1971 (4) TMI 26 - HC - Income Tax

Whether, on the facts and in the circumstances of the case, levy of Rs. 2,500 and Rs. 12,500 by way of penalty by the Tribunal amounted to an enhancement of the penalty levied by the Inspecting Assistant Commissioner? - Held that The Tribunal had before it several circumstances on the basis of which it reduced the penalty to Rs. 2,500 and Rs. 12,500 for the two assessment years and when doing so the Tribunal did not, as indeed it was not bound to, proceed on the basis that the penalty imposed Should be 50 per cent. of the maximum penalty. Accordingly we answer the question referred in the negative and against the assessee.

Summary

Issues:
1. Whether the penalties imposed by the Tribunal amounted to an enhancement of the penalties levied by the Inspecting Assistant Commissioner.

Analysis:
The case involved an individual assessee who was initially assessed for the assessment year 1961-62 with a total income of Rs. 9,491, which was later revised to Rs. 33,241 upon reassessment. In a separate assessment for the year 1962-63, the total income was initially shown as Rs. 8,505 but revised to Rs. 23,151, with the Income-tax Officer determining it to be Rs. 55,220. The Tribunal reduced the total income to Rs. 21,902 and Rs. 44,311 for the respective years. Subsequently, penalty proceedings were initiated by the Income-tax Officer, resulting in penalties of Rs. 5,000 and Rs. 15,000 imposed by the Inspecting Assistant Commissioner for the two assessment years.

The assessee appealed against the penalties, leading to the Tribunal reducing them to Rs. 2,500 and Rs. 12,500 for the two years. The question arose whether these reduced penalties amounted to an enhancement of the penalties initially levied by the Inspecting Assistant Commissioner. The Tribunal's decision was challenged by the assessee through rectification applications, contending that the penalties imposed by the Tribunal were an enhancement. The matter was referred to the High Court for opinion.

A preliminary objection was raised regarding the reference, arguing that it arose from the rectification applications and not the Tribunal's appellate order. However, the objection was overruled as the question referred pertained to the effect of the appellate order on the penalties. The High Court analyzed the merits of the case and concluded that the Tribunal was not bound by the same ratio as the Inspecting Assistant Commissioner in imposing penalties. The Tribunal had discretion based on circumstances to reduce the penalties, and there was no requirement for them to maintain a specific ratio in penalty imposition.

In the final judgment, the High Court answered the question in the negative, ruling against the assessee. The Commissioner of Income-tax was awarded costs, assessed at Rs. 200, along with counsel's fee at the same figure.

In conclusion, the High Court held that the penalties imposed by the Tribunal did not amount to an enhancement of those levied by the Inspecting Assistant Commissioner, as the Tribunal had the discretion to reduce penalties based on the circumstances presented before them.