COMMISSIONER OF INCOME TAX Vs. SREEDHARAN M

JUDGEMENT

(1.) These are connected cases. At the instance of the Revenue the Income Tax Appellate Tribunal (in short, the Tribunal) has referred the following two questions of law for the decision of this Court in the above cases

(2.) The same assessee is the respondent in all the four referred cases. Common questions arise for consideration in the connected cases. They relate to the assessment years 1973-74, 1974-75 and 1975-76. The respondent is an assessee to income tax. For the years 1973-74 and 1974-75, the Income Tax Officer initiated proceedings under S.271(1)(c) of the Income Tax Act, 1961 for alleged concealment of the particulars of the income. For the assessment year 1975-76 the Income Tax Officer initiated proceedings under S.271(1)(a) of the Act for late filing of the return and under S.271(1)(c) of the Act for concealment of the particulars of income. That is why for the three assessment years there were four proceedings and four appeals. Two appeals relate to the assessment year 1975-76. For all the years penalties were levied by the Income Tax Officer. Under S.271(1)(c) of the Act and for the year 1975-76 penalty under S.271(1)(a) of, the Act was also levied. In the appeals filed by the assessee, the Appellate Assistant Commissioner (in short, AAC) held that the Income Tax Officer, who levied the penalty in all the four cases is different from the Income Tax Officer, who had completed the assessment and initiated the penalty proceedings and the officer who levied the penalty did so without giving an opportunity to the assessee of being heard or even without issuing a notice to the assessee. The AAC held that when a successor officer takes up the penalty proceeding for disposal, it is only fair and proper that he gives an opportunity to the assessee of being heard and if he fails to do so and levies the penalties without giving an opportunity to the assessee the penalty orders will be bad in law. He relied on the decision of the Calcutta High Court in C.I.T. v. Smt. Chitra Mukerjee (127 ITR 252). All the four appeals filed by the assessee were allowed and the penalties levied were cancelled. The revenue carried the matter by way of appeals before the Tribunal. All the four appeals were considered together and a common order was passed by the Tribunal, dated 7th July 1983. After adverting to the rival pleas put forward before it and after adverting to S.129 and S.271(1)(a), 271(1)(c) and 274(1) of the Income Tax Act and the decisions of the Andhra Pradesh High Court in Anantha Naganna Chetty v. C.I.T. (78 ITR 743) and of the Calcutta High Court in Smt. Chitra Mukerjee case (127 ITR 252). The Tribunal held that whenever any income tax authority is succeeded by another, the successor may continue the proceedings from the stage from which the proceedings was left by his predecessor, and in such a case, the assessee has a right to demand that before the proceeding is so continued, the previous proceedings or any part thereof should be reopened. The Tribunal further held that it is implicit in the section that the succeeding authority should intimate the assessee his intention to continue the proceeding from the stage at which it was left by his predecessor. In the absence of any opportunity provided for the exercise of his right or without the knowledge that such opportunity exists, the assessee cannot be deemed to have declined to avail of the opportunity by demanding a rehearing of reopening of the case; nor could he be deemed to have availed it. On the basis of the above view of the law, the Tribunal held that the successor Income Tax Officer in the instant case has no authority to pass an order under S.271(1)(a) and (c) of the Income Tax Act, without giving the assessee a fresh opportunity of being heard and the AAC was justified in cancelling the penalties, following the decision of Smt. Chitra Mukerjee case (127 ITR 252). The orders passed by the AAC were confirmed by the Tribunal. It is thereafter, at the instance of the Revenue, the two questions of law, formulated hereinabove, have been referred for the decision of this Court.

(3.) We heard counsel for the Revenue, Mr. P. K. R. Menon and also counsel for the respondent assessee Mr. N. Sukumaran. Admittedly, in these cases in pursuance to the notices issued by the Income Tax Officer under S.271 read with S.274 of the Act, the assessee filed his objections. Subsequently, there was a change in the incumbent of the office. The successor Income Tax Officer, without any further notice to the assessee, or hearing him, levied penalties under S.271(1)(c) for all the three years and also under S.271(1)(a) for the year 1975-76. The short question that arises for consideration, is whether, in a case where the assessee has already filed his objections to the notices, proposing to levy penalties, the change in the incumbent of the office necessitates a fresh notice to be given to the assessee or an opportunity for hearing. The Andhra Pradesh High Court in Anantha Naganna Chetty case (78 ITR 743) has held that it is necessary for the succeeding Income Tax Officer to intimate the assessee of his intention to continue the proceeding from the stage at which it was left by his predecessor; and in the absence of such intimation, the assessee cannot exercise the right conferred on him under S.129 of the Income Tax Act. In other words, a change in the incumbent of the office necessitates that the succeeding authority should intimate to the assessee his intention to continue the proceeding from the stage at which it was left by his predecessor. The absence of the knowledge of the assessee, that the assessing authority has been succeeded by another and that the successor proposes to pass the penalty order is a vital factor to be borne in mind. The above decision has been followed in Commissioner of Wealth Tax v. Smt. Azizunnissa Begum (119 ITR 376). The decision of the Calcutta High Court in Smt. Chitra Mukerjee case (127 ITR 252) is also in accord with the said view.