Inordinate delay in penalty proceedings may justify quashing them as an abuse of statutory power

Inordinate and unexplained delay in penalty proceedings may justify quashing them as vexatious and an abuse of statutory power, even where no limitation period is prescribed. The court noted that prolonged pendency after the relevant assessment years had expired, coupled with the dissolution of the firm and no explanation for the delay, made the continuation of proceedings oppressive and unjustified. Applying the principle that stale proceedings should not be allowed to continue when their persistence becomes abusive, the penalty proceedings were quashed.

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Issues: Whether penalty proceedings initiated after an inordinate delay could be quashed as vexatious and an abuse of the power under section 28(1)(c) of the Indian Income-tax Act, 1922, and the connected provisions.

Analysis: No statutory period of limitation was prescribed for penalty proceedings, but the absence of a limitation period did not make prolonged proceedings immune from judicial review. The delay in the present matter extended over many years after the relevant assessment years had long expired, the firm had been dissolved, and the record did not explain why the proceedings could not be concluded earlier. The Court treated the prolonged pendency, in the circumstances of the case, as oppressive and unjustified. Applying the principle that proceedings must not be allowed to continue when delay makes them vexatious, the Court held that the power to impose penalty could not be exercised in a manner amounting to abuse.

Conclusion: The penalty proceedings were quashed and the assessee succeeded.

Final Conclusion: Inordinate and unexplained delay in penalty proceedings may justify quashing them where continuation would amount to an abuse of power and a vexatious exercise of jurisdiction.

Ratio Decidendi: Even where no limitation period is prescribed, stale penalty proceedings may be interdicted if unexplained delay renders their continuance vexatious or an abuse of statutory power.

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