9911796707
TMI Blog1980 (2) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... . Details Asst. year 1967-68 Asst. year 1968-69 (i) Return filed 22-9-67 5-9-68 (ii) Original assessment completed 19-8-69 21-1-70 (iii) Return in response to notice u/s 148 12-7-71 12-7-71 (iv) Assessment under s. 147(a) r/w s. 144 29-3-75 29-3-75 (v) Penalty Proceedings initiated on 29-3-75 29-3-75 (vi) Application dt. 31-3-75 under s. 146 31-3-75 31-3-75 (vii) Penalty proceedings in relation to asst. Order dt. 29-3-1975 dropped on 31-3-75 31-3-75 (viii) Fresh assessment in pursuance to acceptance of 146 application 28-2-76 28-2-76 (ix) Penalty proceedings initiated on 28-2-76 28-2-76 (x) Reference under s. 274(2) of the IT Act, 1961 by the ITO to the IAC 23-2-78 23-2-78 (xi) Notice by the IAC under s. 274 25-2-78 25-2-78 (xii) Penalty imposed 18-3-78 18-3-78 (There is no dispute on quantum) 3. The first legal issue and contention raised is whether p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s beyond the period of two years after the end of the financial year in which the original assessment was completed and therefore, void ab initio. 5. For the Revenue, the assessee's contentions were opposed. Mr. C.S. Jain very strongly contended that the limitation in terms of s. 275 could be said to start only from 28th Feb., 76, and, therefore, the penalty must be held to be imposed within the statutory period of two years from the end of the financial year ending 31st March, 76. 6. We reject the assessee's contention that the penalty imposed was beyond the statutory period in terms of s. 275. Relevant provisions of s. 275 read as follows" "s. 275 Bar of Limitation of Imposing Penalties. No order imposing a penalty under this Chapter shall be passed. (a) in a case where the relevant assessment or other order is the subject matter of an appeal to the AAC under s. 246 or an appeal to the Tribunal under sub-s (2) of s. 253, after the expiration of a period of (i) two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated are completed, or (ii) six months from the end of the mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of time, therefore, clearly emanates from fallacious legal understanding and is rejected. To our mind, when the legislature provided the limitation of time for completion of various types of assessment, it did not consider it necessary to repeat that limitation for purposes of imposition of penalty because it had already made an apprehensive scheme of limitation for completion of penalties under s. 275 based upon finality of assessment. s. 275 links the period of limitation with the assessment. Therefore, once the assessment is made, the limitation for purposes of imposition of penalty becomes referable to that assessment. The argument that the absence of a provision for extending the period of limitation for imposition of penalties, as against a specific provision for extension of assessments under s. 153, indicates the legislature's intendment to place a bar of limitation of two years for imposing penalty in all cases, including penalties from de novo assessments to our mind does not exist. The first legal issue and contention is decided against the assessee. 7. The second question for our decision is whether on the omission of s. 274(2) and amendment of s. 253(1)(b) of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his income or furnished inaccurate particulars of such income. He may direct that such person shall pay by way of penalty,— (1)(a) (b) xx xx (i) xx xx (ii) xx xx (iii) in the cases referred to in cl. (c), in addition to any tax payable by him, a sum which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income. 9. The contention raised for the assessee is that s. 274(2), before its omission from the statute book, was in the nature of a proviso to s. 271(1)(c)(iii) which is the main enactment for levy of penalty on account of concealment of income or filing inaccurate particulars thereof. Under the said main enactment only the ITO or the AAC is competent to levy penalty irrespective of the amount of penalty involved. Sec. 274(2) only restricted the powers of the ITO in the matter of levy of penalty in certain cases. According to the learned counsel, no other construction was possible from a bare reading of s. 274(2). We were referred to the Hon'ble Supreme Court judgment in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue, Shri C.S. Jain, Senior Authorised Representative, first submitted that there is nothing is the omission if s. 274(2) of the IAC in pending cases got divested and that the penalty cases in which references had been made before 1st April, 1976 had to be restored back to the ITO. The Revenue relied on s. 6 of the General Clause Act. 13. Before proceeding further we like to decide as to whether reference under s. 274(2) had been made before 1st April, 1976 but no order passed by that date, the IAC got divested of the jurisdiction to pass any penalty order. The Hon'ble Punjab Haryana High Court vide its judgment dt. 27th Aug., 1979 in the case CIT vs. Raman Industries(3), has resolved such controversy to a great extent. There Lordships were dealing with the amendment in s. 274(2) w.e.f. 1stApril, 1971 by which it was provided that the IAC would assume jurisdiction only if the minimum penalty imposable exceeded Rs. 25,000. The question before the Hon'ble High Court was as to what happened in the case where reference had been made to the IAC before 1st April, 1971 and where minimum imposable penalty exceeded rupees one thousand but less than rupees twenty five thousands but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this form or that, you should proceed in another and a different way, clearly these bygone transactions are to be sued for and enforced according to the new form of procedure. Alternations in the form of procedure are also retrospective unless there is some good reason or other why they should not be. Then again, I think that where alterations are made in matter of evidence, certainly upon the reason of the thing, and I think upon the authorities also, those are retrospective, whether civil or criminal. But where the effect would be to alter a transaction already entered into, where it would be to make that valid which was previously invalid to make an instrument which had no effect at all, and from which the party was at liberty to depart as long as he pleased, binding, I think, the prima facie construction of the Act is that it is not to be retrospective, and that it would require strong reasons to show that it is not the case...." 8. In order to see whether the amendment of sub-s. (2) of s. 274 effected retrospectively or not, it is necessary to determine as to whether it takes away a vested right of the assessee. It cannot be disputed that the right to institute proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause Court as well as the Bombay City Civil Court which was then about to be established. The legislature intended to deprive the High Court of this jurisdiction to receive, try and determine suit between Rs. 1,000 and Rs. 2,000 which could be instituted by the plaintiff at his selection in the High Court acting under provisions of s. 21 Presidency Small Cause Courts Act. The legislature also intended to deprive they High Court of the jurisdiction to receive, try and determine suits not exceeding Rs. 10,000 in value and arising in Greater Bombay which were intended by it to be congizable by the Bombay City Civil Court which was about to be established. No provision was, however, made by the Legislature for transfer of suits pending in the High Court to Small Cause Courts. It we held by M.M. Bhagwati J. that the absence of such provision had the result of continuing the jurisdiction of the High Court in the matter of jurisdiction determination and trial of suit which had been rightly received by it. Following observation of the learned Judge may be reproduced in extenso: "............Normally it would not have a retrospective operation. It has been laid down as a fundamental of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construed as to take away an action which has been well commenced. 9. Sec. 271 and 274 as amended by the Amendment Act came up for interpretation before Gujarat High Court in CIT Gujarat vs. R Ochhavalal Co.(9), CIT vs. Royal Motor Car (10) and before Andhra Pradesh High Court in Addl. CIT Anantapur vs. Dr. Khaja Khutabuddinkhan (11). In R. Ochhavalal Co.'s case it was held that the jurisdiction of the IAC to deal with the penalty matter is to be looked at as on the date of initiation of proceedings and not with reference to the subsequent events and such jurisdiction cannot be divested by what subsequently happened. This view was again taken by the same High Court in Royal Motor Car Co.'s case. In Dr. Khaja Khutabuddinkhan's case a Division Bench of the Andhra Pradesh High Court said that if during the time when the matter of penalty had been referred to and was pending before the IAC the law changed and the minimum penalty for purpose of making a reference to the IAC was raised from Rs. 1000 to Rs. 25,000 it does not mean that the jurisdiction of the IAC to impose penalty is taken away. We are in respectful agreement with the abovesaid observations. 10. From the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e done even after repeal of s. 274(2) and, therefore there was no question of diverting of the jurisdiction of the IAC by the mere absence of the act of referring by the ITO because the jurisdiction was vested by the statute and not by the act of reference. We are not inclined to go with Shri C.S. Jain because the omission of s. 274(2) certainly did not affect the vested rights of the parties as such. In pending matters before the IAC, he had the requisite powers to levy penalty in the absence of any clear provision that the omission of s. 274(2) the pending cases shall revert back to the ITO but it would be fallacious to think that act of reference was not necessary and that the jurisdiction to impose penalty vested in the IAC in certain class of cases as provided under s. 274(2) with the framing of the assessment as such. If we are to accept the Revenue's argument that act of referral being a ministerial function was of no importance or consequence, then we must also accept that major portion of s. 274(2) was redundant or unnecessary. It is well settled law that redundancy cannot be imputed to legislature and here Mr. Jain even wanted us to ignore the mandatory provision of s. 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the date the lis commences and although it may be actually exercised when the adverse judgment is pronounced, such right, is governed by the cause of action. The Revenue's contention that the assessee has no remedy under the IT Act against the levy of penalty by the IAC is wholly wrong and unjustified. Apparently, it has been lost sight of that the penalty imposed is with the help of the provision of s. 271(1)(c) and right of appeal against penalty order under s. 271(1)(c) has not been taken by any amendment of the Act. It may be observed here that s. 271(1)(c) is on the statute book and only sub-s. (2) of s. 274 has been removed. We could understand the Revenue's contention if the penalty could be imposed under s. 274(2) without the help and reference to s. 271(1)(c). But the position was otherwise because whereas 271(1)(c) is a complete independent provision, sub-s. (2) of s. 274 could not levy any penalty. 18. The cause of action for the order under appeal having emanated from the provision of s. 271(1)(c), the assessee is well within its right to contest the orders of the IAC who did not have the necessary powers of legal sanction behind his action. The manner of processin ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
