Gauhati High Court
Surendra Prasad Singh And Ors. vs Commissioner Of Income-Tax on 16 June, 1988
Equivalent citations: [1988]173ITR510(GAUHATI)
Author: S.N. Phukan
Bench: S.N. Phukan
ORDER--Scope--Order to charge interest under s. 139 and/or s. 217 cannot be passed in revision--However, direction can be issued to the ITO HELD: No duty is imposed on ITO to charge interest under s. 217. It is open for him to consider if circumstances warrant that he may charge such interest. -Central Provinces Manganese Ore. Co. Ltd. v. CIT (1986) 58 CTR (SC) 112 : (1986) 160 ITR 961 (SC) relied on. Income Tax Act 1961 s.263 Revision under s. 263--ERRONEOUS AND PREJUDICIAL ORDER--Scope--Direction to levey penalty under s. 271(1) and s. 273--Cannot be given HELD: To pass order in such terms may in a given case, be an abuse of power or in the parlance of administrative law, a colourable exercise of power. Such an underqualified direction to the ITO to initiate proceeding to levy penalty cannot be justified. NOTE- When SLP (Civil) Nos. 11391-11392 of 1981 were filed against th eorder in -Addl. CIT v. J.K. D'Costa (1982) 133 ITR 7 (Del), leave was rejected on 2-3-1984 [See (1984) 147 ITR (St) 1]. Income Tax Act 1961 s.263 JUDGMENT A. Raghuvir, C.J.
1. These references were consolidated in the statement of cases. Therefore, we propose to dispose of all the cases in one order.
a. The following two questions have been referred under Sub-section (1) of Section 256 of the Income-tax Act, 1961 :
"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in upholding the orders of the Additional Commissioner of Income-tax under Section 263 of the Income-tax Act, 1961, to the extent of charging of interest under Section 139 and Section 217 of the Income-tax Act, 1961, relating to the assessment years involved in the various appeals ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Additional Commissioner of Income-tax was not justified in setting aside the assessments in order to restore to the Income-tax Officer the right to commence the proceedings of penalty under Sections 271(1)(a), 271(1)(c) and 273 of the Income-tax Act, 1961, which had already become barred by limitation on account of failure of the Income-tax Officer to commence these proceedings within the prescribed time-limit relating to the assessment years as mentioned in the various consolidated orders of the Tribunal ? "
3. The assessment orders in all the cases were finalised on March 14, 1972, for the years 1964-65, 1966-67, 1967-68, 1968-69, 1969-70, 1970-71 and as respects 1965-66, the order was finalised on March 18, 1971. The Additional Commissioner of Income-tax, exercising his power of revision, scrutinised the records to find out whether the orders resulted in the detriment of the interests of the Revenue. In the course of the order, the following points were formulated : "(i) The Income-tax Officer has erred in not initiating penalty proceedings under Section 271(1)(a) for all the seven assessment years and under Section 271(1)(c) of the Income-tax Act, 1961, for all the years except 1965-66 assessment year, (ii) The Income-tax Officer has erred in not initiating penalty proceedings under Section 273 for default of payment of advance tax under Section 212 of the Income-tax Act, 1961, for all the seven assessment years, (iii) The Income-tax Officer has not charged interest under Section 139 for the assessment years 1964-65, 1965-66, 1967-68 and 1968-69 and interest under Section 217 of the Income-tax Act, 1961, for all the seven assessment years ; and (iv) Annuity Deposits have not been charged in respect of the assessment years 1964-65 to 1966-67" and he held "Considering all these defects in the assessment orders, I would hold that the assessments have not been proper in the face of non-initiation of penalty proceedings under Section 271(1)(a) and Section 273 for all the seven assessment years 1964-65 to 1970-71, for non-initiation of penalty proceedings under Section 271(1)(c) for the assessment years 1966-67 to 1970-71 and for non-charging of interest leviable under Section 139 for the assessment years 1964-65, 1965-66, 1967-68 and 1968-69 as also of interest under Section 217 of the Income-tax Act, 1961, for all the seven assessment years. All the assessments are, therefore, set aside with a direction that penalty proceedings should be initiated as directed in respect of the relevant years, proper interest chargeable under Section 139 for the assessment years mentioned and under Section 217 for all the above years should be charged. Besides, charging of additional income-tax in lieu of Annuity Deposits payable should also be verified in respect of the assessment years 1964-65 to 1966-67 ".
4. The assesses assailed the orders in appeal. The Income-tax Appellate Tribunal held--"the order of the Additional Commissioner of Income-tax under Section 263 for the assessment years 1965-66 is cancelled while for the other assessment years, it is upheld only to the extent that directions may be given to the Income-tax Officer for charge of interest under Sections 139 and 217 in accordance with the provisions of the Act and the rules made thereunder". Thereafter, two questions are referred to this court.
5. We may now take the first question. The assessee in this case urged that a direction to charge interest cannot be ordered to the Income-tax Officer, as the decision to charge or not to charge depends on the facts of the case. We see the Additional Commissioner of Income-tax did not, in emphatic terms, order the Income-tax Officer to do so. What was held was that the Income-tax Officer had not waived the interest and " waiver by the Income-tax Officer would be clearly erroneous and prejudicial to the interests of the Revenue on the facts and circumstances of the case ".
6. The Appellate Tribunal, however, made such an error and directed that interest be charged by the Income-tax Officer.
7. The Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. CIT [1986] 160 ITR 961 considered this very aspect and held (p. 968):' " In cases where the jurisdictional fact attracting the levy cannot be disputed, for example, that the return has been furnished under Section 139 with delay, it will be a question merely of satisfying the relevant authority that there are circumstances calling for a reduction or waiver of the interest. If an opportunity to do so has not been made available to the assessee before the order levying interest is made, it will be open to the assessee to apply to the Income-tax Officer after such order has been made to show that a reduction or waiver of interest is justified. We have been referred to the judgment by one of us (Sabya-sachi Mukharji J.) in Premchand Sitanath Roy v. Addl. CIT [1977] 109 ITR 751 (Cal). In that case, the question was a very different one. The question was whether a right of appeal was available in regard to the improper exercise of discretion under Sub-section (8) of Section 139. We think that in holding that no right of appeal lay in such a case, the High Court was plainly right.
As the assessee has made no application to the Income-tax Officer for reduction or waiver of interest under Sub-section (8) of Section 139 or under Section 215, no question arises of the relevant authority having denied improperly a reduction or waiver of the interest and that being so, no revision petition can be maintained in that regard by the assessee before the Commissioner of Income-tax,"
8. Following the above decision, we answer the first question in favour of the Revenue but qualify the answer by saying that the Income-tax Officer is not to understand that a duty is imposed on him to charge interest under Section 217. It is open to him to consider whether the circumstances warrant charge of interest. Therefore, we answer the first question in favour of the Revenue and against the assessee with the above qualification.
9. The next question is regarding levy of penalty under Sections 271(1)(a) and 273 of the Income-tax Act. The order of the Additional Commissioner of Income-tax shows that the Income-tax Officer has not initiated penalty proceedings under Sections 271(1 )(a) and 273 and, therefore, assessments are held vitiated. We experience no hesitation in not sustaining the order. We may add that to pass an order in such terms may, in a given case, be an abuse of power or in the parlance of administrative law, a colourable exercise of power. Such an unqualified direction to the Income-tax Officer to initiate proceedings to levy penalty cannot be justified.
10. The Delhi High Court in CIT v. J. K. D'Costa [1982] 133 ITR 7 held and we quote the long passage which explains itself (p. 11): " Here, we find over selves in complete agreement with the view taken by the Tribunal. It is well established that proceedings for the levy of a penalty, whether under Section 271(1)(a) or under Section 273(b), are proceedings independent of and separate from the assessment proceedings. Though the expression ' assessment' is used in the Act with different meanings in different contexts, so far as Section 263 is concerned, it refers to a particular proceeding that is being considered by the Commissioner and it is not possible, when the Commissioner is dealing with the assessment proceedings and the assessment order, to expand the scope of these proceedings and to view the penalty proceedings also as part of the proceedings which are being sought to be revised by the Commissioner. There is no identity between the assessment proceedings and the penalty proceedings; the latter are separate proceedings that may, in some cases, follow as a consequence of the assessment proceedings. As the Tribunal has pointed out, though it is usual for the Income-tax Officer to record in the assessment order that penalty proceedings are being initiated, this is more a matter of convenience than of legal requirement. All that the law requires, so far as the penalty proceedings are concerned, is that they should be initiated in the course of the proceedings for assessment. It is sufficient if there is some record somewhere, even apart from the assessment order itself, that the Income-tax Officer has recorded his satisfaction that the assessee is guilty of concealment or other default for which penalty action is called for. Indeed, in certain cases, it is possible for the Income-tax Officer to issue a penalty notice or initiate penalty proceedings even long before the assessment is completed though the actual penalty order cannot be passed until the assessment is finalised. We, therefore, agree with the view taken by the Tribunal that the penalty proceedings do not form part of the assessment proceedings and that the failure of the Income-tax Officer to record in the assessment order his satisfaction or the lack of it in regard to the leviability of penalty cannot be said to be a factor vitiating the assessment order in any respect. An assessment cannot be said to be erroneous or prejudicial to the interests of the Revenue because of the failure of the Income-tax Officer to record his opinion about the leviability of penalty in the case. We, therefore, answer the first question referred to us in the affirmative and in favour of the assessee."
11. We are in respectful agreement with the reasoning and conclusion reached by the Delhi High Court. We may add that when S.L.P. (Civil) Nos. 11391-11392 of 1981 were filed against the order in CIT v. J. K. D'Costa [1982] 133 ITR 7, leave was rejected on March 2, 1984--See [1984] 147 ITR (St.) 1.
12. We thus answer the second question in the affirmative and hold that the Additional Commissioner of Income-tax was not justified in setting aside the assessment order. The answer is recorded in favour of the assessee and against the Revenue. No costs.