1991 (3) TMI 87 - HC - Income Tax

Summary

Issues:
1. Imposition of penalty under section 271(1)(c) within the period of limitation prescribed under section 275 of the Income-tax Act, 1961.

Analysis:
The case involved a question of law referred by the Income-tax Appellate Tribunal regarding the imposition of penalty under section 271(1)(c) within the prescribed period of limitation. The assessee, a Hindu undivided family, was initially assessed for the assessment year 1965-66, with subsequent penalty imposed by the Inspecting Assistant Commissioner. However, the assessment was set aside on appeal, leading to the cancellation of the penalty. A fresh assessment was then completed in 1974, resulting in the imposition of penalty for concealment. The issue revolved around whether the penalty imposed in 1977 was within the limitation period from the original assessment date in 1970.

The Tribunal rejected the assessee's argument that the penalty order was time-barred, stating that the fresh assessment in 1974 was the relevant assessment for calculating the limitation period. The Tribunal held that the order imposing penalty in 1977 was within the limitation period prescribed under section 275 of the Act. The assessee challenged this decision on legal grounds, emphasizing the importance of completing penalty proceedings promptly as quasi-criminal proceedings. Citing a decision by the Andhra Pradesh High Court, the assessee argued that the limitation period applied not only to the original assessment but also to subsequent proceedings following an order of remand.

In response, the Revenue contended that the crucial factor was the initiation of penalty proceedings during the fresh assessment after remand, not the date of the original assessment. The Revenue argued that the order imposing penalty was within the limitation period as it was initiated during the proceedings for the fresh assessment post-remand. Citing a decision by the Andhra Pradesh High Court, the Revenue emphasized that the relevant assessment for penalty proceedings was the one following remand, not the initial assessment.

The High Court analyzed the provisions of section 275 and held that the proceedings for penalty were initiated with the fresh assessment post-remand, making it the relevant assessment for calculating the limitation period. The Court agreed with the Andhra Pradesh High Court's interpretation, stating that the original assessment order set aside in appeal did not constitute a subsisting assessment until the fresh assessment was completed. Consequently, the Court ruled in favor of the Revenue, affirming that the penalty imposed in 1977 was within the prescribed limitation period from the relevant assessment post-remand.

Therefore, the Court answered the reference in the affirmative, supporting the imposition of penalty under section 271(1)(c) within the prescribed limitation period, as determined by the relevant assessment post-remand.