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TMI Blog1982 (1) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... 1949-50 was decided on January 13, 1959, and the appeals for the two remaining years were decided on 23rd November, 1959. After the ITO had completed the assessment by order dated 30th November, 1951, on the same day he issued notices under s. 28 of the Indian I.T. Act, 1922, hereinafter referred to as " the Act ", to show cause why penalty should not be imposed for concealment of income in all the three years. The notices were served on the assessee-company on January 4, 1952. There is some dispute as to whether anybody had appeared on behalf of the assessee-company on January 30, 1952, on which day the hearing of the penalty proceedings was fixed. According to the assessee-company it appeared before the ITO on that day and had contended that there was no justification for imposing penalty. According to the Revenue, nobody had appeared on January 30, 1952. The Tribunal found none of these stands established. No progress was, however, made in the penalty proceedings between January 30, 1952, and July 19, 1961. On July 19, 1961, the ITO issued fresh notices to the assessee to show cause why penalty should not be imposed against it for concealment of income in the three assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e instance of the assessee. Mr. Dastur, appearing on behalf of the assessee, has contended that the assessee had never made an application to keep the penalty proceedings in abeyance and there was no explanation for the, delay between November, 1951, and July, 1961, and it was merely the surmise of the Tribunal that the ITO might have kept the proceedings in abeyance as the concealments were large and the appeals were pending. Further, it is contended that there was no explanation whatsoever on the part of the Revenue in respect of the delay between November, 1959, and July, 1961, and then between July, 1961, and May, 1967. Thus, according to the learned counsel, on a proper perusal of the facts, the delay was of 16 years from November, 1951, to 1967, and not of 6 years as assumed by the Tribunal. On this premise it is argued that this was an inordinate delay and the Tribunal should have held that taking penalty proceedings against the assessee would amount to an abuse of the powers under the Act by the ITO and the orders of penalty should, therefore, have been set aside by the Tribunal. Heavy reliance is placed by the learned counsel on the two decisions of the Allahabad High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee on the basis of the decision in Mohd. Atiq's case that if there is an inordinate delay, then the order of penalty, if levied, should be quashed. Dealing with this argument, the Division Bench in Ram Kishan's case has observed (p. 494): " If the learned single judge intended to lay down that inordinate delay in every case, as a matter of law, would lead to the invalidity of the penalty order then we cannot, with respect, subscribe to it. " In Lalta Prasad Goenka's case [1980] 122 ITR 399 (Bom), this court has taken the view that since no limitation has been prescribed in the Indian I.T. Act, 1922 for completion of the penalty proceedings, it will not be possible to hold that the order of penalty becomes vulnerable merely on the ground of delay. Mr. Dastur has with reference to this decision contended that this decision does not have the effect of holding that even where the inordinate delay has not been properly explained, the orders of penalty cannot be interfered with. According to Mr. Dastur, the observations made by the Division Bench in Lalta Prasad's case [1980] 122 ITR 399 (Bom), must be read in the light of the fact that penalty proceedings which were initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his partnership firm. Though the reply was filed by the assessee on 12th October, 1944, nothing further was done by the Department for a period of 12 years till April 16, 1956, when another notice was issued. Thereafter, nothing was done for another three years till September, 1959, when a third notice was issued to the petitioner to show cause against the imposition of penalty. This was followed by a fourth notice of February 5, 1960, and a fifth notice of August 10, 1961. These notices were challenged by the petitioner. It was held by the Division Bench that when a notice regarding penalty is issued under s. 28 of the Indian I.T. Act, 1922, after an unreasonable lapse of time, it amounts to an abuse of power and the proceedings could be quashed by a writ issued by the court. The Division Bench pointed out that the answer to the question as to what is a reasonable time would depend on the peculiar facts and circumstances of each case. We may point out that the decision in Bisheshwar Lal's case [1970] 76 ITR 653 (All), does not make any reference to the decision of the same court in Ram Kishan Baldeo Prasad v. CIT [1967] 65 ITR 491, on which reliance has been placed by Mr. Joshi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statute cannot be exercised at any point of time but should be exercised within reasonable time. The following observations may usefully be referred to (headnote) : " If it could be found, on the facts and circumstances of the case, that there is unreasonable delay in initiating proceedings for the imposition of penalty, such proceedings would be bad in law. The long delay by itself may prima facie be unreasonable but if, in such a case, there is an explanation for the delay, that explanation has to be considered. But if there be no explanation at all and the authority acts under the impression that, in the absence of a period of limitation in the Act, it is open to it to exercise its power after any number of years, that would be an unsustainable approach. If in such a case the court finds that such exercise has been beyond reasonable time and there is no scope for an examination of the explanation, the action would be bad." These observations have our respectful concurrence. The questions which, therefore, will have to be decided when the penalty proceedings are challenged on the ground of inordinate delay are, firstly whether the delay is inordinate, and, secondly, wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id rulings". Now, if the assessment proceedings did not become illegal merely on the ground of inordinate delay, because there is no statutory bar of limitation, then the question as to whether on the ground of delay the proceedings for penalty should be quashed or the orders of penalty should be set aside, will be a matter which it was open to the Tribunal to decide and the matter will have to be decided by the Tribunal on the circumstances of each case. If, on a consideration of the circumstances, the Tribunal did not think it fit to exercise its discretion to set aside the order of penalty on the ground of inordinate delay, it cannot be said that the Tribunal had acted, in any way, illegally or contrary to law. The assessee could not as a matter of right claim that the penalty proceedings should be set aside and the Tribunal was entitled to take the view that on the facts and circumstances of the case, the penalty order should not be set aside. We, therefore, find no error of law in the order of the Tribunal and, consequently, the question referred has to be answered in the negative and against the assessee. The question is accordingly answered in the negative and against th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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