RAJESWARI EXPORT HOUSE Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) This is an application under S.256(2) of the Income Tax Act, 1961. The assessment year concerned is 1974-75 for which the relevant accounting period ended on 30-6-1973. The assessee is an exporter of handloom textiles. The Assessing Authority completed the assessment making an addition to Rs.59,430/- to the returned income alleging inflation in the purchase cost. The Inspecting Asst. Commissioner of Income Tax, Calicut - 1 initiated proceedings under S.271(1)(c) of the Income Tax Act for levy of penalty. By order dated 6-3-1978, a penalty of Rs.59,430/- was levied. The assessee took up the matter in appeal before the Income Tax Appellate Tribunal, Cochin Bench, Ernakulam. The Appellate Tribunal upheld, inter alia, the contention of the petitioner that the Inspecting Assistant Commissioner had no jurisdiction to levy penalty and accordingly cancelled the penalty. Against the order cancelling the levy of penalty, Revenue filed an application under S.256(1) of the Income Tax Act which was allowed. In the reference so allowed, the High Court by its judgment dated 13-3-1985 held that in view of its earlier decision in I.T.R. 1 of 1979, the reference must be answered in favour of the Revenue. The matter was accordingly sent back to the Tribunal for giving effect to the judgment of the High Court under S.260 of the Income Tax Act. However, by the time the matter came up before the Tribunal for passing an order under S.260(1) of the Income Tax Act, the High Court in the case of C.I.T. v. P. I. Issac and others (168 ITR 793) overruled its decision in ITR 1 of 1979 and held that after 1-4-1976, the Inspecting Assistant Commissioner had no jurisdiction to levy a penalty.

(2.) The Tribunal, however, has implemented the decision of the High Court while passing orders under S.260(1) of the Income Tax Act. The present reference application under S.256(2) by the assessee is in respect of this order of the Tribunal under S.260(1) of the Income Tax Act.

(3.) Apart from anything else, the provision for Preference to the High Court under S.256 of the Income Tax Act is only in respect of an order passed by the Tribunal under S.254 of the Income Tax Act. The relevant provisions of S.256(1) are as follows: "256(1). The Assessee or the Commissioner may, within sixty days of the date upon which he is served with notice of an order under S.254 ...... require the Appellate Tribunal to refer to the High Court any question of law arising out of such order ...."