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Issues Involved:
1. Whether the order of penalty dated December 16, 1969, passed by the Inspecting Assistant Commissioner u/s 271(1)(c) of the Income-tax Act, 1961, is barred by limitation as provided u/s 275 of the said Act? Summary: Issue 1: Limitation for Penalty Order u/s 271(1)(c) The core issue was whether the penalty order dated December 16, 1969, by the Inspecting Assistant Commissioner (IAC) u/s 271(1)(c) of the Income-tax Act, 1961, was barred by limitation as per the provisions of s. 275 of the Act. The assessee contended that the penalty was barred by limitation, a view upheld by the Appellate Tribunal, which followed the decision of the Assam and Nagaland High Court in Commissioner of Income-tax v. Sabitri Devi Agarwalla [1970] 77 ITR 934. Arguments and Legal Precedents The revenue argued, citing the Supreme Court decision in Director of Inspection of Income-tax (Investigation) v. Pooran Mall & Sons [1974] 96 ITR 390, that the Tribunal erred in holding that the period of limitation prescribed in s. 275 applies even when a matter is remanded to the original authority. Conversely, the assessee's counsel distinguished the Supreme Court's decision, asserting it did not address the limitation issue under s. 275. Interpretation of s. 275 and Related Provisions The court examined the legislative intent behind s. 275, noting that it prescribes a two-year limitation period for imposing penalties, emphasizing the need for timely completion of quasi-criminal proceedings. The court also considered the absence of provisions for excluding certain periods in computing the limitation under s. 275, unlike s. 153(3) of the Act. Judicial Reasoning and Conclusion The court rejected the revenue's reliance on CIT v. Kishoresinh Kalyansinh Solanki [1960] 39 ITR 522 (Bom), which dealt with the limitation for orders passed by the Commissioner in revision. The court favored the view expressed by the Assam High Court in CIT v. Sabitri Devi Agarwalla [1970] 77 ITR 934 and the Kerala High Court in Addl. CIT v. K. S. G. Panicker [1974] 97 ITR 525, which emphasized the mandatory nature of the limitation period in s. 275. The court distinguished the Supreme Court's decision in Pooran Mall & Sons' case, noting it pertained to the powers of taxation and not the imposition of penalties. The court concluded that the period of limitation prescribed in s. 275 is mandatory and applies to both the initial and subsequent orders passed after remand. Final Judgment The court agreed with the Tribunal's view and answered the question in the affirmative, ruling against the revenue. The penalty order was deemed barred by limitation, and costs were awarded to the assessee with an advocate's fee of 250.
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