PRABHUDAYAL AMICHAND Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961, made by the Tribunal at the instance of the assessee and the following questions of law have been referred by the Tribunal for opinion of this court :

(2.) THE brief facts giving rise to this reference are that the firm in its return for the assessment year 1972-73 claimed deduction of Rs. 1,36,000 representing interest credited to the account of Prabhudayal Surajbhan of Indore. It is an admitted fact that two of the four partners of the assessee-firm were partners of Prabhudayal Surajbhan. During the course of assessment proceedings, the Income-tax Officer (in short "ITO"), found that deduction of Rs. 1,36,000 was very excessive and, therefore, he called upon the assessee to furnish the basis of the above deduction. THE statements of one of the partners as well as that of the accountant of the firm were also recorded by the Income-tax Officer. On proper calculations, the Income-tax Officer held that only a sum of Rs. 56,132 should be allowed as a deduction and the balance was to be treated as income of the assessee. On further appeal, certain reliefs were allowed to the assessee and, ultimately, an addition of Rs. 68,638 was retained. After initiating penalty proceedings under Section 271(1)(c) of the Income-tax Act, the Income-tax Officer levied penalty under the above provisions vide order dated August 31, 1980, but the said order was set aside by the Commissioner of Income-tax under Section 263 of the Income-tax Act by his order dated September 1, 1981. THE Commissioner of Income-tax as per the above order, directed the Income-tax Officer to pass a fresh order in accordance with law. THE Income-tax Officer then passed a fresh order on December 14, 1981, levying penalty of Rs. 68,638 under Section 271(1)(c) of the Income-tax Act. Meanwhile the law was amended with effect from April 1, 1976, vesting the jurisdiction to the Income-tax Officer. It may also be relevant to mention here that the order of the Commissioner of Income-tax was also confirmed by the Tribunal by order dated December 20, 1982, in I. T. A. No. 921 of 1981.

(3.) AS regards the question of limitation, the Tribunal held that this very objection of limitation as raised before the Tribunal in the earlier appeal by the assessee, was overruled by the Tribunal in its earlier order ; therefore, the findings given by the Tribunal with regard to the limitation also became final. Moreover, the period of limitation applies only to the initial order of penalty and not to the order passed by the Income-tax Officer in pursuance of the directions of the higher authorities like the one given by the Commissioner of Income-tax under Section 263 of the Income-tax Act.