ADDITIONAL COMMISSIONER OF INCOME TAX ANDHRA PRADESH HYDERABAD Vs. WATAN MECHANICAL AND TURNING WORKS HYDERABAD

JUDGEMENT

(1.) This case has been referred to the Full Bench under the following circumstances: This case first came up before a Division Bench consisting two of us (Chief Justice and Chennakesav Reddy, J.): but, in view of the fact that there was some conflict between the decision of a Division Bench of this Court consisting of Sambasiva Rao, Acting Chief Justice and Muktadar, J., in R. C. No. 36 of 1974 decision of the Full Bench of this High Court in Allied Exports and Imports v. State of Andhra Pradesh, 28 STC 175 : (1971 Tax LR 750) (Andh Pra) regarding the principles of law applicable when an amendment has been made in a statute regarding the period of limitation and the period of limitation has been extended as compared to the previous period of limitation and such amendment has come into force at a date when, under the law as it stood prior to the amendment, the particular action on the part of the authorities concerned was not barred by the pre-existing law, the period of limitation to be applied is according to the pre-amendment law or the post-amendment law. Since this was an important question which often arises, and in view of the conflicting principles invoked by the Full Bench on the one hand and by the Division Bench on the other, it was felt desirable that the conflict, which apparently existed between the two decisions, should be resolved one way or the other.

(2.) The facts leading to this reference, so far as they are necessary for the purpose of this judgment are as follows:- The assessment years under consideration are assessment years 1965-66 to 1968-69. The assessee is a registered firm. The assessment for all the years under reference was completed on 25/02/1970. On that very date, the Income Tax Officer issued a show-cause notice for levying penalty under Section 271 (1)(a) of the Income Tax Act, 1961, because the returns for the respective years were filed much later than the due dates for filing the returns for the respective years as contemplated by Section 139(1). In respect of the assessment year 1965-66, the assessee did not file any explanation, but for the assessment years 1966-67 and 1967-68, the assessee stated that he had applied for extension of time till 30/12/1966 and 31/12/1967 respectively. For the assessment year 1968-69, the assessee replied that, since a return was filed under Section 139(4), penalty could not be levied. It was also contended that, since interest under Section 139(1) was charged, penalty could not be levied. The Income Tax Officer held that there was no reasonable cause for the delay in filing the returns and imposed penalties for the four assessment years by his order dated 25/03/1972. When the matter was carried in Appeal, the Appellate Assistant Commissioner, by a common order, dismissed the appeals and upheld the orders of penalty.

(3.) On further appeal by the assessee to the Income Tax Appellate Tribunal, it was contended that the orders of penalty passed by the Income Tax Officer were invalid, inasmuch as they were passed after the expiry of two years of the initiation of the penalty proceedings. The argument was based on the language of Section 275 of the Income Tax Act prior to its amendment by the Taxation Laws (Amendment) Act, 1970, which came into force on 1/04/1971. After the amendment, the time-limit of two years was to commence from the expiry of the financial year in which the proceedings for penalty were initiated. The Tribunal, relying on its earlier decision in I. T. A. No. 703(Hyd)/1972-73 dated 21/12/1972, held that the amendment brought about by the Taxation Laws (Amendment) Act, 1970 would not govern the assessment years under consideration, as the amendment was effective from 1/04/1971 only. Thereafter, at the instance of the Revenue, the following question was referred by the Tribunal for the opinion of this Court: