COMMISSIONER OF INCOME-TAX Vs. BIPAN LAL KUTHIALA

JUDGEMENT

(1.) THE following two questions have been referred for the opinion of this court by the Income-tax Appellate Tribunal, Delhi Bench "b" : "1. Whether, on the facts and circumstances of the case, the Tribunal was justified to hold that on a correct and true interpretation of Section 297 (2) (k) of the Income-tax Act, 1961, the notice under Section 28 (3) of the Income-tax Act, 1922, issued on August 6, 1959, cannot be deemed to have been issued under the corresponding provision of the 1961 Act ?

(2.) WHETHER, on the facts and in the circumstances of the case, the notice under Section 274 (1), read with Section 271 (1) (a) of the Income-tax Act, 1961, issued on April 27, 1963, constituted a valid commencement of proceedings within the meaning of Section 275 of the Act ?" 2. The assesses is a Hindu undivided family carrying on trade in timber in the States of Jammu and Kashmir and Himachal Pradesh. The relevant assessment year is l958-59 and in connection therewith a notice dated May 10, 1958, under Section 22 (2) of the Indian Income-tax Act, 1922, was duly served on the assessor. In accordance with this notice, the return was due to be filed on or before June 20, 1958. However, the assessee applied for and secured an extension of time till October 31, 1958. No return was submitted before this date and the assessee applied again for extension but this was declined by the authorities. What is significant for the determination of the above-said questions, however, is that, on the 6th of August, 1959, the Income-tax Officer issued a notice under Section 28 (3) of the Act of 1922, calling upon the assessee to show cause why penalty should not be imposed for non-compliance with the earlier notice under Section 22 (2) of the Act. Subsequently, the return was in fact filed on the 30th of September, 1959, and the assessment was completed as late as the 28th of September, 1962, on a total income of Rs. 1,46,026.

(3.) IT deserves notice that the Income-tax Act, 1961, had come into force on the 1st of April, 1962, and the assessment had been completed after that date Again, on the 27th of April, 1963, another notice under Section 274 read with Section 271 of the new Act was duly issued and served on the assessee. In reply to the said notice the assessee raised several objections to the imposition of penalty, vide his explanation thereto dated the 18th of July, 1963. These objections were rejected by the Income-tax Officer on the ground that under Section 297 (2) (g) of the Act of 1961, the proceedings may be initiated and penalty may be imposed under the new Act. He proceeded to impose a penalty of Rs. 12,709 being two per cent, of the tax payable for 10 months of delay in filing the return. On appeal, the Appellate Assistant Commissioner, Ambala Range, upheld the imposition of the penalty but reduced the amount thereof to Rs. 11,372. However, on further appeal, the contention of the assessee that the penalty notice had not been issued in the course of assessment proceedings and therefore penalty proceedings were not leviable under the new Act, found favour with the Tribunal. It was held that the notice under Sections 271/274 issued on the 27th of April, 1963, was long after the completion of assessment proceedings and there was consequently no valid commencement of penalty proceedings which were held to be unsustainable and hence the appeal was allowed: vide the Tribunal's order dated the 15th of November, 1966. The revenue then moved for and secured the present reference.