Patna High Court
Commissioner Of Income-Tax vs Dewan Kunj Lal Kanhaiya Lal on 9 November, 1985
Equivalent citations: [1987]164ITR284(PATNA)
JUDGMENT Nazir Ahmad, J.
1. A statement of the case has been submitted by the Income-tax Appellate Tribunal, Patna Bench "A", Patna (hereinafter referred to as "the Tribunal"), referring the following question of law under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act "), for the opinion of this court:
"Whether, on the facts and in the circumstances of the case, the Tribunal had rightly cancelled the penalty of Rs. 1,108 under Section 271(1)(a) of the Income-tax Act, 1961 ?"
2. From the statement of facts as stated by the Commissioner of Income-tax, Bihar, Patna, it appears that for the assessment year 1970-71, the due date for filing the return was September 30, 1970, but the assessee filed the return on August 10, 1971, and thus there was a delay in filing the return. The Income-tax Officer, therefore, initiated proceedings under Section 271(1)(a) of the Act before completion of the assessment. A notice under Section 274 read with Section 271(1)(a) of the Act was issued on December 10, 1971, which was served on the assessee on December 14, 1971, as mentioned by the Income-tax Officer in the penalty order at page 1 of the paper book. However, the assessment year was not mentioned in the said notice by inadvertence. This omission was removed by issuing a subsequent notice on March 12, 1974, which was served on the assessee on March 14, 1974. The case was fixed for hearing ultimately on March 20, 1974. The assessee failed to make any compliance and so the Income-tax Officer held that it was a fit case for imposition of penalty for late filing of the return and he imposed penalty of Rs. 1,108 under Section 271(1)(a) of the Act.
3. The assessee appealed before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held that the penalty leviable would be Rs. 930 and not Rs. 1,108 as levied by the Income-tax Officer. He, therefore, reduced the penalty but upheld the imposition of penalty by the Income-tax Officer. Before the Appellate Assistant Commissioner, the assessee also pleaded that sufficient time was not allowed for hearing as the second notice was served on March 14, 1974, fixing the hearing on March 20, 1974. The Appellate Assistant Commissioner held that the assessee was at Ranchi and the case did not involve considerable time for preparation and appearance before the Income-tax Officer and so he held that adequate time was allowed to the assessee to file show cause. The assessee also pleaded reasonable cause before the Appellate Assistant Commissioner but he did not accept the plea of reasonable cause as pleaded by the assessee.
4. The assessee appealed before the Tribunal. The Tribunal only considered the notice issued on December 10, 1971, and served on December 14, 1971, and, as in that notice, the assessment year was not mentioned, the Tribunal held that it was a serious defect in the notice and so the notice was defective and so the penalty proceedings carried on thereafter were invalid. The Tribunal, therefore, cancelled the penalty order of the Income-tax Officer.
5. Mr. B.P. Rajgarhia, the learned advocate for the Revenue, has submitted that the Tribunal ignored the second notice which was served on the assessee on March 14, 1974, in which the assessment year was mentioned. He has also submitted that the satisfaction of the Income-tax Officer was recorded in the assessment order and the notice could be issued subsequently and that the initiation of the penalty proceeding was not by issue of the first notice.
6. In this case, nobody has appeared on behalf of the assessee and so only Mr. B. P. Rajgarhia has been heard on behalf of the Revenue.
7. It cannot be doubted that the first notice issued on December 10, 1971, and served on December 14, 1971, was a defective notice. However, when the second notice was issued on March 12, 1974, and served on the assessee on March 14, 1974, in which the assessment year was mentioned, the second notice was a valid notice and the proceeding cannot be held to be invalid because of the issue of the defective first notice.
8. It has been held in the case of D.M. Manasvi v. CIT [1972] 86 ITR 557 (SC) that what is contemplated by Section 271(1) of the Act is that the Income-tax Officer should have been satisfied in the course of the assessment proceedings regarding matters mentioned in the Clauses of that sub-section and that it is not essential that the notice to the person proceeded against should have also been issued during the course of the assessment proceedings. It has also been held in this decision that satisfaction, in the very nature of things, precedes the issue of the notice and it would not be correct to equate the satisfaction of the Income-tax Officer with the actual issue of notice. The view taken by the Supreme Court had been earlier taken by the Bombay High Court in the case of Padgilwar Brothers v. CIT [1971] 81 ITR 258. In view of the decision of their Lordships of the Supreme Court, it has to be held that if the satisfaction has been recorded in the course of the assessment proceedings, then notice can be issued subsequently and if the first notice was defective, a second notice could be issued and in the present case, the second notice had been issued by the Income-tax Officer, although the Income-tax Officer has wrongly mentioned about the service of the first notice. I, therefore, hold that the second notice was validly issued and served on the assessee and so the Tribunal was not justified in cancelling the penalty by referring only to the first notice which was a defective notice.
9. In view of my above discussions, I hold that the penalty of Rs. 930 as assessed by the Appellate Assistant Commissioner under Section 271(1)(a) of the Act was justified and the Tribunal was not justified in cancelling the penalty order of the Income-tax Officer. The question is thus answered in favour of the Revenue and against the assessee. However, in the circumstances of the case, there will be no order as to costs. Let a copy of this judgment be forwarded to the Assistant Registrar of the Tribunal under the seal of the court and the signature of the Registrar for passing such orders as are necessary to dispose of the case conformably to such judgment.
Uday Sinha, J.
10. I agree.