1986 (8) TMI 26 - HC - Income Tax

Summary

Issues Involved:
1. Whether the requirement of personal hearing was met.
2. Whether the procedure for the imposition of penalty would be governed by the law as it stood on the date of initiation of proceedings.
3. Whether the imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961, was justified.

Issue-wise Detailed Analysis:

1. Requirement of Personal Hearing:
The Tribunal found that the same person who was the Income-tax Officer, Circle VI, at the relevant time and had issued the notice initiating the penalty proceedings had also imposed the order of penalty as the Income-tax Officer, Central Circle XVIII, Calcutta, after giving the assessee an opportunity of being heard. However, the High Court noted that several dates of hearing were fixed, but the assessee either did not attend or applied for adjournment. The last adjournment was granted on July 22, 1974, at the instance of the assessee, but no further date of hearing was fixed or communicated. The court observed that under section 274 of the Income-tax Act, 1961, no order imposing a penalty shall be made unless the assessee has been heard or given a reasonable opportunity of being heard. The High Court concluded that no reasonable opportunity was afforded to the assessee before imposing the penalty, thus answering this issue in the negative and in favor of the assessee.

2. Procedure for Imposition of Penalty:
The Tribunal held that the quantum of penalty imposable under section 271 of the Income-tax Act, 1961, would be governed by the law as it stood on the date of the filing of the return, but the procedure would be governed by the law prevailing on the date of the initiation of the penalty proceedings. The Tribunal found that on the date the penalty proceedings were initiated, the Income-tax Officer had jurisdiction to pass the order and impose the penalty. The High Court did not return an answer to this question as it was not pressed by the assessee's advocate, given the resolution of the other issues.

3. Justification of Penalty Imposition:
The High Court reviewed the facts and found that the assessee was not given a reasonable opportunity to be heard before the penalty was imposed. The court noted that the penalty proceedings initiated by the Income-tax Officer, Central Circle XVIII, Calcutta, were based on the estimated income from a truck and a savings bank account, which the assessee had failed to disclose initially but later admitted. The court emphasized that the assessee requested a rehearing by letter dated November 28, 1974, which was not answered, and no further hearing was scheduled after the adjournment on July 22, 1974. Consequently, the High Court held that the imposition of the penalty was not justified, answering this issue in the negative and in favor of the assessee.

Conclusion:
The High Court concluded that the assessee was not afforded a reasonable opportunity of being heard before the penalty was imposed. Therefore, questions 1 and 3 were answered in the negative and in favor of the assessee, while question 2 was not answered as it was not pressed by the assessee's advocate. The reference was disposed of accordingly, with no order as to costs.