COMMISSIONER OF INCOME TAX Vs. JASWANTIRAJ

JUDGEMENT

(1.) At the instance of the Commissioner of Income-tax, the following two questions of law have been referred to this court under Section 256(2) of the Income-tax Act, 1961, for the assessment year 1961-62 :

(2.) Whether, on the facts and in the circumstances of this case, the Tribunal's finding that the assessee had not been heard before the order imposing the penalty was made was based on no evidence or based only on irrelevant materials and/or was otherwise unreasonable ?" 2. The controversy in this reference relates to the jurisdiction and validity of the penalty order under Section 274(2) read with Section 271(1)(c) passed by the Inspecting Assistant Commissioner and the correctness of the finding of the Tribunal that the assessee was not heard before imposition of penalty. The assessee is a registered firm and the relevant assessment year is 1961 -62 for which the previous year is 2017 R. N. The return of income was filed on July 4, 1962, admitting an income of Rs. 1,99,386. The Income-tax Officer, "A" Ward, Dist. III(3), Calcutta, completed the assessment on March 31, 1966, on a total income of Rs. 9,03,316, which included suppression of income, inflation of expenses, introduction of bogus cash credits and payment of interest thereon amounting in all to Rs. 6,31,896 and initiated penalty proceedings under Section 271(1)(c). As the quantum of penalty exceeded his limit, the Income-tax Officer referred the penalty proceedings to the Inspecting Assistant Commissioner, Range IV, Calcutta. Thereafter, the jurisdiction and the file of the assessee was transferred to the Income-tax Officer, "C" Ward, Hundi Circle, and, consequently, the penalty proceedings were also transferred to the Inspecting Assistant Commissioner, Range V, for disposal. The Inspecting Assistant Commissioner continued the proceedings thereafter and imposed penalty of Rs. 7,65,400 as he was satisfied that the assessee had concealed income deliberately and wilfully.

(3.) The assessee preferred an appeal before the Tribunal and challenged the jurisdiction of the Inspecting Assistant Commissioner, Range V, Calcutta, to levy penalty. The assessee's counsel relied on the judgment of the Calcutta High Court in the assessee's own case relating to an earlier year which has been reported in [1975] 1 CLJ 372 (Jaswanti Rai and Bros. v. ITO). The Appellate Tribunal, accepting the contention of the assessee and feeling bound by the decision of the Calcutta High Court, held that the Inspecting Assistant Commissioner, Range-V, Calcutta, wrongly assumed jurisdiction. The Tribunal also observed that the notice dated January 6, 1968, issued by the Inspecting Assistant Commissioner was bad in law as the Income-tax Officer, Hundi Circle, had not made any reference to him and the notice in the printed form was issued in a mechanical way.