1975 (12) TMI 44 - HC - Income Tax

Summary

Issues:
- Whether penalties levied under section 271(1)(a) for assessment years 1966-67 and 1967-68 were barred by limitation.

Analysis:
The judgment revolves around the issue of whether penalties imposed by the Income-tax Officer under section 271(1)(a) for the assessment years 1966-67 and 1967-68 were time-barred. The assessee, a firm running a hotel and bar, filed its returns late due to partners' ill-health. The Income-tax Officer levied penalties, which were upheld by the Appellate Assistant Commissioner, albeit with some relief for one assessment year. The Income-tax Appellate Tribunal later held that the penalty proceedings were time-barred due to an amendment to section 275 of the Income-tax Act, which extended the period for initiating penalty proceedings. The Tribunal emphasized that the law in force at the beginning of the relevant assessment year governs assessments. The revenue contended that the amended section 275 should apply, citing various cases to support its argument.

The judgment delves into the specific provisions of section 275 of the Income-tax Act, comparing the law before and after the amendment that extended the time limit for initiating penalty proceedings. It highlights that the amended section 275 did not have retrospective effect, and any law passed during the existing period would enlarge the time limit accordingly. The court referred to the principle that the Income-tax Act must apply as amended on the first day of April of a financial year for assessments of that year, even if amendments occur later. The judgment cites relevant cases like Karimtharuvi Tea Estate Ltd. v. State of Kerala and Continental Commercial Corporation v. Income-tax Officer to support this principle.

The court dismissed the revenue's contention, emphasizing that amendments to the Income-tax Act after the start of a financial year do not apply to assessments of that year. It distinguished the cases relied upon by the revenue, stating they were not relevant to the current case. The judgment underscored that the amendment to section 275 introduced on April 1, 1971, could not apply to penalty proceedings initiated for the assessment years 1966-67 and 1967-68. Consequently, the reference was answered in favor of the assessee, with costs awarded.