Madhya Pradesh High Court
Commissioner Of Income-Tax vs Damodardas Murarilal on 19 February, 1996
Equivalent citations: [1996]222ITR401(MP)
JUDGMENT N.K. Jain, J.
1. By this reference under Section 256(1) of the Income-tax Act, 1961 (for short, "the Act"), the Income-tax Appellate Tribunal, Indore Bench, Indore, has referred the following questions of law to this court for its opinion :
"(i) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that in view of Clause (b) of Section 251 of the Income-tax Act, 1961, the first appellate authority had no power of remand and, therefore, the procedural illegality could not be corrected by recourse to remanding the case to the Income-tax Officer ?
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the period of limitation prescribed under Section 275 of the Act could not be extended by an order of remand since in the Explanation three specific conditions have been given under which the period of limitation could be extended ?"
2. The material facts giving rise to this reference, briefly, are as follows :
(1) The assessee is a registered firm. The year of assessment involved is 1980-81. The Income-tax Officer levied penalty of Rs. 24,100 on the assessee under Section 271(1)(c) of the Act, in respect of concealment of income in excess of Rs. 25,000 without the approval of the Inspecting Assistant Commissioner of Income-tax. According to the proviso to Clause (iii) of Sub-section (1) of Section 271 of the Act, if the amount of income, as determined by the Income-tax Officer on assessment, in respect of which the particulars have been concealed, exceeds a sum of Rs. 25,000, the Income-tax Officer shall not issue any direction for payment by way of penalty without the previous approval of the Inspecting Assistant Commissioner. A copy of the order of the Income-tax Officer is marked annexure "A" forming part of the statement of the case.
(II) The assessee went in appeal before the Appellate Assistant Commissioner. He found such order illegal, having been passed without the approval of the Inspecting Assistant Commissioner. He, therefore, cancelled the penalty. A copy of the order of the Appellate Assistant Commissioner is marked annexure "B" forming part of the statement of the case. The Department came in appeal before the Tribunal. The Tribunal agreed with the proposition of law that in proceedings lawfully initiated if there is any procedural illegality, it can be permitted to be corrected at the point at which the illegality supervened. However, the Tribunal held that in view of Clause (b) of Section 251(1) of the Act, the first appellate authority had no power of remand in an appeal against an order imposing a penalty. The Tribunal further held that even if the case was remitted to the Income-tax Officer, he could do nothing since the period of limitation prescribed under Section 275 had already expired and in view of Section 275 of the Act, particularly the Explanation to it, the time taken in the first and second appeals could not be excluded.
3. Now, from the facts found by the Tribunal, it is clear that while the Tribunal agreed with the proposition of law advanced on behalf of the Department that in proceedings lawfully initiated if there is any procedural illegality, it can be permitted to be corrected at the point at which the illegality was discovered, however, the Tribunal could not direct remand of the case to the Income-tax Officer on the following two grounds :
(A) That, in view of Clause (b) of Section 251(1) of the Act, the first appellate authority had no power to remand the case in appeal against an order imposing a penalty ; and (B) That, the Income-tax Officer even after remand could do nothing in the case since the period of limitation prescribed under Section 275 has already expired.
4. Both the points involved in the case stand concluded by the decisions of this court in Prabhudayal Amichand v. CIT [1989] 180 ITR 84 and CIT v. Sardarilal Bhasin [1989] 179 ITR 307. In the case of Prabhudayal Amichand [1989] 180 ITR 84, this court under similar situation has held (headnote) :
"That a procedural irregularity not involving the question of jurisdiction can be cured. The Tribunal was, therefore, justified in directing the Income-tax Officer to pass a fresh order in accordance with law."
5. In the case of Sardarilal Bhasin [1989] 179 ITR 307 (MP), it was held (headnote) :
"The clause 'No order imposing a penalty under this Chapter shall be passed' occurring in Section 275 of the Income-tax Act, 1961, is attached only to the initial penalty order and not to the penalty order passed after the case is remanded by the appellate authority. This position is not affected by the amendments made in Section 275 by the Taxation Laws (Amendment) Act, 1970, or the Taxation Laws (Amendment) Act, 1975."
6. We noticed the undernoted position from the statement of case submitted to this court :
"There is a contrary judgment of the Madhya Pradesh High Court in CIT v. Sardarilal Bhasin [1989] 179 ITR 307, which was not brought to the notice of the Tribunal. A copy of the order of the Tribunal is marked annexure-'C' forming part of the statement of the case."
7. It is thus clear that at a later stage the Tribunal itself realised the infirmity of the order passed by it and referred the questions on application of the Commissioner of Income-tax, Bhopal. Shri Vyas, learned counsel for the applicant, thus submitted that in view of the aforesaid averment and legal position the questions deserve to be answered in favour of the applicant-Department. Shri Nazir Singh, learned counsel for the non-applicant, was unable to urge anything substantially to take a different view from what is taken in the aforesaid two cases and could not dispute the position contained in the statement in the case.
8. In the result, we hold that the Tribunal was not justified in taking the view as reflected by the aforesaid two questions. We, therefore, answer the questions in the negative, i.e., in favour of the applicant-Department and against the non-applicant assessee.
9. The reference application is decided in terms indicated above but without any order as to costs. Counsel fee for each side shall, however, be Rs. 750, if certified.
10. A copy of this order be transmitted to the Tribunal for further action as may be necessary in accordance with law.