1981 (3) TMI 13 - HC - Income Tax

Issues Involved:
1. Applicability of the Indian Income-tax Act, 1922, for assessments post-April 1, 1962.
2. Applicability of the Income-tax Act, 1961, for assessments where proceedings were initiated under the 1922 Act.
3. Validity of the ex parte order in an appeal against the order under section 27 of the 1922 Act.
4. Cancellation of penalties under sections 271(1)(a) and 273(a) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

Issue 1: Applicability of the Indian Income-tax Act, 1922, for assessments post-April 1, 1962

The primary question addressed was whether an assessment could be completed under section 23(4) of the Indian Income-tax Act, 1922, after April 1, 1962. The court examined the effect of section 6 of the General Clauses Act in conjunction with section 297 of the Income-tax Act, 1961. It was established that pending proceedings are generally saved by the operation of section 6 of the General Clauses Act unless a different intention is expressed by the repealing statute. The court referenced several Supreme Court decisions, including Kalawati Devi Harlalka v. CIT [1967] and T. S. Baliah v. T. S. Rangachari, ITO [1969], which clarified that section 297(2) of the 1961 Act evidenced an intention to the contrary, thereby not saving the old provisions for pending assessments. The court concluded that the assessment under section 23(4) of the 1922 Act was not permissible after the new Act came into effect.

Issue 2: Applicability of the Income-tax Act, 1961, for assessments where proceedings were initiated under the 1922 Act

The court addressed whether the provisions of the Income-tax Act, 1961, were applicable and whether the assessment order under section 23(4) of the 1922 Act could be sustained as having been passed under section 144 of the 1961 Act. The Tribunal had held that the old Act was repealed and section 297(2) did not save the old provisions, indicating that section 6 of the General Clauses Act would not apply. The court agreed with the Tribunal's view that the assessment could not be sustained under the new Act, as the old Act's provisions were not saved for pending proceedings.

Issue 3: Validity of the ex parte order in an appeal against the order under section 27 of the 1922 Act

The Tribunal had held that the validity of the ex parte order could be decided upon in the appeal against the order under section 27 of the 1922 Act. The court found that the AAC was incorrect in holding that the assessment order was bad under section 27(2) of the old Act after the new Act came into operation. The court directed that the Tribunal could instruct the ITO to consider the appeal under section 27 on its merits and dispose of it in accordance with the law. The court clarified that the validity of the power to make the assessment under the old Act could not be questioned.

Issue 4: Cancellation of penalties under sections 271(1)(a) and 273(a) of the Income-tax Act, 1961

The Tribunal had cancelled the penalties imposed under sections 271(1)(a) and 273(a) of the 1961 Act. The court found that neither the AAC nor the Tribunal had considered the merits of the penalty orders. The court held that the penalties were exigible in law, but the Tribunal or the AAC would need to consider the merits and quantum of the penalties. The question was answered by stating that penalties could be imposed, but the appropriateness and amount should be evaluated on merits.

Conclusion

In conclusion, the court held that:
1. The assessment under section 23(4) of the 1922 Act post-April 1, 1962, was not permissible.
2. The provisions of the 1961 Act were applicable, and the assessment could not be sustained under the old Act.
3. The AAC was not competent to question the validity of the assessment in an appeal under section 27 of the 1922 Act.
4. Penalties under sections 271(1)(a) and 273(a) of the 1961 Act were exigible, but their merits and quantum needed consideration.

Each party was ordered to bear its own costs.

← Previous Next →