1978 (12) TMI 7 - HC - Income Tax

Summary

Issues Involved:
1. Whether an assessee can be allowed to raise a new ground of attack in appeal before the Tribunal in the absence of that ground having been taken before the ITO.
2. Whether penalty can be imposed for the entire period of default or only for the period after the notice u/s 148 was served.

Summary:

Issue 1: Raising a New Ground of Attack in Appeal
The Tribunal allowed the assessee to raise a new ground of attack against the order of the ITO, which was not previously taken before the ITO. Rule 11 of the Rules and Orders relating to the Appellate Tribunal permits an appellant to urge a new ground in support of the appeal. The Tribunal is not confined to the grounds set forth in the memorandum of appeal, provided the affected party has had a sufficient opportunity to be heard. The court referenced CIT v. Hazarimal Nagji & Co. [1962] 46 ITR 1168 (Bombay High Court), which supports the respondent's right to support the AAC's order on a new ground, provided it does not require further investigation into facts not already on record.

Issue 2: Period for Imposing Penalty
The Tribunal held that the penalty could be imposed only for the delay after the notice u/s 148 was served, amounting to five months, instead of the nineteen months calculated by the ITO. The court disagreed with the Tribunal's view, stating that the default period should be calculated from the original due date u/s 139(1) to the actual filing date. The court referenced multiple authorities, including CIT v. Indra and Co. [1971] 79 ITR 702 (Rajasthan High Court) and S. Balaram v. CIT [1976] 105 ITR 674 (Gujarat High Court), which support the imposition of penalty for the entire period of default, not just after the notice u/s 148. The court emphasized that the issuance of a notice u/s 139(2) or u/s 148 does not condone the initial default under s. 139(1).

Conclusion:
The court answered question No. 1 in the affirmative, allowing the assessee to raise a new ground before the Tribunal. Question No. 2 was answered in the negative, holding that the penalty should be imposed for the entire period of default from June 30, 1969, to February 24, 1971, amounting to nineteen months. The assessee was ordered to pay the costs of the reference to the Commissioner.