1979 (3) TMI 73 - AT - Income Tax

Tribunal Upholds Penalty under Income-tax Act for AY 1965-66

Seth Panchhi Ram And Company. Versus Income-Tax Officer.

The Tribunal upheld the penalty imposed by the IAC under section 271(1)(c) read with section 274 of the Income-tax Act, 1961, for the assessment year ... Original Assessment Issues Involved:1. Imposition of penalty under section 271(1)(c) read with section 274 of the Income-tax Act, 1961.2. Bar of limitation for imposing penalties under section 275.3. Competence of the authority to levy penalty (ITO vs. IAC).Issue-Wise Detailed Analysis:1. Imposition of Penalty under Section 271(1)(c) Read with Section 274:The appeal by the assessee challenged the imposition of penalty under section 271(1)(c) read with section 274 for the assessment year 1965-66. The original assessment was completed on 17-3-1970, with a total income determined at Rs. 1,02,300. A penalty was initially levied by the IAC on 24-3-1972, but this was set aside by the Tribunal. A fresh assessment (de novo) was completed on 30-9-1974, again determining the income at Rs. 1,02,300. The ITO issued a notice under section 274 read with section 271(1)(c) for concealment of income. The IAC imposed the penalty on 23-5-1977, after the Tribunal dismissed the revenue's appeal on 21-1-1977.2. Bar of Limitation for Imposing Penalties under Section 275:The assessee argued that the penalty order by the IAC was barred by limitation based on the Andhra Pradesh High Court judgment in Addl. CIT v. N.V. Ganapathi Rao. Section 275 prescribes a limitation period of two years from the end of the financial year in which the proceedings were completed. The assessee contended that this period applies to both initial and remand proceedings, emphasizing the need for timely completion of quasi-criminal penalty proceedings. The revenue countered that the penalty was based on the de novo assessment completed on 30-9-1974 and was within the time limit prescribed under section 275, considering the Tribunal's order dated 21-1-1977.3. Competence of the Authority to Levy Penalty (ITO vs. IAC):The assessee's alternative submission was that only the ITO could levy the penalty, not the IAC, based on the date of assessment. The Tribunal upheld the revenue's contention that the date of filing the return determines the competent authority for penalty imposition, not the date of assessment, aligning with the Andhra Pradesh High Court judgment in Addl. CIT v. Dr. Khaja Khutabuddinkhan.Detailed Analysis:Competence of Authority:The Tribunal affirmed that the date of filing the return determines the competent authority for penalty imposition, rejecting the assessee's argument that the date of assessment is material. This aligns with the precedent set by the Andhra Pradesh High Court in Dr. Khaja Khutabuddinkhan.Limitation Period:Section 275(a) provides a limitation period of two years from the end of the financial year in which the proceedings were completed, or six months from the end of the month in which the order of the appellate authority is received by the Commissioner, whichever is later. The Tribunal analyzed that the limitation period for contested assessments varies based on the receipt date of the appellate authority's decision by the Commissioner. In this case, the original assessment was set aside, and the fresh assessment initiated new penalty proceedings. The penalty imposed by the IAC on 23-5-1977 was within the six-month period from the Tribunal's order dated 21-1-1977, thus not barred by limitation.Legislative Intent and Judicial Precedents:The Tribunal considered the legislative intent behind section 275, noting that penalties should be completed with minimal delay. However, it differentiated the present case from the Andhra Pradesh High Court judgment in N.V. Ganapathi Rao, as the penalty proceedings in this case were based on a fresh assessment, not merely a continuation of the original proceedings. The Tribunal emphasized that the fresh assessment reactivated the entire process of law applicable to assessments and penalties, making the penalty within the period of limitation.Conclusion:The Tribunal dismissed the appeal, holding that the penalty imposed by the IAC was within the limitation period prescribed under section 275 and that the IAC was the competent authority to levy the penalty based on the date of filing the return. The penalty was not ab initio void due to limitation, and the assessee's contentions were rejected.