1993 (9) TMI 66 - HC - Income Tax

Summary

Issues:
1. Whether penalty can be levied in reassessment proceedings under section 273 of the Income-tax Act, 1961.

Analysis:
The case involved a dispute regarding the imposition of a penalty during reassessment proceedings under section 273 of the Income-tax Act, 1961. The original assessment was conducted, followed by proceedings under section 147 resulting in a reassessment with a higher total income. The Income-tax Officer initiated penal action during the reassessment proceedings for the assessee's failure to file proper advance tax estimates and pay tax accordingly. The Appellate Assistant Commissioner quashed the penalty, stating that penalty proceedings under section 273(b) could not be legally initiated during reassessment proceedings. The Revenue appealed to the Income-tax Appellate Tribunal, which upheld the Appellate Assistant Commissioner's decision, emphasizing that penalties could only be imposed in regular assessment proceedings.

The main argument presented by the Commissioner was that section 273(a) is not limited to the power of imposing penalties in regular assessment proceedings under sections 143 or 144 of the Act. The Commissioner contended that the penalty imposed during reassessment proceedings was not illegal. However, the definition of "regular assessment" under section 2(40) of the Income-tax Act specifies that it pertains to assessments made under sections 143 or 144 only. The assessee argued that since the power to levy penalties is conferred only in regular proceedings, it cannot be extended to reassessment proceedings.

The court agreed with the assessee's interpretation, stating that the power to impose penalties is restricted to proceedings conducted under sections 143 and 144, as defined in the Act. Referring to previous judgments, the court held that penalties cannot be levied in reassessment proceedings under section 147(b). The court cited decisions from the Allahabad, Punjab and Haryana, and Patna High Courts to support its conclusion. Additionally, a similar issue regarding the applicability of section 217 to reassessment proceedings was addressed in a previous case, where it was held that interest payable only applies to regular assessments and not reassessment proceedings.

In conclusion, the court ruled in favor of the assessee, stating that no penal action can be taken during reassessment proceedings under section 273. The assessee was awarded costs amounting to Rs. 400.