COMMISSIONER OF INCOME TAX Vs. K L BAGGA

JUDGEMENT

(1.) This reference under Section 256(1) of the Income-tax Act, 1961 which will hereafter be referred to as the new Act arises out of an order made by the Income-tax Appellate Tribunal, Delhi Bench 'A'. The applicant is the Commissioner of Income-tax while the respondent who will hereafter be referred to as the assessee is Shri K. L. Bagga a dealer in petrol, mobil oil etc.

(2.) The assessment year is 1958-59 and the matter concerns the validity or otherwise of the commencement of proceedings for imposition of penalty of Rs. 12,000.00 under Section 271(1 )(c) of the Income-tax Act, 1961. The penalty was levied on the ground that the cash credits appearing in certain accounts in the b'JJks of account maintained by the assessee were actually secreted profits of the assessee. The inspecting Assistant Commissioner accordingly imposed a penalty of Rs. 12,000- under Section 271(l)(c) of the new Act on the assesses.

(3.) On appeal against the penalty, the Income-tax appellate Tribunal set aside the order of penalty on the ground that the proceedings for the imposition of penalty had not been validly initiated. The relevant facts are that the assessment for the year 1958-59 was completed on 30-3-1963. The Income-tax Officer wrote in that order "issue penalty notice for concealment of income as discussed above. Copy of the assessment order is annexed hereto as other documents." On 1st June., i963, the Income-tax Officer referred the case for imposition of penalty to the Inspecting Assistant Commissioner. He did so in pursuance of the provisions of Section 274(2) of the new Act under which if the 'minimum penalty imposible exceeded the sum of Rs. 1,000.00, the case had to be referred to the Inspecting Assistant Commissioner. On 3rd April, 1964 the Inspecting Assistant Commissioner issued notice to the assessee under S. 274 calling upon him to show cause as to why he should not be penalised for concealing his income. Meanwhile the Inspecting Assistant Commissioner was transferred and his successor issued another notice on 8th September, 1964 again under Section 274. It was only on 24th October 1964 that the Income-tax Officer informed the assessee about the reference of his case for penalty to the Inspecting Assistant Commissioner. Thereafter another notice dated 17-11-1964 was given to the assessee under Section 274.