1974 (2) TMI 17 - HC - Income Tax

Summary

Issues:
1. Imposition of penalty by the Inspecting Assistant Commissioner exceeding Rs. 1,000.
2. Jurisdiction of the Inspecting Assistant Commissioner to pass a fresh penalty order after the Tribunal set aside the initial penalty order.
3. Application of the time limit prescribed under section 275 of the Income-tax Act, 1961, for passing a fresh penalty order.

Analysis:
1. The case involved the imposition of a penalty by the Inspecting Assistant Commissioner exceeding Rs. 1,000, which was challenged by the assessee before the Tribunal. The Tribunal found that the maximum penalty imposable was less than Rs. 1,000 based on the facts presented by the Inspecting Assistant Commissioner. The Tribunal held that only the Income-tax Officer had jurisdiction to impose the penalty and directed the Inspecting Assistant Commissioner to pass a fresh order after finding out the correct facts and giving both parties an opportunity to be heard.

2. Subsequently, the Inspecting Assistant Commissioner imposed a penalty of Rs. 3,000 after hearing the assessee, which was again appealed to the Tribunal. The issue raised was whether the penalty order passed by the Inspecting Assistant Commissioner was barred by the limitation of two years under section 275 of the Income-tax Act, 1961. The department contended that the Inspecting Assistant Commissioner was duty-bound to follow the Tribunal's directions. The Tribunal upheld this plea, stating that the Inspecting Assistant Commissioner was bound to pass an order as directed by the Tribunal.

3. The Tribunal further examined whether the direction given by them to pass a fresh order implied disregarding the time limit prescribed under section 275. The Tribunal clarified that they had left it to the Inspecting Assistant Commissioner to make a fresh order in accordance with the law, implying that the parties could raise relevant pleas within the legal framework. The Tribunal's order did not explicitly address the question of whether the Inspecting Assistant Commissioner could pass a fresh order considering the expiration of the two-year limitation period.

4. The High Court analyzed the Tribunal's order and concluded that the Tribunal had indeed left the decision on passing a fresh penalty order to the Inspecting Assistant Commissioner, without explicitly addressing the issue of the time limit under section 275. The High Court held that the Inspecting Assistant Commissioner had the discretion to pass a fresh order if it was legally valid, and therefore, the question of jurisdiction due to the lapse of time became of academic value. Consequently, the High Court ruled in favor of the assessee, holding that the Inspecting Assistant Commissioner was not debarred by the time limit under section 275 in passing a fresh penalty order as directed by the Tribunal.