1973 (10) TMI 11 - HC - Income Tax

Whether, within the meaning of section 275 of the Income-tax Act, 1961, penalty order must not only be made within two years of the completion of the proceedings for the imposition of penalty concerned but also communicated to the assessee within the said period of limitation ? - The order imposing penalty under section 271(1)(c) should be passed within two years from the dateof the completion of the proceedings in the course of which the proceedings for the imposition of penalty had been commenced and it is not necessary that the communication of the same to the assessee should also be within the said period of two years.

Issues Involved:
1. Whether, under section 275 of the Income-tax Act, 1961, a penalty order must be both made and communicated to the assessee within the two-year limitation period.

Issue-Wise Detailed Analysis:

1. Whether a penalty order must be both made and communicated to the assessee within the two-year limitation period under section 275 of the Income-tax Act, 1961.

Facts of the Case:
The Income-tax Officer imposed a penalty under section 271(1)(c) for the assessment year 1963-64, with the assessment completed on January 22, 1964. The penalty order was made on March 31, 1965, but served on the assessee on June 7, 1966. The assessee contended that the order was barred by limitation as it was not served within two years from the completion of the assessment proceedings.

Appellate Assistant Commissioner's Decision:
The Appellate Assistant Commissioner dismissed the appeal, holding that the order was made within the two-year period and that the Act did not require the order to be served within that time frame.

Income-tax Tribunal's Decision:
The Tribunal upheld the Appellate Assistant Commissioner's decision, stating that the order was passed within the prescribed period and that there was no requirement in the Act for the order to be communicated within the two-year period.

Contentions by the Assessee:
The assessee argued that the expressions "made" and "passed" are used differently in various sections of the Act and should be given distinct meanings. The assessee contended that "passed" should be construed as "issued" and that an effective order must be communicated to the affected party to be considered "passed."

Contentions by the Department:
The department argued that "made" and "passed" are synonymous and that an order is considered "made" or "passed" when it is signed by the authority, regardless of when it is communicated. The department emphasized that the Act provides remedies for the assessee to appeal from the date of communication, indicating a distinction between the making and communication of an order.

Court's Analysis:
The court examined various sections of the Income-tax Act, including sections 153, 263, 274, and 275, and concluded that the expressions "made" and "passed" are used interchangeably and synonymously. The court referred to previous judgments, including *N. N. Majumdar v. N. M. Bardhan* and *Secretary of State for India in Council v. Gopisetti Narayanaswami Naidu*, which held that an order affecting a person's rights must be communicated to be effective. However, the court distinguished these cases, noting that the context and statutory provisions of the Income-tax Act differ.

The court also referred to decisions in *Badri Prosad Bajoria v. Commissioner of Income-tax*, *Esthuri Aswathiah v. Commissioner of Income-tax*, and *Viswanathan Chettiar v. Commissioner of Income-tax*, which held that the making of an order under the Income-tax Act implies signing the order and not its communication.

Conclusion:
The court held that the expressions "made" and "passed" in the Income-tax Act are synonymous and that the order imposing penalty should be considered passed when it is signed by the authority within the prescribed period. The court rejected the contention that the order must be communicated within the two-year period to be valid.

Judgment:
The court answered the referred question by stating:
"The order imposing penalty under section 271(1)(c) should be passed within two years from the date of the completion of the proceedings in the course of which the proceedings for the imposition of penalty had been commenced, and it is not necessary that the communication of the same to the assessee should also be within the said period of two years."

Costs:
The parties shall bear their own costs of this reference.

← Previous Next →