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Issues:
1. Interpretation of the amended time-limit of penalty under section 275 of the Income-tax Act, 1961. 2. Applicability of the amended provision to penalty proceedings pending before April 1, 1971. Analysis: The case involved penalty proceedings initiated by the Income-tax Officer under sections 271(1)(a) and 273(b) of the Income-tax Act for various assessment years due to the assessee's failure to file returns and pay advance tax. The Appellate Assistant Commissioner, in a consolidated order, canceled the penalty orders citing limitation issues. The Appellate Assistant Commissioner noted that penalties were imposed after the expiry of the limitation period under section 275 of the Act. The amendment to section 275 effective from April 1, 1971, extended the time limit for imposing penalties to two years from the end of the financial year in which the proceedings were completed. The penalties in question were imposed on March 23, 1973, within the extended time limit if the amended provision was applied. The Appellate Assistant Commissioner's decision was challenged by the Department, leading to appeals before the Tribunal. The Tribunal upheld the cancellation of penalty orders, agreeing with the Appellate Assistant Commissioner's interpretation of the limitation issue. The Tribunal held that penalties should have been imposed within two years from the completion of the proceedings, which was not the case, thereby supporting the cancellation of penalties. The High Court analyzed various legal precedents, including the case of Hajee K. Assainar v. CIT, emphasizing that procedural amendments apply to pending as well as future actions if they do not affect substantive rights. The court also referred to the case of Addl. CIT v. Watan Mechanical and Turning Works, highlighting that limitation is considered procedural and not substantive, and an extended limitation period applies to ongoing proceedings. The court cited several other cases supporting the application of amended provisions to pending cases if the limitation had not expired before the amendment came into force. In conclusion, the High Court held that the penalties imposed by the Income-tax Officer were not barred by limitation as the amended section 275 applied to the case, enlarging the period of limitation. The court disagreed with the Tribunal's view that the amended time-limit was not applicable to pending penalty proceedings before April 1, 1971, ruling in favor of the Revenue and against the assessee.
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