1982 (1) TMI 29 - HC - Income Tax

Summary

Issues Involved:
1. Legality of the Tribunal's cancellation of the penalty levied u/s 273 of the Income-tax Act, 1961.
2. Applicability of the amendment to section 275 brought by Act 42 of 1970, effective from April 1, 1971, on the Tribunal's order.

Summary:

Issue 1: Legality of the Tribunal's Cancellation of the Penalty Levied u/s 273
The Tribunal cancelled the penalty of Rs. 3,521 levied u/s 273 on the grounds that the original assessment was completed on February 28, 1969, and the penalty order should have been passed on or before February 28, 1971. The Tribunal did not accept the department's plea that the amendment to section 275, which extended the limitation period, was applicable. The Tribunal held that even if the reassessment completed on April 28, 1970, was considered, the penalty order should have been passed within two years from that date. Therefore, the penalty order was beyond time and without jurisdiction.

Issue 2: Applicability of the Amendment to Section 275
The department contended that the amendment to section 275, which extended the period of limitation, was procedural and could be applied to all cases where the limitation period had not expired by April 1, 1971. The department argued that since the reassessment was completed on April 28, 1970, the penalty order could be passed within two years from the end of the financial year in which the reassessment was completed, i.e., by March 31, 1973. However, the court held that the penalty proceedings initiated on April 27, 1970, were incompetent and beyond the jurisdiction of the ITO. The penalty proceedings should have culminated in a penalty order on or before February 27, 1971, as the original assessment was completed on February 28, 1969. Since the amendment to section 275 became effective after this date, it could not extend the limitation period.

Conclusion:
The court answered the first question in the affirmative, upholding the Tribunal's cancellation of the penalty, and the second question in the negative, stating that the amendment to section 275 did not apply to the case. The penalty order was barred by limitation, and no costs were awarded to the assessee.