1960 (7) TMI 5 - SC - Income Tax

The Income-tax Officer is well within his jurisdiction to continue the proceedings from the stage at which the illegality has occurred and to assess the appellants to a penalty, if any, which the circumstances of the case may require. Appeal dismissed.

Summary

Issues:
- Dismissal of application under Article 226 for writ of prohibition against Income-tax Officer
- Failure to provide a reasonable opportunity of being heard before imposing penalty
- Corrective actions taken by the Appellate Assistant Commissioner
- Interpretation of legality of proceedings and authority of Income-tax Officer to continue assessment

Analysis:
The Supreme Court judgment pertains to an appeal filed against the dismissal of an application under Article 226 for a writ of prohibition against the Income-tax Officer. The appellants failed to file a return within the prescribed time for the assessment year 1948-49, leading to the Income-tax Officer issuing a notice for penalty imposition under section 28(1)(a) of the Indian Income-tax Act. The appellants responded with a written reply, but the penalty of Rs. 16,000 was levied without affording them a hearing as mandated by section 28(3) of the Act. The Appellate Assistant Commissioner held the order defective due to the lack of a hearing opportunity and directed the refund of the penalty if recovered.

The Income-tax Officer subsequently issued a notice for a hearing, but before a decision was made, the appellants filed a petition under Article 226, which was dismissed by the High Court. The Supreme Court emphasized that the penalty imposition without a hearing opportunity was illegal, and the Appellate Assistant Commissioner's order corrected this error, allowing the Income-tax Officer to continue the proceedings from the stage of the illegality. The judgment highlighted a Kerala High Court decision to support the view that corrective actions could be taken during the assessment proceedings.

The Supreme Court concluded that the Income-tax Officer had the jurisdiction to proceed with the assessment and impose a penalty based on the circumstances of the case. It was determined that the notice for penalty imposition remained valid, and the proceedings could be considered as part of the assessment proceedings, enabling the Income-tax Officer to continue the assessment process. Ultimately, the appeal was dismissed, affirming the authority of the Income-tax Officer to proceed with the assessment and penalty determination.