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TMI Blog2005 (5) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... late Tribunal, Allahabad, hereinafter referred to as "the Tribunal", has referred the following question of law under section 256(1) of the Income-tax Act, 1961, hereinafter referred to as "the Act"), for opinion to this court. "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that proceedings under section 148 were validly initiated in the present case and that, therefore, it would not be correct to quash the penalty proceedings on the ground that the reassessment proceedings were void ab initio for the failure of the Income-tax Officer, to record the reasons for initiating proceedings under section 147 for the assessment year 1981-82?" Whereas in Income-tax Reference No. 62 of 1992, the Tribunal has referred the following question of law under section 256(2) of the Act for opinion to this court. "Whether, on the facts and in the circumstances of the case, the levy of penalty under section 271(1)(c) is justified?" As both the references relate to the same assessee and pertain to the assessment year 1981-82 in proceedings arising out of imposition of penalty under section 271(1)(c) of the Act, they have been heard together and ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hulling, it was stated that the applicant was under the impression "that it can include its share only when it is sold" and therefore 433 quintals of Kinki rice was not shown by it as its closing stock. The Income-tax Officer did not accept the above explanation to be satisfactory and he imposed the penalty of Rs. 33,380. The applicant appealed against the aforesaid order before the Commissioner of Income-tax (Appeals), who confirmed the order in question. The applicant further appealed against the aforesaid order in the Tribunal. At the time of hearing the applicant's learned counsel moved the following additional grounds: "1. That in the absence of proper initiation of proceedings under section 148 the assessment order passed by the Income-tax Officer is void ab initio and as such the penalty initiated in the course of assessment is void assessment is a nullity and no penalty can be imposed. 2. That the penalty imposed is illegal since the assessment itself is void ab initio and penalty deserves to be quashed." On behalf of the Revenue, the admission of the aforesaid additional ground was passed by the Tribunal admitted the said additional ground as in its opinion the questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, therefore, be regarded as bona fide; nor can it be said that the assessee had placed all the relevant material on record while filing the return of income for the assessment year 1981-82. 10. It is true that in respect of the assessment year 1982-83, the assessee has been assessed on an income which is more than the real income of the assessee of that year because the set off of the opening stock against sales of rice was not claimed by and given to the assessee. This is, however, a mistake, which has occurred in respect of the assessment year 1982-83, which is apparent from record and it was for the assessee to have taken proper action to get the mistake rectified. The mistake of 1982-83 cannot, however, cloud the issue of concealment of income for the assessment year 1981-82 which, according to us, has been established on the basis of the facts of the present case discussed above. On the merits, therefore, the assessee has, in our opinion, no case to persuade us to reverse the order of the learned Commissioner of Income-tax (Appeals)." So far as the additional ground was concerned, the Tribunal examined the record of the Income-tax Officer and gave the finding that taking al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's default and whether the Income-tax Officer has spelt out his reasons to come to the above conclusion. In the present case, it is vital to remember that reassessment proceedings for 1981-82 arose out of investigation done by the Income-tax Officer for the assessment year 1982-83 and as a result of putting a specific query by him to the assessee with regard to the omission of the closing stock, and consequent income. It was as a result of this specific query that the revised return declaring income of about Rs. 87,000 more than the originally assessed income was filed by the assessee. The direction of the Income-tax Officer to issue notice under section 148 in the aforesaid setting of the facts cannot be without any reasoning. Return, showing income undisclosed earlier, is itself the reason for forming the belief that the income has escaped assessment. We are, therefore, unable to accept the assessee's contention that in the present case, initiation of action under section 148 was not valid. The assessee's additional grounds of appeal, therefore, stand rejected." We have heard Sri Vikram Gulati, learned counsel for the applicant, and Sri Shambhu Chopra, learned standing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t been found to be false or unsubstantiated and, therefore, no penalty is leviable. In support of the aforesaid plea he has relied upon the following decisions: (1) D.M. Dahanukar v. CIT [1967] 65 ITR 280 (Bom); (2) Sir Shadilal Sugar and General Mills Ltd. v. CIT [1987] 168 ITR 705 (SC); (3) CIT v. Bedi and Co. (P.) Ltd. [1990] 183 ITR 59 (Karn); (4) CIT v. Agarwalla Brothers [1991] 189 ITR 786 (Patna); (5) CIT v. A. Yonus Kunju [1997] 228 ITR 147 (Ker); (6) CIT v. Dhoolie Tea Co. Ltd. [1998] 231 ITR 65 (Cal); (7) CIT v. Suresh Chandra Mittal [2000] 241 ITR 124 (MP); (8) Baldev Singh Giani v. CIT [2001] 248 ITR 266 (P&H); and (9) Ess Ess Kay Engineering Co. P. Ltd. v. CIT [2001] 247 ITR 818 (SC). Sri Shambhu Chopra, learned standing counsel for the Revenue, submitted that the assessment in the present case had been completed on April 5,1982, on a total income of Rs. 12,390. While completing the assessment proceedings for the subsequent assessment year 1982-83, the Income-tax Officer had noticed that the applicant had sold 209 quintals of Ghuta rice in the first week of April, 1981, whereas till then there was no hulling of paddy nor was there any pending stock of Ghuta r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being detected in the proceeding for assessment in the subsequent assessment year 1982-83 constituted sufficient material for imposition of penalty. Having given our anxious consideration to the various pleas raised by learned counsel for the parries, we find that it is not in dispute that the applicant had not disclosed in the closing stock on the last date of the previous year relevant to the assessment year in question, the quantity of 433.04 quintals of Kinki rice as its own share out of Government rice hulling. The applicant had further not disclosed any closing stock of Ghuta rice which it had sold in the first week of April 1981, which fell in the previous year relevant to the assessment year 1982-83. The two discrepancies/omissions were noticed by the Income-tax Officer while completing the assessment proceeding for the subsequent assessment year, i.e., 1982-83, whereupon even though the assessment for the assessment year 1981-82, i.e., the year in question having been already completed on April 5, 1982, the applicant had filed a revised return. The assessing authority had made an entry on the order sheet on February 14, 1983, to the following effect: "Return received on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity, if he is satisfied in the course of any proceedings, to levy a penalty on the ground, inter alia, that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. The provision is quite wide in scope. And the additional material considered in appeal from the assessment order, would be available to the authority in proceeding for the levy of penalty under section 271(1)(c) of the Act. In the case of Jute Corporation of India Ltd. [1991] 187 ITR 688, the apex court has held as follows: "(ii) An appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer." Thus, from the aforesaid decisions it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he bar of res judicata being attracted because the order in such cases would lack inherent jurisdiction and would be a void order or a nullity. If an original order is without jurisdiction it would be a nullity confirmed in further appeals. The appellate order of the Tribunal thereon would also be a nullity and the Tribunal cannot confer any jurisdiction on the Income-tax Officer by making a remand order." In the case of R. Vijayaraghavan [1977] 110 ITR 535, the Madras High Court has held as follows: "The jurisdiction to revise an order of assessment would arise only if the order was wrong and further discovery has enabled the authority to revise. Accordingly, when in a partition, minor daughters are allotted shares though they were not entitled thereto, that will not militate against the partition itself as it is for the other sharers to question the partition deed if they so desired. As partition is not a transfer, the provisions of section 9(2)(iv) of the Tamil Nadu Agricultural Income-tax Act, 1955, would not apply. In the circumstances, the orders of reassessment of the original orders of composition on the ground that the partition under which the lands were partitioned was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment, it is irrelevant that the jurisdiction of the Income-tax Officer to reassess was not challenged at any of the earlier stages. The assessee is entitled to challenge the jurisdiction of the Income-tax Officer to initiate reassessment proceedings before the Appellate Assistant Commissioner in the second round of proceedings even though he had not raised it earlier before the Income-tax Officer or in the earlier appeal. The powers of the first appellate authority, whether the Appellate Assistant Commissioner or the Commissioner of Income-tax (Appeals), are coterminous with that of the Income-tax Officer. The appellate authority has jurisdiction to entertain a ground regarding jurisdiction to make reassessment in an appeal following remand." In the case of Johri Lal (HUF) [1973] 88 ITR 439, the apex court has held as follows: "The formation of the required belief by the Income-tax Officer before proceedings can be validly initiated under section 34(1)(a) is a condition precedent: the fulfilment of this condition is not a mere formality, it is mandatory, and, failure to fulfil that condition would vitiate the entire proceedings. Further, the formation of the required belief is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment. If any of the conditions mentioned above is missing the proceeding would be invalid and vitiated. Applying the principles laid down in the aforesaid decisions to the facts of the present case, we find that in the present case the applicant itself had filed a revised return on February 1, 1983, which was taken note of by the assessing authority and thereafter a notice was issued under section 148 of the Act on February 14, 1983. Moreover, we find that no specific form for recording reasons has been prescribed under the Act or the rules made thereunder. If, the assessee voluntarily files a return for which omission has been detected in the assessment proceedings in the subsequent assessment year and taking note of the revised return, a notice under section 148 of the Act is issued, the reasons would be sufficient. Thus, it cannot be said that no reasons have been recorded by the assessing authority, while issuing notice in the peculiar facts and circumstances of the case under section 148 of the Act. It may also be mentioned here that the reassessment had become final between the parties and unless and until it is specifically challenged in appropriate proceedings, either by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt injunction is punishable for contempt of court even though it was granted in proceedings deemed to have been irrevocably abandoned owing to the expiry of a time-limit.' 8. A distinction exists between a decree passed by a court having no jurisdiction and consequently being a nullity and not executable and a decree of the court which is merely illegal or not passed in accordance with the procedure laid down by law. A decree suffering from illegality or irregularity of procedure, cannot be termed in executable by the executing court; the remedy of a person aggrieved by such a decree is to have it set aside in a duly constituted legal proceedings or by a superior court failing which he must obey the command of the decree. A decree passed by a court of competent jurisdiction cannot be denuded of its efficacy by any collateral attack or in incidental proceedings." Thus, applying the principles laid down by the apex court in the aforesaid cases to the facts of the present case, we find that the reassessment order having not been challenged in an appeal or any other proceeding, it cannot be said to be a void order in a collateral proceeding. Now, coming to the merits of the case, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces but that does not absolve the Revenue from proving the mens rea of quasi-criminal offence. In the case of Bedi and Co. P. Ltd. [1990] 183 ITR 59, the Karnataka High Court has held that where reassessment has been set aside, there was no basis of imposition of penalty. In the case of Agarwalla Brothers [1991] 189 ITR 786, the Patna High Court has held that where the reassessment has been held to be not valid, and has been set aside, the penalty was not leviable as it has been imposed consequentially, on reassessment. In the aforesaid case the validity of the reassessment proceedings by way of separate question as also the penalty was came up for consideration. In the case of Dhoolie Tea Co. Ltd. [1998] 231 ITR 65, the Calcutta High Court has held that where the assessee has bona fide belief that his income is not taxable and he has failed to disclose such income under bona fide belief, no penalty should be imposed under section 271(1)(c) of the Act. In the case of Suresh Chandra Mittal [2000] 241 ITR 124, the Madhya Pradesh High Court has held as follows: "That the assessment was made by the Revenue and once the assessing authority had failed to take any objection in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which the income with reference to the original return was increased by Rs. 30,863, while the amount of Rs. 8,500 paid to D was not included even at that stage. The Inspecting Assistant Commissioner, therefore, initiated penalty proceedings in regard to the total amount of Rs. 39,363 and levied penalty under section 271(1)(c). The Tribunal found that there was a technical mistake in the accounting so far as the amount of Rs. 30,863 was concerned since the goods were in transit, but the non-disclosure of Rs. 8,500, which was paid in March, 1968, could not be said to be a technical mistake." We find that the apex court in the case of K.C. Builders v. Asst. CIT [2004] 265 ITR 562; [2004] JT 2 SC 100 has held as follows: "15. One of the amendments made to the abovementioned provisions is the omission of the word 'deliberately' from the expression 'deliberately furnished inaccurate particulars of such income'. It is implicit in the word 'concealed' that there has been a deliberate act on the part of the assessee. The meaning of the word 'concealment' as found in Shorter Oxford English Dictionary, third edition, Volume I, is as follows: 'In law, the intentional suppression of truth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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