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TMI Blog1981 (1) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... ved under s. 30 or where the assessee has been treated as not being in default under the proviso to sub-s. (1) of s. 40 pending his appeal, after the expiration of three years from the date on which the appeal was decided. Therefore, by virtue of sub-s. (4), the tax imposed on an assessee becomes irrecoverable after the period specified in sub-s. (4) and, similarly, if penalty is imposed, such: penalty becomes irrecoverable after the period specified in sub-s. (4). In a case, where the tax imposed has become irrecoverable by lapse of time, if after many years, the assessing authority chooses to impose penalty, could such an imposition be validly attacked ? That is the question before us. The period is about 16 years after the demand. Despite the absence of a period specified in s. 41 as that within which penalty could be imposed, could penalty be imposed beyond a reasonable period ? If not, is a period of 16 years reasonable period ? These are the questions raised in this original petition. The assessee in this case was assessed to agricultural income-tax for 1958-59, by order dated February 10, 1960, and a demand notice for Rs. 2,787.54 was served on the assessee. Out of this a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of default in paying the tax. I have not been shown any provision in the statute which places an embargo on imposing penalty beyond a certain time from the date of the assessment. " Of course there is no provision in the statute limiting the time within which penalty is to be imposed. The question whether even in the absence of a provision in the statute limiting the time within which action had to be taken, an authority could exercise its power to impose penalty after any number of years and without having any reason for the inordinate delay, was not before the learned judge. In fact, it was not raised in that case. The assessment there was by an order dated February 10, 1962. There was an appeal against that order and it was in March, 1967, that Ex. P-2 notice proposing recovery of tax and imposition of penalty was issued to the petitioner therein. On those facts no contention was raised in that case that there was any inordinate delay in issuing the notice, so much so, there was no occasion to consider it. Our attention has been drawn to the decision of the Supreme. Court in Swastik Oil Mills Ltd. v. H. B. Munshi [1968] 21 STC 383, by the learned counsel, Sri Dharmadan, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter was already pending in revision and the assessment had not become final. In our view, whatever the Supreme Court observed in that case has to be understood in the context of the facts and circumstances of that case, without treating it as one laying down a principle of general application." The Division Bench further observed thus : " To us it appears to be a sound principle that even though s. 34 of the Act in terms does not prescribe a time-limit within which the power under that section has to be exercised, in order to avoid prejudice and hardship to the assessee it should be exercised within a reasonable time once the assessment becomes final, lest it be a Damocles' sword hanging over the head of the assessee for all time. We have not been shown anything to justify the inordinate delay between the completion of assessment for the years 1967-68 and 1968-69, on November 2, 1967, and November 20, 1968, respectively, on the one hand and its reopening on August 31, 1978, on the other, the delay being about 11 years in one case and about 10 years in the other. " The decision of our learned brother, Gopalan Nambiyar J. is well answered by the decision of the Division Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or, to be taken into consideration in determining the propriety of the order ...... Therefore, where the assessee is not to blame for the inordinate delay in completing penalty proceedings and the sword of Damocles has been kept hanging over his head for many a year without any rhyme or reason, it will certainly be a factor, amongst others, for the Tribunal to consider whether the order passed by the Income-tax Officer was a proper one. In Bisheshwar Lal v. ITO [1970] 75 ITR 698 (All), penalty notices had been issued to the petitioner-firm between the years 1944-45, 1945-46, 1946-47 and 1948-49. Since the penalty proceedings were kept pending till 1963, the petitioner filed a writ petition to quash the penalty notices. These notices were quashed by a Division Bench of the Allahabad High Court which found that the department did not explain why the proceedings could not be completed during the interval of 14 years and, therefore, the penalty proceedings must be found to be an abuse of the power conferred on the ITO under s. 28(1)(c) of the I.T. Act. The notices were quashed and the penalty proceedings were directed to be dropped. The contention that since no period of limitation w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1975] 100 ITR 17. The question there arose by way of reference by the Appellate Tribunal and the question was " Whether, on the facts and in the circumstances of the case, any penalty was exigible in the assessee's case for the assessment year 1946-47 ? " The assessment had become final on 24th July, 1954, and there was no order levying penalty till 1st July, 1963. The court observed thus : " Though no period for levying the penalty has been fixed in the Indian Income-tax Act, 1922, it has been held by this court that there should not be any inordinate delay and it should be levied within reasonable time ...... The department has not chosen to furnish any explanation for the inordinate delay ...... As there is inordinate delay, we consider that the levy of penalty has not been made within a reasonable time." The decision of the Orissa High Court in CIT v. Rupsa Rice Mills [1964] 54 ITR 328 has been referred to in Bisheshwar Lal v. ITO [1970] 75 ITR 698 (All) and explained. There the question referred concerned the validity of an order imposing penalty under s. 28(1) of the Indian I.T. Act. The Orissa High Court was not prepared to read a rule of limitation so as to restrict the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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