani and Co. v. CIT [1978] 112 ITR 819, where it was observed as follows (p. 822) :
"On a plain reading of this provision where the Legislature had laid down a bar of limitation for imposition of penalty, it is obvious that the term 'no order imposing a penalty under Chapter XXI' would refer prima facie to the initial order or the first order, which would have to be passed by the competent authority. When the Legislature has enacted the provisions providing for appeal or revision where the appellate or revisional authority could interfere with the original imposition of penalty, the very scheme enacted by the Legislature for such appeal or revision would be frustrated if the provision in Section 275 is literally read so that all these appeals, revision and even reference proceedings to this court and even an appeal to the Supreme Court would be governed by this period of two years' limitation."
7. In arriving at the aforesaid conclusion, reliance was placed on the decision of the Bombay High Court in CIT v. Kishoresinh Kalyansinh Solanki [ 1960] 39 ITR 522. It is true that this decision was in the context of section 33B(2)(b) of the Indian Income-tax Act 1922, but in that case also the question for consideration was as to the construction that should be placed on the clause : "No order shall be made under Sub-section (1) after the expiry of two years from the date of the order sought to be revised." The Bombay High Court was of the view that Sub-section (2)(b) of section 33B of the Act would not have the effect of curtailing the appellate powers of the Tribunal under Sub-section (4) and hence it could not be held that a direction to dispose of the case afresh could not be given to the Commissioner by the Appellate Tribunal when the period of limitation prescribed under Sub-section (2)(b) of Section 33B had expired. This decision of the Bombay High Court was affirmed by the Supreme Court in CIT v. National Taj Traders [ 1980] 121 ITR 535. In view of this decision of the Supreme Court, the decisions of some High Courts relied upon by learned counsel for the assessee holding that the bar of limitation provided in Section 275 applies not only to the initial penalty order, but also to a penalty order passed after the case is remanded by the appellate authority cannot, with respect, be held to be the correct view. The decision in Vasani and Co. v. CIT [1978] 112 ITR 819 (Guj) was followed by two Division Benches of this court in Mohd. Shaft Khan v. CWT [ 1983] 144 ITR 489 and CIT v. Dr. Manoranjan Mohanty [1988] 171 ITR 95. Learned counsel for the assessee, however, contended that these decisions require reconsideration in the light of the amendments made in Section 275 by the Taxation Laws (Amendment) Act, 1970, and the Taxation Laws (Amendment) Act, 1975. Reliance was placed on the decision of the Rajasthan High Court in CIT v. Shiv Das Sire Mat [1989] 175 ITR 546. In our opinion, the amendments made in Section 275 of the Act by the Taxation Laws (Amendment) Act, 1970, or the Taxation Laws (Amendment) Act, 1975, would have no impact on the view taken by this court in CIT v. Dr. Manoranjan Mohanty [1988] 171 ITR 95 (MP) and Mohd. Shaft Khan v. CWT [1983] 144. ITR 489 (MP) that the clause "No order imposing a penalty under this Chapter shall be passed" occurring in Section 275, is attracted only to the initial penalty order and not to the penalty order passed after the case is remanded by an appellate authority.
8. Learned counsel for the assessee also contended that there was unnecessary delay in passing the order of penalty subsequent to the remand and hence the penalty order deserved to be set aside. The Tribunal, in the instant case, has not at all applied its mind to the question as to whether the delay was or was not unreasonable. Under the circumstances, it cannot be held that the order of penalty was unnecessarily delayed and hence deserved to be set aside. In our opinion, therefore, the Tribunal was not right in holding that the order of penalty deserved to be set aside stating that it was barred by limitation and was unnecessarily delayed.
9. For all these reasons, our answer to the question referred to this court is in the negative and against the assessee. In the circumstances of the case, parties shall bear their own costs of this reference.