1948 (8) TMI 18 - HC - Income Tax

Court Upholds Penalty Legality in Section 34 Proceedings, Rejects Appellant's Argument

CV. GOVINDARAJULU IYER Versus COMMISSIONER OF INCOME-TAX, MADRAS

The court upheld the legality of the penalty levied under Section 28(1)(a) during the Section 34 proceedings, rejecting the appellant's argument that ... - Issues Involved:1. Legality of the penalty levied under Section 28(1)(a) in the course of proceedings under Section 34 read with Section 22(2).2. Whether the notice under Section 34 read with Section 22(2) amounted to an extension of time within the meaning of the proviso to Section 22(1).Issue-wise Detailed Analysis:1. Legality of the penalty levied under Section 28(1)(a) in the course of proceedings under Section 34 read with Section 22(2):The appellant did not submit statutory returns under Section 22(1) for the years ending 12th April 1942 and 12th April 1943. Subsequently, the Income-tax Officer issued notices under Section 34 on 25th January 1945, and the appellant filed returns. Penalties were levied for the failure to file returns under Section 22(1), confirmed by the Appellate Assistant Commissioner. The appellant contended that no penalty could be levied unless there was a default during the Section 34 proceedings. The appellant argued that the penalty should relate to defaults occurring in the course of Section 34 proceedings, not prior defaults.The court examined the contention that the proceedings under Section 34 are separate from the original assessment proceedings. The appellant relied on the Allahabad High Court ruling in Mayaram Durga Prasad v. Commissioner of Income-tax, which held that penalty cannot be imposed in Section 34 proceedings for defaults in the original assessment. However, the court distinguished the present case, noting there was no prior assessment or order declaring no assessment could be made.The court held that proceedings under Section 34 relate to the same period as the original assessment, allowing the Income-tax Officer to levy penalties under Section 28(1) for defaults under Section 22(1). The court disagreed with the artificial separation of proceedings under Section 34 from the original assessment, emphasizing that Section 28 allows penalties if the officer is satisfied during any proceedings under the Act.2. Whether the notice under Section 34 read with Section 22(2) amounted to an extension of time within the meaning of the proviso to Section 22(1):The appellant argued that the notice under Section 34 should be treated as an extension of time for submitting returns under Section 22(1). The court rejected this contention, stating it was not raised before the Tribunal and lacked substance. The court emphasized that there is no lapse of the general notice under Section 22(1), which initiates assessment proceedings. These proceedings end only with an assessment order or a declaration that no assessment can be made.The court concluded that the notice under Section 34 did not amount to an extension of time under the proviso to Section 22(1). The assessment proceedings initiated by the general notice under Section 22(1) continued and were validly extended by the Section 34 proceedings.Conclusion:The court answered the reference in the affirmative, upholding the legality of the penalty levied under Section 28(1)(a) during the Section 34 proceedings. The appellant was ordered to pay the costs of the reference amounting to Rs. 250.