1967 (4) TMI 20 - HC - Wealth-tax

Whether it was obligatory on the succeeding ITO to give another opportunity of showing cause before imposing a penalty under s. 28 of the IT Act, 1922 - held, no

Summary

Issues Involved:
1. Whether it was obligatory for the succeeding Income-tax Officer to give another opportunity of showing cause before imposing a penalty under section 28 of the Indian Income-tax Act, 1922.

Issue-wise Detailed Analysis:

1. Obligation of the Succeeding Income-tax Officer to Give Another Opportunity:
The primary issue in this case was whether the succeeding Income-tax Officer was required to provide another opportunity for the assessee to show cause before imposing a penalty under section 28 of the Indian Income-tax Act, 1922.

The facts of the case reveal that the assessee, engaged in the business of manufacturing and selling umbrellas, was assessed for the year 1957-58. The Income-tax Officer, Shri B. R. Kumbhat, issued a notice to the assessee on February 24, 1959, to show cause why a penalty should not be imposed for concealing income. The assessee did not appear in person but sent a written reply denying the concealment. Shri Kumbhat was later transferred, and his successor, Shri N. L. Jain, continued the proceedings and imposed a penalty of Rs. 5,000 on July 30, 1959, without giving a fresh opportunity for the assessee to be heard.

The court examined whether the succeeding officer was required to provide another opportunity for the assessee to show cause. The court noted that the assessee did not request a personal hearing or demand a rehearing under section 5(7C) of the Act. The court agreed with the respondent's counsel that in cases where the assessee submits a written reply and does not request a personal hearing, the succeeding officer can continue the proceedings and impose a penalty based on the written representation without providing a fresh opportunity for a hearing.

The court referred to various precedents, including the Calcutta Tanneries (1944) Ltd. v. Commissioner of Income-tax and Kanailat Gatani v. Commissioner of Income-tax and Excess Profits Tax, to understand the necessity of a rehearing by the succeeding officer. The court observed that if no witnesses were called and no arguments were advanced, the succeeding officer could continue from where the predecessor left off, provided the successor applied his mind to the materials before him.

The court also cited Murlidhar Tejpal v. Commissioner of Income-tax and Shop Siddegowda and Family v. Commissioner of Income-tax, which supported the view that the succeeding officer could pass an order based on the explanation provided to the predecessor, as long as the assessee did not demand a rehearing.

In conclusion, the court held that in the circumstances of this case, it was not obligatory for the succeeding Income-tax Officer to give another opportunity of showing cause before imposing a penalty on the assessee under section 28 of the Act.

Additional Observations:
The court addressed an oral contention raised by the assessee's counsel, alleging that Shri N. L. Jain had mechanically signed the order without reviewing the record. The court stated that it could not entertain this allegation as it was beyond the scope of the referred question. The jurisdiction of the court under section 66 of the Act is limited to answering the specific question referred and does not extend to raising or answering different questions. The proper course for the assessee would have been to raise this issue before the Tribunal.

Conclusion:
The court concluded that it was not obligatory for the succeeding Income-tax Officer to give another opportunity of showing cause before imposing a penalty under section 28 of the Indian Income-tax Act, 1922. The parties were directed to bear their own costs.