SHRIRAM DAGDULAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under S. 256(1) of the IT Act, 1961. The questions referred to us for our determination are as follows :

(2.) THE assessment in question relates to the asst. year 1958 59. The assessee was an HUF. The assessment order was passed by the ITO concerned on 27th Feb., 1963, computing the total income of the assessee at Rs. 1,23,009. The said assessment order was contested in an appeal filed by the assessee before the AAC, Jalgaon, who passed a consolidated order for the relevant year and for some other years. During the hearing of the appeal, the AAC found that the ITO did not commence penalty proceedings for the late submission of the return. It is common ground that there was a delay of 13 months and few days in the filing of the return for the said assessment year. The AAC set in motion penalty proceedings. The succeeding AAC issued to the assessee a fresh notice dt. 22nd Oct., 1969, to show cause why penalty should not be imposed for the late filing of the return. Hearing was fixed on 29th Oct., 1969. On 31st Oct., 1969, extension of time for giving explanation was applied for. Thereafter the proceeding was adjourned from time to time, but the assessee did not file any explanation in answer to the said show cause notice. The AAC proceeded to levy penalty on the footing that the assessee had no explanation to offer. Being aggrieved by this order, the assessee preferred an appeal to the Tribunal. A number of contentions were raised by him before the Tribunal, including a challenge to the competence of the AAC to levy penalty. It was contended that the ITO who passed the assessment order had waived the levy of penalty and, therefore, the AAC had no jurisdiction to levy penalty. The next contention was that the assessee was an HUF and the family was partitioned on 11th Oct., 1966, and hence no penalty proceeding could be initiated against or penalty levied on the disrupted family. There was a further controversy, namely, according to the assessee, that the provisions of the Indian IT Act, 1922 (for brevity's sake referred to as "the Act of 1922"), were applicable to the case and the penalty proceedings levied under the IT Act, 1961 (for brevity's sake referred to as "the Act of 1961"), were invalid in law, as the Act of 1922 did not permit the levy of any such penalty. All these contentions were rejected by the Tribunal. The Tribunal took the view that in view of the provisions of S. 297(2)(g) of the Act of 1961, the question of penalty was governed by the Act of 1961 and that the levy of penalty was justified. It was urged on behalf of the assessee before the Tribunal that there was a reasonable cause which prevented the assessee from filing the return in time. The Tribunal refused to entertain this contention, because it was taken at a belated stage, and hence there were no facts on record to support the contention that there was a reasonable cause for the late filing of the return. In the result, the Tribunal dismissed the appeal and the questions set out earlier have been referred from that decision of the Tribunal.

(3.) THE first submission of Mr. Khatri is that the powers of the AAC at the hearing of the appeal are set out in S. 31 of the Act of 1922. It is pointed out by him that the only material provision in this connection is contained in cl. (a) of Sub S. (3) of S. 31 of the Act of 1922. A perusal of this clause shows that the only power of the AAC, at the hearing of the appeal, is to confirm, reduce, enhance or annul the assessment, and there is no mention in S. 31 of power to levy penalty. It was submitted by him that in view of this provision, the AAC had no power to levy penalty, as he did in the present case. In our view, there is no merit in this contention. The section which has really to be referred is not S. 31 but S. 28 of the Act of 1922. The relevant portion of S. 28 runs as follows :