1982 (9) TMI 35 - HC - Income Tax

Summary

Issues:
1. Correctness of canceling penalty order instead of setting it aside for a fresh hearing and disposal by the Inspecting Assistant Commissioner of Income-tax.

The judgment of the High Court of Allahabad involved a reference made by the Income-tax Appellate Tribunal regarding the cancellation of a penalty order under section 271(1)(c) of the Income Tax Act, 1961. The Tribunal found that the penalty was imposed without affording the assessee an opportunity to be heard, rendering the penalty order unsustainable. The Tribunal deliberated on whether the penalty order should be set aside for a fresh hearing by the Inspecting Assistant Commissioner (IAC). The Tribunal determined that the period of limitation for passing the penalty order had expired, relying on the decision in CIT v. Ram Baran Ram Nath [1976] 104 ITR 691. The Tribunal distinguished the Supreme Court decision in Director of Inspection of Income-tax v. Pooran Mall & Sons [1974] 96 ITR 390. The High Court analyzed both decisions and found that the principles laid down in the Supreme Court case were not applicable to the present case. The High Court referenced the Ram Baran Ram Nath case where it was held that the IAC was debarred by the time-limit under section 275 of the Act from passing a fresh penalty order after the expiration of the limitation period. Consequently, the High Court upheld the Tribunal's decision to cancel the penalty order and declined to remand the case back to the IAC for a fresh hearing, ruling in favor of the assessee and awarding costs of Rs. 250.

In conclusion, the High Court determined that the Tribunal was correct in canceling the penalty order instead of setting it aside for a fresh hearing by the Inspecting Assistant Commissioner of Income-tax due to the expiration of the limitation period under section 275 of the Income Tax Act. The Court distinguished relevant precedents and held in favor of the assessee, awarding costs of Rs. 250 for the proceedings.