VASANI AND COMPANY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Tribunal has posed the following question in this reference :

(2.) THE present question has arisen in aspect of the two assessment years 1958 -59 and 1964 -65. 11 years' proceedings in respect of this assessee had been pending before the various authorities. The proceedings for the fur years from 1957 -58 to 1960 -61 had been reopened under section 148 while the proceedings for assessment for the years 1961 -62, had been pending before the Income -tax Officer and the year 1962 -63, had been pending before the Appellate Assistant Commissioner. For the other five years, 1963 -64 to 1967 -68, proceedings for assessment were pending before the Income -tax Officer. In all these proceedings settlement had been reached, and in so far as the present two years were concerned in the assessment proceeding for 1958 -59, Rs. 15,000 with Rs. 920 as interest has been added on account of the hundi loan in question, as per the order at annexure 'H', dated January 25, 1969; while in the proceeding for the assessment year 1964 -65, the amount of Rs. 20,000 with interest of Rs. 5,875 and an additional amount of Rs. 10,000 by way of cash credit in the account of one Harshrai Thaker had been added a per the order at annexure 'F' dated March 10, 1969. Both the orders recited the fact that penalty proceedings had been initiated for concealment of income. On the basis of the aforesaid orders, the Inspecting Assistant Commissioner levied penalty of Rs. 1,582.02 and Rs. 3,445. The assessee having challenged this order in appeal before the Tribunal on the ground that no show -cause notice had been served on him as required by section 274 for giving due opportunity for hearing, the Tribunal upheld the contention. The Tribunal even perused the envelope in which the show -cause notice was alleged to have been sent. The remark on the envelope was 'party not traceable', which indicated the fact that the assessee had not been served with the notice. the Tribunal, therefore, held that, as the law required that no order imposing penalty under Chapter XXI may be passed unless the assessee had been heard or had been given a reasonable opportunity of being heard, mere dispatch of notice was not sufficient compliance with the mandatory provision of section 274. Then the Tribunal strangely observed that 'though in law it may constitute proper service', it was clear that the assessee has not been given an opportunity to put up his case. Therefore, the Tribunal set aside the order of penalty and sent back the matter to the Inspecting Assistant Commissioner for giving an opportunity to the assessee to show cause why penalty should not be imposed under section 271(1)(c), and then to pass a legal order. The Tribunal having disposed of these two appeals of the assessee by the aforesaid order, the assessee had come in the present reference.

(3.) MR . Patel, therefore, vehemently argued that the penalty proceedings for both these year having been initiated on the date of completion of the reassessment proceeding in 1958 -59, and the assessment proceeding in 1964 -65, by the aforesaid order dated January 25, 1969, and March 10, 1969, the two years' limitation period had expired as the final order imposing the penalty should have been passed before January 25, 1971, and March 10, 1971, in these two cases. Therefore, the Tribunal had no jurisdiction to pass such a remand order proceeding on an assumption that the Inspecting Assistant Commissioner would have authority to impose this penalty in the face of this bar of limitation enacted in section 275. Mr. Patel invoked the terms of the Explanation where the legislature lifted the bar when the opportunity for re -hearing had to be given under the proviso to section 219, when the incumbent in office has been changed and the assessee demanded such fresh opportunity or when the proceeding for imposition of penalty under Chapter XXI had been stayed by some order or injunction of any court. He also relied even on the analogy of the other provisions in the sold section 34(3) corresponding to section 153(3) and in section 263(3), and even in the very Explanation I to section 153 and the Explanation to section 263, where the legislature had made such provision for lifting the bar of limitation, whenever it so intended. Therefore, the argument of Mr. Patel was that the legislature having laid down the final limit of the period during which the penalty proceeding should be completed by the original authority, the original authority could not be conferred jurisdiction by any such remand order so as to ignore that limitation period.