COMMISSIONER OF INCOME TAX Vs. OCHHAVLAL PANALAL KOTHARI

JUDGEMENT

(1.) IN this reference made at tahe instance of the revenue, the following question has been referred to us by the Tribunal :

(2.) THE facts giving rise to this reference are that the assessee, the respondent herein, is a registered firm. The relevant assessment year was 1956 -57 and the assessee -firm filed its return voluntarily for the assessment year 1956 -57 on March 31, 1958, and the return showed a total income of Rs. 57,994. On June 30, 1960, the Income -tax Officer passed the assessment order holding the total income of the assessee -firm in the assessment year 1956 -57 to be Rs. 70,369. At the time of passing the assessment order the Income -tax Officer directed that notice under section 28 for late submission of return under section 22(1) should also be issued. In the penalty proceedings, the Income -tax Officer levied a penalty of Rs. 2,000 under section 28(1)(a) of the Indian Income -tax Act, 1922 (hereinafter referred to as 'the old Act'). The assessee filed an appeal before the Appellate Assistant Commissioner against the order of assessment and the Appellate Assistant Commissioner set aside the assessment and in consequence thereof the order of penalty was also set aside. Thereafter, fresh assessment was made and a sum of Rs. 66,169 was determined as the total income of the assessee for the assessment year 1956 -57; and this assessment order was passed by the Income -tax Officer on June 15, 1963. At the time of passing this order on June 15, 1963, the Income -tax Officer directed that penalty notice for default under section 22(1) of the old Act should be issued and fresh notice under section 28(3) of the old Act was issued by the Income -tax Officer on July 19, 1964. The Income -tax Officer passed an order on January 30, 1963, levying the penalty of Rs. 11,456 under section 271(1)(a) of the Income -tax Act, 1961 (hereinafter referred to as 'the new Act'); and this penalty was levied for default in filing the return in time as contemplated by section 22(1) of the old Act. Against this order of penalty, an appeal was filed before the Appellate Assistant Commissioner and that officer cancelled the penalty order. He held that the assessment order for the assessment year 1956 -57, having been passed de novo after April 1, 1962, the provisions of section 297(2)(g) would apply and the Income -tax Officer should have initiated penalty proceedings and the penalty should have been imposed under the new Act. According to the Appellate Assistant Commissioner since the penalty proceedings had been initiated under section 28 of the old Act and the penalty was imposed in consequence of the new Act, the order of penalty was cancelled, as this was not permissible in law. After the Appellate Assistant Commissioner's order cancelling the order of penalty was communicated to the Income -tax Officer, the Income -tax Officer once again started the proceedings under section 271 read with section 274 of the new Act. A notice was issued to the assessee to show cause why the penalty should not be levied and by his order, dated 11th June, 1965, the Income -tax Officer levied a penalty in the sum of Rs. 12,027 under section 271(1)(a) of the new Act. This order of penalty was confirmed by the Appellate Assistant Commissioner in the appeal filed by the assessee. The matter was taken in further appeal to the Tribunal and the Tribunal held that the order of the Appellate Assistant Commissioner, dated November 16, 1964, setting aside the penalty of Rs. 11,466 had become final and it was not open to challenge and hence the Tribunal set aside the fresh order of penalty, dated June 11, 1965, in the sum of Rs. 12,027. Thereafter, at the instance of the department, the question set out hereinabove has been referred to us for our decision.

(3.) UNDER section 297(2)(g) of the new Act, notwithstanding the repeal of the old Act, any proceeding for the imposition of a penalty in respect of any assessment for the year ending 31st day of March, 1962, may be initiated and any such penalty may be imposed under the new Act. The Tribunal in its order has observed in paragraph 3 that the main contention on behalf of the assessee was that the Income -tax Officer has no jurisdiction to levy penalty under section 271(1)(a) inasmuch as the proceedings for penalty had not been initiated when the Income -tax Officer finalised the assessment; and the Tribunal observed that in their opinion this submission on behalf of the assessee had no answer. The Tribunal also observed in paragraph 4 that since the order of the Appellate Assistant Commissioner, dated November 16, 1964, had become final in the sense that it was not appealed against by the department, it was not open to challenge.