COMMISSIONER OF INCOME TAX Vs. TIWARI JHUMARLAL SARUPLAL

JUDGEMENT

(1.) THESE two references have been made to this court by the Income-tax Appellate Tribunal, Delhi Bench 'A', and the following two questions have been referred at the instance of the Commissioner of Income-tax :

(2.) WHETHER, on the facts and circumstances of the case, the Tribunal was correct in holding that the notice issued under Section 271 read with Section 274 of the I.T. Act, 1961, was not valid and was hit by the provisions of Section 297(2)(d)(i) of the said Act?"

(3.) THE Tribunal, following the decision of the Mysore High Court in Magavi's case [1967] 64 ITR 409, held that the proceedings for the imposition of penalty were included in the proceedings for assessment for the purposes of Section 297(2)(a) of the new Act and that applying the provisions of Section 297(2)(d)(i), the proceedings for the imposition of penalty are a continuation of the proceedings for assessment. Thus, according to the Tribunal, a penalty could be imposed under the old Act, in respect of assessment relating to the assessment year 1961-62, and any year earlier thereto, under Section 28 of the old Act, as Section 271 of the new Act could apply only to defaults made or discovered in respect of proceedings under the new Act. So far as the proceedings for reassessment under Section 34 of the old Act, which were initiated by the issuance of a notice before the commencement of the new Act, is concerned, Section 297(2)(d)(i) clearly provides that such proceedings shall be continued and disposed of as if the new Act has not been passed. In C.A. Abraham v. ITO [1961] 41 ITR 425, their Lordships of the Supreme Court held that the expression "proceedings for assessment" employed in Clause (a) of Section 297(2) of the new Act includes proceedings for imposition of penalty as well. THE same view was also taken by their Lordships of the Supreme Court in Kalawati Devi Harlalka v. CIT [1967] 66 ITR 680 and it was held that the word "assessment" can bear a very comprehensive meaning, as it can comprehend the entire procedure for ascertaining and imposing liability upon a taxpayer, including the power of revision. However, the aforesaid cases have no bearing on the question as to when proceedings for assessment or reassessment are taken in accordance with the provisions of Section 34 of the old Act, by virtue of the provisions contained in Section 297(2)(d)(i) of the new Act, and assessment proceedings are completed after the commencement of the new Act, then whether the provisions of the old Act or those of the new Act would be applicable for initiating proceedings for imposition of penalty. Whether penalty proceedings in such cases should be taken under the old Act or under the new Act is a question, which was not the subject-matter of consideration before their Lordships of the Supreme Court either in Abraham's case [1961] 41 ITR 425 or in Kalawati's case [1967] 66 ITR 680.