1998 (9) TMI 53 - HC - Income Tax

Summary

Issues:
1. Refusal to refer question of law regarding cancellation of penalty under section 271(1)(c) of the Income-tax Act.
2. Misconceived application by Revenue under section 256(2) of the Act.

Issue 1: Refusal to refer question of law regarding cancellation of penalty under section 271(1)(c) of the Income-tax Act:
The case involved a reference under section 256(2) of the Income-tax Act, 1961, where the Revenue sought mandamus to the Income-tax Appellate Tribunal for drawing up a statement of case. The primary question for reference was whether the Tribunal was right in cancelling the penalty imposed under section 271(1)(c) of the Income-tax Act amounting to Rs. 63,135. The Tribunal had initially imposed the penalty, but upon the deletion of the addition in the income of the assessee, the penalty was set aside. The Revenue sought a reference to the High Court on this issue. However, the High Court rejected the application, stating that the question did not arise as a question of law from the order of the Tribunal. The Court emphasized that the Revenue should have requested the Tribunal to adjourn the penalty appeal awaiting the decision of the High Court in the quantum proceedings. Since such a plea was not raised before the Tribunal, the Court held that the question did not arise as a question of law from the Tribunal's order.

Issue 2: Misconceived application by Revenue under section 256(2) of the Act:
The Court noted that the Revenue had a practice of filing applications under section 256(2) of the Act before the High Court after losing in penalty proceedings following adverse decisions in quantum proceedings. The Court highlighted that the jurisdiction under section 256(2) is limited and circumscribed by the phraseology of the Act. It emphasized that the Revenue should seek adjournment of penalty appeals awaiting the outcome of quantum proceedings rather than approaching the High Court after an adverse order. The Court dismissed the Revenue's application, stating that it was entirely misconceived and advised the Department to keep in view the observations made and seek adjournment in penalty appeals before the Tribunal itself.

In conclusion, the High Court dismissed the petition, emphasizing that the application by the Revenue was entirely misconceived and advising the Department to follow proper procedures in such cases to avoid unnecessary applications before the High Court.