KERALA OIL MILLS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following question of law has been referred for our opinion by the Income-tax Appellate Tribunal, Cochin Bench:

(2.) THE question arises with respect to the assessment year 1966-67. THE return was filed on December 1, 1966, and the assessment was "completed by order dated the 20th March, 1971. Penalty was imposed by order dated March 31, 1973. Section 275 of the I.T. Act, 1961, which provided the time-limit within which proceedings for imposition of penalty had to be completed was amended 'by the Taxation Laws (Amendment) Act (42 of 1970) with effect from April 1, 1971. THE section, after its amendment, permitted penalty proceedings to be completed within two years of the completion of the assessment order. It is beyond dispute that, but for this amendment, under the section as it stood previously, the penalty proceedings would be beyond the time-limit indicated by the earlier section. On these facts the Tribunal held that Section 275 was a procedural section which would govern the penalty proceedings at the time of the imposition. THE Tribunal held that Section 275 embodied a rule of limitation; that rules of limitation are rules of procedure and that the rules applicable are the rules which are in force at the time when the proceedings are taken. It relied upon certain passages from Mitra's Limitation Act and on a passage from the decision in Beepathuma v. Shankaranarayana, AIR 1965 SC 241. Counsel for the assessee contended before us that the view of the Tribunal that Section 275 is a procedural section cannot be supported in law, that the section was inextricably linked with certain substantive provisions of the Act relating to the imposition of the penalty and, such being the position, the principle that procedural sections have retrospective operation so as to affect pending proceedings, cannot apply. Counsel drew our attention to the various amendments introduced by the Taxation Laws (Amendment) Act, 1970, to Sub-section (4A) of Section 271, Sub-section (2) of Section 274 and Section 275. In particular, it was stressed that, as a result of these amendments, the range of the power of ITO to take penalty proceedings had itself been enlarged or widened so as to cover even cases where the concealment exceeds a sum of Rs. 25,000 with the qualification that such cases were to be referred to the IAC. THE provisions of Section 275 being inextricably linked with Section 274(2) which gave the above power, it was contended that it was wrong to regard Section 275 as dealing only with procedure, and thereby to apply it even to pending proceedings. THE principle of the decision of a Division Bench of this court in Hajee K. Assainar v. CIT [1971] 81 ITR 423 was stressed. THEre it was observed by this court (p. 428):

(3.) FROM these observations, counsel would contend that Section 275 embodied a jurisdictional condition or a fetter on the right or jurisdiction of the officer and not a period of limitation. On a conspectus of the provisions and the scheme of the sections, we cannot accept this argument. The provision construed by the Supreme Court in Gadgil's case [1964] 53 ITR 231 was different, and the observations are understandable.