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TMI Blog1980 (4) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings had not been initiated correctly and thereby cancelling the levy of penalty under section 271(1)(a) of the Act of 1961 ? (2) Whether, on the facts and in the circumstances of the case, the, Tribunal was right in law in holding that proceedings for the imposition of penalty under section 273 had not been validly initiated and thus cancelling the penalty levied under section 273 of the Income-tax Act, 1961 ? " The facts leading to the reference may be briefly stated. For the assessment year 1959-60, the assessee should have filed an estimate under s. 18A of the Indian I.T. Act, 1922, and paid advance tax but failed to do so. His return of income under s. 22(1) of the Indian I.T. Act, 1922, was also due to be filed by June, 1959, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings had been initiated before the completion of the assessment proceedings. However, on the quantum of the penalty he gave some relief. He reduced the penalty under s. 271(1)(a) to Rs. 9,656 and that under s. 273 to Rs. 2,033 only. The assessee was not satisfied with the relief given by the AAC and preferred appeals to the Appellate Tribunal. Several contentions were raised before the Appellate Tribunal, but, having regard to the terms of the questions referred to us, only one of the contentions is material. This contention was that, in the case of both the penalties, the proceedings had not been initiated in the course of the assessment proceedings. It was pointed out that the penalty notices had been issued only after the assessment w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmitted certain types of defaults such as, failure without reasonable cause to file a return; failure without sufficient cause to comply with statutory notices and concealing or furnishing of incorrect particulars of income. In other words, the Act only required that before the assessment was completed the ITO should have arrived at a prima facie conclusion that defaults of the above nature or any of them had been committed by the assessee. It was not necessary further that this conclusion of the ITO must have been translated into action by initiation of steps against the assessee in this regard such as, issue of a penalty notice by the officer himself or issue of directions by the ITO for such issue. This position was explained by the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been issued before that date, it is seen that the officer had given a direction to his office before completing the assessment that such a notice should be issued. Similarly, in cases governed by s. 274(2) (which has been deleted w.e.f. April 1, 1976), action could be considered to have been initiated if the officer had made a reference to the IAC under that provision though the IAC might apply his mind and issue a further notice to the assessee only long thereafter. But some definite step by way of initiation of penalty proceedings should be taken by the officer before the assessment proceedings come to an end. The above position is quite clear from the terms of the section itself and has also been clarified in a number of decisions whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. On behalf of the department, Sri. Mukerjee submitted that the words used in the assessment order should not be construed narrowly And that the sentence at the end of the assessment order (extracted earlier) should be treated as sufficient for the purpose. We are unable to accept this submission. As explained above, the language of s. 275 envisages some positive step on the part of the ITO being taken before the completion of the assessment. In our opinion, it is not enough for the officer to record that penalty proceedings are to be or will be initiated separately There should be some other step such as an actual direction to the office to issue a penalty notice (which thereafter needs only ministerial compliance), the actual issue o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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