1964 (3) TMI 113 - HC - Income Tax

Summary

Issues:
1. Validity of penalty order passed by the Income-tax Officer under section 28(1)(c) of the Income-tax Act, 1922, for the assessment year 1946-47 based on unconscionable delay.

Analysis:
The case involved a reference under section 66(1) of the Indian Income-tax Act, 1922, regarding the validity of a penalty order passed by the Income-tax Officer under section 28(1)(c) of the Act for the assessment year 1946-47. The Tribunal found that there was an unconscionable delay in passing the penalty order, which led to the question of whether such delay rendered the penalty order bad in law. The Tribunal, while acknowledging the absence of a specific time limit in the Act for passing a penalty order, held that the significant delay without any special circumstances warranted the penalty order to be considered bad in law. However, the High Court pointed out that the delay alone cannot render a penalty order bad and cited a case where the order was set aside not solely due to delay but because the department failed to prove a default by the assessee in filing returns. The court emphasized that a rule of limitation must be explicitly provided in the statute, and in the absence of such provision in the Income-tax Act, 1922, delay alone cannot invalidate a penalty order.

Moreover, the court highlighted a previous decision of the Lahore High Court, which held that no period of limitation can be implied from the provisions of section 28 of the Act concerning penalty orders. While acknowledging the Tribunal's authority to set aside a penalty order based on the overall circumstances of the case, the court clarified that the decision to invalidate a penalty order should be based on propriety rather than solely on legal grounds. In this case, the Tribunal's decision to vacate the penalty order purely on the basis of it being bad in law due to delay was deemed a misconception by the High Court. Consequently, the High Court answered the reference question in the negative, indicating that the penalty order was not invalid solely due to the delay, and no costs were awarded in the matter.