COMMISSIONER OF INCOME TAX Vs. EMINENT ENTERPRISES

JUDGEMENT

(1.) AS directed by this court and 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 :

(2.) THE respondent is an assessee to income-tax. For the year 1976-77, the Income-tax Officer, by order dated March 18, 1981, levied a penalty of Rs. 39,480 on the respondent-assessee under Section 271(1)(a) of the Income-tax Act. In the appeal, the Appellate Assistant Commissioner of Income-tax, by order dated December 30, 1983, set aside the order of penalty with a direction to the Income-tax Officer to pass a fresh order, after giving an opportunity to the assessee of being heard. In second appeal, at the instance of the assessee, the Tribunal set aside the order of the Appellate Assistant Commissioner and deleted the penalty levied by the Income-tax Officer. THE appeal filed by the assessee was allowed by order dated July 23, 1986. THEreafter, the Revenue moved the Tribunal to refer certain questions of law for the decision of this court. It was declined. THE Revenue moved this court and this court reformulated or recast the questions as specified hereinabove and directed the Tribunal to refer the same to this court.

(3.) SECTION 251(1)(a) deals with the power of the first appellate authority in disposing of an appeal against an order of assessment. The appellate authority may confirm, reduce, enhance or annul an assessment. He may also set aside the assessment and refer the case altogether to the Assessing Officer for making a fresh assessment and he can also issue directions in that behalf. SECTION 251(1)(b) deals with an appeal against an order imposing penalty. Therein, the only powers given to the appellate authority are that he may either confirm the order or he may cancel such order or he may vary it either by enhancing the penalty or reducing it. Under SECTION 251(1)(c), cases not governed by Clauses (a) and (b) can be dealt with wherein the appellate authority can pass such orders in the appeal as he thinks fit. Normally, very wide discretion or jurisdiction is conferred on the first appellate authority under SECTION 251(1)(c) in cases not coming under SECTION 251(1)(a) or (b). He may set aside the order appealed against and order a remit or make further directions or pass such other order which will meet the ends of justice. SECTION 251 deals with the powers of the first appellate authority in different situations. Whereas, in cases coming under SECTION 251(1)(a)--appeal against an order of assessment and cases other than appeals against assessment and penalty--the first appellate authority can pass any order as he thinks fit, in the appeals against orders imposing penalties, the power of the first appellate authority is circumscribed or confined within limits. He can only confirm or cancel such order or vary it either enhancing it or reducing it. It is not open to the first appellate authority to set aside the order of the Income-tax Officer and order a remit or to give any direction as done in the instant case. This section is similar to SECTION 31(3)(f) of the Indian Income-tax Act, 1922. Construing SECTION 31(3)(f) of the Indian Income-tax Act, 1922, a Bench of the Allahabad High Court in CIT v. Rameshwardas Earn Narain [1977] 107 ITR 710 held that there is no power in the first appellate authority to give a direction to take fresh action in accordance with law. In other words, the first appellate authority in the cases governed by SECTION 31(3)(f) of the Indian Income-tax Act, 1922, corresponding to SECTION 251(1)(b) of the Income-tax Act, 1961, cannot set aside the order appealed against and order a remit or give further directions in that behalf. In this perspective, the Tribunal was justified in cancelling the order passed by the Appellate Assistant Commissioner and, in the result, cancelling the penalty levied. The decision of the Tribunal . is not open to objection. We, therefore, hold that the order of the Tribunal does not suffer from any error of law. We answer question No. 1 in the affirmative to the extent we hold that, on the language of SECTION 251(1)(b) of the Income-tax Act, 1961, the first appellate authority has no power to set aside the order appealed against and order a remit with directions. The order passed by the Tribunal interfering with the order passed by the. Appellate Assistant Commissioner dated December 30, 1983, is valid and justified. We answer question No. 2 in the affirmative, against the Revenue and in favour of the assessee and hold that the order of the Appellate Assistant Commissioner was infirm and that he has no power to set aside an order levying penalty with a direction to pass fresh orders.