SWARUP D ITO Vs. GAMMON INDIA LIMITED

JUDGEMENT

(1.) THIS is an appeal by the ITO, Companies Circle, Bombay, against the order of the learned single judge quashing the notice of penalty issued on July 4, 1969, by the ITO to the respondent company under s. 273 of the I.T. Act, 1961. Since pure questions of law arise in this appeal, it is not necessary to refer in detail to the assessment proceedings for the assessment year 1959 -60 out of which the penalty proceedings had arisen.

(2.) ORIGINALLY for the assessment year 1959 -60 the income of the assessee company was determined at Rs. 20,53,407 by an assessment order, dated April 16, 1963. Earlier, notice under s. 18A of the Indian I.T. Act. 1922, was issued to the assessee in May, 1959, demanding advance tax of Rs. 8,65,592 to which the assessee in May, 1959, demanding advance tax of Rs. 8,65,592 to which the assessee had objected, as according to the assess the correct amount of the advance tax payable was Rs. 3,23,732. Notice under s. 274 of the I.T. Act, 1961, came to be issued to the assessee to show cause why penalty should not be imposed for under -estimating the profits while paying advance tax and a penalty of Rs. 81,000 was levied against the assessee by the ITO in respect of the assessment year 1959 -60. The levy of this penalty came to be challenged by the assessee before the Income -tax Tribunal and though on the facts the Tribunal took the view that the assessee had filed an estimate which he knew or had reason to believe to be untrue and the penalty would have ordinarily been attracted, the order of penalty was set aside on the technical ground that the proceedings taken under the new Act could not be sustained. The Revenue had brought the matter to this court by way of a reference under s. 256 of the Act. The reference was pending when the order under appeal was passed by the learned single judge. But it is now common ground that the validity of the penalty proceedings has been upheld by this court in favour of the Revenue and the order of penalty of Rs. 81,000 was sustained.

(3.) ONE of the grounds, which alone is material for the disposal of this appeal, on which the notice we challenged, was that no action for levy of penalty under s. 273 could be taken against the assessee on the basis of the penalty under s. 273 could be taken against the assessee on the basis of the order passed in reassessment under s. 147 of the Act because the power under s. 273 of the Act can be exercised only if ITO 'in the course of any proceedings in connection with the regular assessment for any assessment year is satisfied that any assessee has furnished a statement of the advance tax payable by him which he knew or had reason to believe to be untrue'. The argument before the learned single judge was that when s. 273 refers to 'regular assessment', those words must be construed with reference to the meaning given to those words in s. 2(40) of the Act, as to mean 'assessment made under section 143 or section 144'. This contention has been accepted by the learned single judge and the notice of penalty was quashed as being without jurisdiction.