Kerala High Court
Commissioner Of Income Tax vs M.A. Unneerikutty on 19 December, 1997
Equivalent citations: (1998)149CTR(KER)43
ORDER P.A. MOHAMMED, J.
The question of law referred to us for decision at the instance of the CIT, Cochin, is as follows .
"Whether, on the facts and in the circumstances of the case, the order of imposition of penalty by the IAC was invalid and without jurisdiction?"
The assessment for the year 1972-73 involved in this case was completed on 23rd Aug., 1975 determining the total income of the assessee at Rs. 6,97,330 which includes addition of amount of income from undisclosed sources representing unaccounted purchases of copra. The AO initiated penalty proceedings under s. 271(1)(c) of the IT Act, 1961. Since the minimum penalty leviable exceeded Rs. 25,000 the officer referred the case to the IAC. Accordingly by order dt. 26th July, 1979 the IAC imposed penalty of Rs. 3,25,845 under s. 271(1)(c) of the Act. The assessee contended in the appeal that the order of penalty passed by the IAC on 26th July, 1979 was invalid inasmuch as the said order was passed after the amendment made to the IT Act w.e.f. 1st April, 1976. The Tribunal relying on the decision of a Full Bench of this Court in CIT vs. P1 Issac & Ors. (1988) 67 CTR (Ker) 200: (1987) (2) KLT 429 : (1987) 168 ITR 793 (Ker) : 5 held that the order passed by the IAC levying penalty was passed without jurisdiction. It is against the said decision this reference has been made.
2. The Full Bench in P1 Issac's case (supra) observed as follows :
"As noticed earlier in this judgment, s. 271(1) of the IT Act confers jurisdiction on the ITO to impose penalty on satisfaction of the conditions mentioned in sub-cls. (a), (b) or (c). Sec. 274(2) of the Act had invested the IAC with the power of the ITO to impose penalty in cases mentioned therein. The jurisdiction of the IAC under s. 274(2) was only that of the ITO under s. 271(1) of the Act. By deletion of sub-s. (2) of s. 274 by the Taxation Laws (Amendment) Act, 1975, the IAC is divested of the jurisdiction of the ITO under s. 271(1) of the Act and on such divestiture the IAC ceased to have jurisdiction to proceed under s. 271 of the Act. After the amendment that came into force on 1st April, 1976 the authorities competent to impose penalty are those mentioned in s. 271 of the Act. The change of forum is a matter of procedure and the Amendment Act is retrospective in regard also to matters pending before the IAC. "
However, counsel for the Revenue relied on the decision of the Supreme Court in CIT vs. Smt. R. Sharadanima (1996) 133 CTR (SC) 136: (1996) 219 1TR 671 (SC) .. 4. In the, above decision the Supreme Court held that once the IAC was thus seized of the matter, he did not lose seizin thereof on account of the deletion of sub-s. (2) of s. 274 by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1st April, 1976. The 1AC did not lose the jurisdiction to continue with the proceedings pending before him on 31st March, 1976. He was entitled to continue with those proceedings and pass appropriate orders according to law. Therefore, counsel further contended that the order of imposition of penalty by the 1AC was without (sic) jurisdiction.
3. The counsel for the assessee submitted that the assessment for the year 1972-73 was completed on 23rd Aug., 1975 and the deletion of sub-s. (2) of s. 274 by the Taxation Laws (Amendment) Act 1975 was w.e.f. 1st April, 1976. It is further pointed out that the order levying penalty under s. 271(1)(c) was passed only on 26th July, 1979. Therefore, the case of the assessee.is that the burden is on the Revenue to establish that the IAC has jurisdiction at the time when the penalty was imposed, that is to say, on 26th July, 1979. In this context, counsel for the assessee placed reliance on the decision of a Full Bench of this Court in CIT vs. Late S.M. Mohammed (1995) 128 CTR (Ker) (FB) 172 : (1995) 216 ITR 331 (Ker) (FB) 9. As against this submission counsel for the Revenue submitted that the question involved in Syed Mohammed's case (supra) was only whether there was a valid reference by the ITO under s. 274(2) to the IAC.
4. In view of the submissions made by the counsel on both sides, we feel that an important question of law arises for decision in this case for being dealt with by a larger Bench. We, therefore, adjourn the case for being heard by a larger Bench. Place the papers before the Honourable the Chief Justice for orders.
P. SHAAMGAM, J. :
5. 1 have gone through the order of reference. In my view the issue is settled and covered.
6. The following question is referred for our decision "Whether, on the facts and in the circumstances of the case, the order of imposition of penalty by the 1AC was invalid and without jurisdiction".
7. Briefly stated, the facts are as follows : The assessment for the asst. yr. 197273 was completed on 23rd Aug., 1975. This included addition on account of income from undisclosed sources. The AO also initiated penalty proceedings under s. 271(1)(c) of the IT Act, 1961. As the minimum penalty exceeded Rs. 25,000, the AO referred the case to the IAC for disposal. The IAC by his order dt. 26th July, 1979 imposed the penalty of Rs. 3,25,845. The assessee challenged the penalty in appeal contending that the order of penalty passed by the 1AC on 26th July, 1979 was bad in law since the said order was passed after the amendment made to the IT Act w.e.f. 1st April, 1976. The Tribunal following the Full Bench decision in CIT vs. P1 Issac & Ors. (1988) 67 CTR (Ker) (FB) 200 : (1986) 168 ITR 793 (Ker) (FB) : 5 quashed the order of imposition of penalty as null and void. Hence the reference.
8. The question that arises for consideration is whether the IAC had jurisdiction to pass an order subsequent to 1st April, 1976. Sub-s. (2) of s. 274 was deleted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1st April, 1976. After the amendment, the AO was empowered to levy penalty in cases of concealment irrespective of the quantum of penalty or concealed income, subject, however, to the limitation provided under s. 271(1)(iii) to the effect that the prior approval of the IAC has to be obtained by the AO where the concealed income exceeds Rs. 25,000. Whereas under the law as it stood before the amendment, the AO has to refer the case to the IAC for imposing penalty. Therefore, the question that arises for consideration is whether it is open to the 1AC to impose penalty even after lst April, 1976.
9. In this case, on facts it is seen that the assessment was completed on 23rd Aug., 1975 and the AO had also initiated penalty proceedings. The assessee did not contend that the penalty proceedings were not initiated immediately or in any event before 1st April, 1976 From the statement of facts it is seen that the assessee had contended that the IAC's order was bad because the said order was passed after the amendment. Before the Tribunal, the assessee had submitted that the order of the IAC was bad in law since it came to be passed after the amendment and it was further pleaded that even if initiation was earlier to lst April, 1976, the IAC had no jurisdiction to pass the penalty order after 1st April, 1976. The penultimate paragraph of Tribunal's order states that referring to the Full Bench judgment in Issac's case (supra) it is stated that in Issac's case also the matter was referred to the IAC in 1975 and it was the IAC who had jurisdiction to levy the penalty. From the statement of facts and the order of the Tribunal it is beyond any doubt that the initiation of penalty proceedings was made prior to Ist April, 1976 and it was pending before the LA.C at the time mihen the amendment came into force. On this point, it has to be remembered that the moment the AO passes an order for initiating the penalty proceedings, the proceedings stand initiated. This is the view taken by the Full Bench in CIT vs. Mohinder Lal (1987) 61 CTR (PM) (FB) 154: (1987) 168 1TR 101 (PM) (FB) : 2. The Full Bench held that reference under s. 274(2) of the Act is only administerial act. The IAC will continue to have the jurisdiction in the matters which were then pending before him. The Patria High Court in CIT vs. Ganga Dayal Sarlu Prasad (1985) 48 CTR. (Pat) 113: (1985) 155 ITR 618 (Pat) .. 8. held that the jurisdiction of the IAC to deal with the matter of penalty is to be looked at as on the date of initiation of proceedings and not with reference to subsequent events.
10. On the factual position that the assessment was completed on 23rd Aug., 1975 and the penalty proceedings was also initiated by the AO and the fact that it was initiated prior to 1st April, 1976, was never disputed before the authorities, inasmuch as the assessee had not raised any question on the initiation of penalty proceedings. This Court has to proceed on the facts and circumstances as found by the Tribunal and cannot be called upon to go into the question of fact as held by the settled position of law.
11. On the basis of series of decisions, the settled position regarding the finding of fact, the learned authors Kanga and Palkhivala in their "Law and Practice of Income Tax", Eighth Edri., at P. 1547 have stated as follows ..
"Court cannot go behind Tribunal's findings of fact-Specific question necessary to challenge a finding of fact. The duty to find facts is on the Tribunal. It is the final fact-finding authority under this Act. It is for the Tribunal to find facts and it is for the Court to lay down the law applicable to the facts found. The Court has no jurisdiction to go behind or to question statements of fact made by the Tribunal in its appellate order or the statement of the case, unless there is no evidence to support them or the Tribunal has misdirected itself in law. Further, the Court cannot disturb or go behind any finding of fact given by the Tribunal even on the ground that there is no evidence to support it, unless it has been first expressly challenged by a question raised in the reference application under s. 256(1) other Tribunal (though this rule does not apply to a finding on a mixed question of fact and law). (See under s. 258, "Need to reconsider decisions on Court's jurisdiction in income-tax references"). An applicant cannot raise in the Court an issue of fact which ought to have been raised before the Tribunal".
12. The assessee had not raised the issue that reference was made subsequent to Ist April, 1976. They have not sought for a reference on this question. It is settled law that no question can be referred to the High Court unless it arises out of the order of the Tribunal. In C1T vs. Scindia Steam Naidgation Co. Ltd. (1961) 42 ITR 589 (S0 : and Harish vs. CIT (1981) 21 CTR (Raj) 104 : (1981) 132 ITR 806 (Raj), the Supreme Court held by majority in the earlier case reviewing the conflicting case law on the point as follows :
"(a) a question of law can be said to arise out of the Tribunal's order only if it is dealt with by the Tribunal or is raised before though not decided by the Tribunal.
(b) a question of law not raised before the Tribunal and not dealt with by it in its order cannot be said to arise out of its order even if, on the facts of the case stated in the order, the question fairly arises".
13. On the legal question it is seen that the Tribunal has followed the Full Bench decision in CIT vs. P.1 Isaac & Ors. (Supra). The said Full Bench laid down that after the Taxation Law (Amendment) Act of 1975, which came into force as on 1st April, 1976, the authorities competent to impose penalty are those mentioned in s. 271. The change of forum is a matter of procedure and the Amendment Act is retrospective in regard also to matters pending before the IAC. The Full Bench mainly followed the reasoning of the Division Bench of the Orissa High Court in CIT vs. Dhadi Sahu (1976) 105 ITR 56 (Ori) : 9 in support of their conclusion in preference to the view of the Division Bench of this Court in CIT vs. Varkey Chacko (1981) 21 CTR (Ker) 334 : (1981) 136 1TR 733 (Ker) .. 6. On appeal against the Orissa High Court's decision in the CIT vs. Dhadi Sahu (supra), Supreme Court reversed it in W vs. Dhadi Sahu (1992) 108 CTR (SQ) 444..(1993) 199 1TR 610 (SQ: 3.
Similarly the Supreme Court confirmed the decision of Varkey Chacko vs. C.IT (1994) 114 CTR (SC) 207 : (1993) 203 ITR 885 (S0 2. The controversy has now been settled by the above two decisions of the Supreme Court.
14. In a subsequent decision of the Supreme Court in CIT vs. Smt. R. Sharadamma (1996) 133 CTR (SQ) 136 .. (1996) 219 ITR 671 (SQ) : 4 the Supreme Court reiterated and applied Dhadi Sahus case (supra) and held that once the IAC was thus seized of the matter, he did not lose seizin thereof on account of the deletion of s. 274(2) by the Taxation Laws (Amendment) Act, 1975. He will continue with the proceedings pending before him on 31st March, 1976. He was entitled to continue with those proceedings and pass appropriate orders according to law. The Supreme Court also approved the view that it is also true that no litigant has any vested right in the matter of procedural law but, where the question is of change of forum, it ceases to be a question of procedure only. The forum of appeal or proceedings is a vested right as opposed to pure procedure to be followed before a particular forum. The right becomes vested when the proceedings are initiated in the Tribunal or the Court of first instance and, unless the legislature has, by express words or by necessary implication, clearly so indicated, that vested right will continue in .spite of the change of jurisdiction of the different Tribunals or forums.
The Supreme Court in Ramesh Singh vs. Cinta DeO (1996) 3 SCC 142 has held as follows-
"In our ~iew, the point at issue stands squarely covered by three decisions of this Court reported in Hoosein Kasam Dada (India) Ltd vs. State of M.P. 1953 SCR 987, State of Bombay vs. Supreme General Films Exchange Ltd. (1960) 3 SCR 640 and Vitthalbhai Naranbhai Patel vs. CST AIR 1967 SC 344. In all these decisions the view taken is that unless the new Act expressly or by necessary implication makes the provision applicable retrospectively, the right to appeal will crystallise in the appellant on the institution of the application in the Tribunal of first instance and that vested right of appeal would not be dislodged by the enactment of the New AcC.
A Full Bench in CIT vs. late S.M. Syed Mohammed (1995) 128 CTR (Ker) (FB) 172 : (1995) 216 ITR 331 (Ker)(FB) 9 was concerned with the question whether the Full bench in CIT vs. Isaac (Supra) is impliedly overruled by the Supreme Court decision in CIT vs. Dhadi Sahu (supra). By majority, the Fun Bench declined to answer the question on the ground that the validity of reference was not an issue in the earlier Full Bench. However, the majority took the view that if the reference was valid then initiation was also valid.
15.~ In the light of the law laid down by the Supreme Court in CIT vs. Dhadi Sahu (supra) and CIT vs. Stnt. R. Sharadamma (supra) referred earlier, there is no scope for holding that the IAC has no jurisdiction. The Tribunal had taken the view that though the reference was made in the year 1975 still the IAC has no jurisdiction. This is clearly contrary to the law laid down by the Supreme Court in three judgments referred above. In the above circumstances 1 have no hesitation to hold that the order of IAC was valid and he had the jurisdiction to pass the order of penalty.
However, is since my learned Brother has taken the view that an important question of law arises for decision, I do not wint to differ on that view and hence 1 agree.
OPEN