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TMI Blog1973 (1) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... is, two days subsequent to the date of the issue of the notice of penalty. Mr. S. Bhattacharjee, learned counsel appearing on behalf of the assessee, draws my attention to section 274(2) of the Act, which is in the following terms: "274. (2) Notwithstanding anything contained in clause (iii) of sub-section (1) of section 271, if in a case falling under clause (c) of that sub-section, the minimum penalty imposable exceeds a sum of Rs. 1,000, the Income-tax officer shall refer the case to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty." My attention was next drawn to a Division Bench judgment of this court in the case of Commissioner of Income-tax v. A. K. Das . In that decision after stating the relevant statutory provisions P. B. Mukharji J. (as he then was), observed at page 47 of the report as follows: "Certain results follow from a provision of this nature. The first is that the authority, prima facie, belongs to the Income-tax Officer. It is before him that the first foundations of penalty are laid. That foundation is his ' satisfaction ' in the course of assessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment was passed, it must necessarily follow that on the date the impugned notice referring the case to the Inspecting Assistant Commissioner was issued under section 274(2) of the Act, the Income-tax Officer could not possibly be satisfied that the penalty imposable exceeded Rs. 1,000. Consequently the condition precedent for the exercise of power under section 274(2) of the Act being absent, the impugned notice referring the case to the Inspecting Assistant Commissioner must be held to be entirely without jurisdiction and void. Mr. Bhattacharjee also submitted that any material contained in the order of assessment which was passed on a date subsequent to the issue of the notice could not be called in aid of the satisfaction of the Income-tax Officer at the time of the issue of the impugned notice. Lastly, it was submitted by Mr. Bhattacharjee that section 271 read with section 274 of the Act requires that before a notice under section 274(2) is issued the Income-tax Officer must be "satisfied ". He drew my attention to the impugned notice which contains, inter alia, the following expression: "Whereas it appears to me that you have concealed the particulars of your income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Detailed examination of the books of account were made on a large number of dates by the deponent, namely, 4th, 9th, 10th, 17th and 22nd November, 1966; 10th and 16th January, 1967; 7th, 17th and 22nd February, 1967; 1st, 3rd, 8th, 10th, 15th, 16th, 20th and 23rd March, 1967. It is stated in the affidavit that some of the books produced by the assessee were found to be very unsatisfactory and in fact some of the books were impounded under section 131(3) of the Act. There were also certain interpolations noticed in the books of account which were recorded in the order-sheet of the assessment file of the petitioner. Various discrepancies were found in these books and the representatives of the were called upon to explain such discrepancies. They were, however, unable to explain the discrepancies. The assessee was required to produce its general ledger, journal and cash book which the assessee failed and neglected to do on the pretext that the said books were under the custody of the assessee's solicitor under the order of the Company Tribunal dated the 3rd August, 1966. Thereupon, notices were issued to the petitioner's solicitor to produce the same books. Paragraph 2(c) of the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm had concealed its income." Relying on the above observations, Mr. Sen contended that the only question to be decided in the present application is that having regard to the entire facts of the case can it be said that before the Income-tax Officer issued the impugned notice dated 27th March, 1967, there were materials before him on the basis of which he could have arrived at a prima facie satisfaction that the penalty imposable in the instant case would exceed Rs. 1,000. In this connection the concluding portion of the order of assessment may be noted: "Penalty proceedings under section 271(1)(c) have already been initiated for several concealments discussed in the order." It must be noted that the hearing of the assessment case of the petitioner for this year went on for several months. Large number of days were spent in scrutinizing the books of account of the petitioner. As already noted, some of the books of account had been impounded. The Income-tax Officer had formed the view that not only was the assessee concealing a large number of the relevant books of account, but there were various interpolations and discrepancies in the books which were produced and which cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer or the Appellate Assistant Commissioner in respect of the matters mentioned in sub-section (1) before he hears the assessee or gives him an opportunity of being heard. The final conclusion on the point as to whether the requirements of clauses (a), (b) and (c) of section 271(1) have been satisfied would be reached only after the assessee has been heard or has been given a reasonable opportunity of being heard." This legal position was not disputed by the learned counsel for the assessee as I have already indicated. Mr. Bhattacharjee also relied on a decision of the Supreme Court in the case of Commissioner of Income-tax v. Khoday Eswarsa Sons, being an authority for the proposition that the penalty cannot be levied solely on the basis of the reasons given in the original order of assessment. That may be so. But I do not see how this proposition helps the petitioner in the present case. We are not concerned at this stage within the levy of penalty but only with the initiation of the proceedings under section 271 read with section 274 of the Act. This disposes of all the contentions raised by the parties. In the result this application fails and is dismissed. The rule i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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