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Issues:
1. Whether the order of penalty passed by the Inspecting Assistant Commissioner was time-barred? 2. Interpretation of the time limit provision under section 275 of the Income-tax Act. 3. Application of the principle of strict construction to fiscal statutes. Detailed Analysis: 1. The case involved a reference under section 256(i) of the Income-tax Act regarding the time-barred penalty order passed by the Inspecting Assistant Commissioner. The Tribunal had initially set aside the penalty order imposed on the assessee for concealment of income, leading to an appeal by the Revenue. The key issue was whether the penalty order passed on March 18, 1975, was beyond the permissible time limit, considering the assessment was reopened in 1964 under section 34 of the Income-tax Act. 2. The Tribunal relied on a decision in a Kerala case and allowed the appeals against the penalty order, citing time limitations. The Revenue contended that the Tribunal should have followed a Bombay case precedent and argued that the Supreme Court's judgment supported their position. The assessee, on the other hand, emphasized the strict construction principle for penalty proceedings under section 275, asserting that the penalty order exceeded the time limit from the original assessment order. 3. The High Court analyzed the conflicting interpretations and observed that the principle of strict construction applies to taxing provisions like charging or penalty imposition, not to machinery provisions. The Court referred to the Supreme Court's ruling that the time limit provision under section 275 was not a penalty imposition but a limitation provision. The Court upheld the Gujarat High Court's precedent on limitation under section 275, emphasizing that the Supreme Court's observation did not overrule the previous decision. Consequently, the High Court answered the reference in favor of the Revenue, stating that the penalty order was not time-barred, based on the interpretation of the relevant provisions. In conclusion, the High Court's judgment clarified the application of the principle of strict construction to fiscal statutes, particularly in penalty proceedings under the Income-tax Act. The decision highlighted the distinction between taxing provisions and machinery provisions, emphasizing the interpretation of time limit provisions in penalty cases. The Court's analysis resolved the issue of the time-barred penalty order, aligning with the Gujarat High Court's precedent and rejecting the assessee's argument based on the Supreme Court's observation.
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