COMMISSIONER OF INCOME TAX CENTRAL Vs. PADAMPAT SINGHANIA

JUDGEMENT

(1.) THE Income Tax Appellate Tribunal, Allahabad has referred the following questions of law under Section 256(2) of the Income Tax Act, 1961, hereinafter referred to as the Act, for opinion to this Court. "(1) Whether on the facts and in the circumstances of the case, the penalty under section 28(1)(c) has rightly been cancelled by the Tribunal? (2) Whether on the facts and in the circumstances of the case, the Tribunal is justified in ignoring the reasonable cause for inordinate delay in imposing penalty under section 28 (1)(c) and in holding that the case of the assessee falls within the purview of the decisions of the Hon'ble High Court in the case of Ram Kishan Baldeo Prasad Vs. CIT(65 I.T.R.- 491) and in the case of Bisheshwar Lal Vs. ITO(75 ITR-698)?" Briefly stated the facts giving rise to the present Reference are as follows:-

(2.) THE reference relates to the Assessment Year 1947-48. THE Income Tax Officer completed the assessment for the aforementioned assessment year under Section 23(3)/34 of the Indian Income Tax Act, 1922, hereinafter referred to as the Act of 1922 on 28th March, 1956. THE status of the respondent was taken as HUF. THE addition of Rs.1,20,000/- was added to the total income. THE Income Tax Officer initiated the proceedings under Section 28(1)(c) under the Act of 1922. He imposed a sum of Rs.50,000/- as penalty vide order dated 7.12.1976. Feeling aggrieved the respondent preferred an appeal before the Appellate Assistant Commissioner, who deleted the penalty on the ground that there was an inordinate delay in the imposition of penalty inasmuch as the assessment was made on 28th March, 1956 while the penalty was imposed on 7.12.1976. THE Revenue feeling aggrieved preferred an appeal before the Income Tax Appellate Tribunal, Allahabad. THE two members differed in their views. THE Accountant Member was of the view that the order cancelling the order passed by the Appellate Assistant Commissioner has to be restored whereas the Judicial Member disagreeing with the conclusion of the Accountant Member held that the proceedings have been unduly delayed by the Income Tax Officer for about 20 years and, therefore, the respondent-assessee was entitled to claim cancellation of the penalty imposed. As there was difference of opinion, the matter was referred to the third Member. THE third Member dealt with the different aspects of the matter and agreed with the view expressed by the Judicial Member to the effect that for the inordinate delay there was no explanation and, therefore, the penalty has rightly been cancelled. THE Tribunal has passed the order in conformity with the opinion expressed by the third Member and had upheld the order passed by the Appellate Assistant Commissioner cancelling the penalty.

(3.) LEARNED counsel appearing for the respondent, however, submitted that the assessment order having been passed on 28th March, 1956 and the penalty order having been passed on 7th December, 1976, there was an inordinate delay of more than 20 years and, therefore, the Tribunal has rightly upheld the order passed by the Appellate Assistant Commissioner cancelling the penalty. He submitted that reliance placed by the learned counsel for the Revenue on the various proceedings, which did not relate to the respondent, would not come to his rescue for explaining the delay. He further submitted that the Tribunal had not committed any illegality.