1976 (7) TMI 23 - HC - Income Tax

Jurisdiction upheld to levy penalty under Income-tax Act based on assessment order completion date

The court confirmed the jurisdiction of the Inspecting Assistant Commissioner to levy a penalty under section 271(1)(c) of the Income-tax Act, 1961, based ... Act Of 1961, Assessment Order, Law Applicable, Original Assessment, Penalty Proceedings, Total Income Issues Involved:1. Violation of fundamental rights under Article 14 due to the levy of penalty under the Income-tax Act, 1961.2. Commencement of penalty proceedings before the completion of assessment proceedings and the liability of penalty under section 271(1)(c).3. Determination of penalty by reference to the difference between the income returned and the income assessed or by reference to the amount concealed.4. Jurisdiction of the Inspecting Assistant Commissioner to levy penalty under section 271(1)(c) based on the completion date of the assessment order.Issue-wise Detailed Analysis:Issue 1: Violation of Fundamental Rights under Article 14- This issue was not pressed by the assessee due to the precedent set by the Supreme Court in Jain Brothers v. Union of India [1970] 77 ITR 107 (SC). Therefore, the court did not provide an answer.Issue 2: Commencement of Penalty Proceedings- The court examined whether penalty proceedings were initiated before the completion of assessment proceedings. However, the court focused primarily on Issue 4 to determine the outcome of this issue. Consequently, the court decided that Issue 2 did not survive based on the resolution of Issue 4.Issue 3: Determination of Penalty- Similar to Issue 1, this issue was not pressed by the assessee, citing the Supreme Court decision in Mansukhlal and Brothers v. Commissioner of Income-tax [1969] 73 ITR 546 (SC). Therefore, the court did not provide an answer.Issue 4: Jurisdiction of the Inspecting Assistant Commissioner- The primary question was whether the assessment order for the year 1954-55, dated July 31, 1957, in relation to the income from business in the name of Chhaganlal Velji & Co., could be considered as an order completed on or after April 1, 1962, thereby giving jurisdiction to the Inspecting Assistant Commissioner to levy a penalty under section 271(1)(c).- The court detailed the background of the case, noting that the original assessment included two contested items: Rs. 28,747 from Chhaganlal Velji & Co. and Rs. 10,000 on account of bad debts. The Income-tax Officer initially added these amounts, leading to penalty proceedings.- The Tribunal confirmed the addition of Rs. 28,747 but remanded the issue of bad debts for further scrutiny. A fresh assessment was made on July 20, 1963, including the same contested amounts.- The court considered whether the assessment was completed before April 1, 1962, which would invoke clause (f) of section 297(2) of the Income-tax Act, 1961, or on or after April 1, 1962, invoking clause (g).- The court concluded that since the Tribunal had set aside the initial assessment and remanded the matter, the assessment could not be considered complete until the fresh order was passed on July 20, 1963. Thus, the case fell under clause (g), allowing penalty proceedings under the new Act.- The court rejected the assessee's reliance on the Kerala High Court decision in V. Damodaran v. Commissioner of Income-tax [1974] 96 ITR 335 (Ker), noting significant factual differences.- Ultimately, the court answered Issue 4 in the affirmative, in favor of the department, confirming the jurisdiction of the Inspecting Assistant Commissioner to levy the penalty under the new Act.Conclusion:- The court held that the penalty proceedings were appropriately initiated under the Income-tax Act, 1961, and the penalty imposed was valid. The assessee was ordered to pay the costs of the reference.