1982 (10) TMI 4 - HC - Income Tax

Summary

Issues:
1. Whether the Tribunal was right in canceling the penalty under section 271(1)(c) of the Income Tax Act, 1961?
2. Whether the Tribunal was correct in not remanding the case back to the IAC due to the expiration of the time limit to impose the penalty under section 271(1)(c)?

Analysis:
The case involved an application by the Commissioner seeking a reference to the High Court regarding the cancellation of a penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The non-applicant, engaged in liquor contracts, filed a return for the assessment year 1972-73 without maintaining proper books of account. The Income Tax Officer (ITO) disallowed a loan amount of Rs. 50,000 taken by the non-applicant, leading to an addition to the total income. The Assistant Commissioner and the Tribunal upheld this decision. Subsequently, a penalty of Rs. 50,000 was imposed by the Income Tax Appellate Tribunal (ITAT) for concealing income, but ITAT set aside the penalty due to inadequate opportunity given to the non-applicant before its imposition. The Department sought a reference to the High Court, which was rejected by ITAT.

The primary contention was whether the Tribunal erred in setting aside the penalty imposed by the Income Tax Appellate Commissioner (IAC) based on inadequate opportunity provided to the non-applicant. The Department argued that all necessary materials were considered by the IAC, and the Tribunal's decision was unjustified. Conversely, the non-applicant's counsel asserted that the Tribunal's findings were based on factual considerations, and the issue of adequate opportunity was a question of fact, not law. The High Court agreed that determining the sufficiency of the opportunity granted to the non-applicant was a factual matter based on the evidence before the Tribunal.

Regarding the second issue, the Tribunal's decision not to remand the case to the IAC due to the expiration of the time limit under section 275 for imposing the penalty raised a legal question. The Department contended that the limitation under section 275 would not apply in the case of a remand, citing relevant case law. The non-applicant acknowledged the differing interpretations but agreed that a legal question arose concerning the applicability of the limitation in case of a remand. The High Court directed the Tribunal to refer this specific legal question to the Court for clarification.

In conclusion, the High Court determined that the first issue regarding the adequacy of opportunity for the non-applicant was a question of fact and did not warrant a reference. However, the Court directed the Tribunal to refer the legal question concerning the expiration of the time limit for imposing the penalty back to the High Court for resolution. The parties were instructed to bear their own costs in the matter.