1973 (9) TMI 15 - HC - Income Tax

Invalid Penalty Order Beyond Statutory Period; Assessee Not Estopped; Tribunal Decision Not Review; Parties' Costs

The High Court held that the penalty order issued on March 19, 1969, was beyond the statutory period, making it without jurisdiction. The court determined ... “(i) Whether the order of penalty passed by the ITO dated March 19, 1969, in pursuance of the directions contained in the order of the ITAT in I. T. A. No. 9202 of 1966-67, dated December 7, 1968, is time-barred ? (ii) Whether the assessee is estopped from contending that the order of penalty passed by ITO in pursuance of the directions contained in the order of the Income-tax Appellate Tribunal in I. T. A. No. 9202 of 1966-67, dated December 7, 1968, is illegal and void by not challenging the said decision of the Tribunal by applying for a reference therefrom under section 256(1) of the Income-tax Act, 1961? (iii) Whether the acceptance of the assessee's contention by ITAT and the grant of relief on that basis would not amount to a review of its earlier order and whether the Appellate Tribunal is competent to review its previous order?” - Section 275 of the Income-Tax Act, 1961 does not permit any relaxation of the rigidity of the rule of limitation, it is specifically mentioned in section 153(3) and 263(3) that period of limitation will not apply when the authority acts under the direction of appellate authority Issues:1. Time-barred penalty order2. Estoppel of the assessee from challenging the penalty order3. Competency of the Tribunal to review its previous orderAnalysis:Issue 1: Time-barred penalty orderThe case involved the imposition of income tax and penalty on an assessee for the assessment year 1963-64. The Income-tax Appellate Tribunal directed the Income-tax Officer to re-examine the penalty proceedings. However, the penalty order passed by the Income-tax Officer on March 19, 1969, was challenged. The High Court referred to Section 275 of the Income-tax Act, 1961, which states that no penalty order shall be passed after two years from the completion of assessment proceedings. The High Court held that the penalty order passed on March 19, 1969, was beyond the statutory period and, therefore, without jurisdiction.Issue 2: Estoppel of the assessee from challenging the penalty orderThe High Court addressed whether the assessee was estopped from challenging the penalty order passed by the Income-tax Officer. It was concluded that the assessee was not estopped from contending that the penalty order was illegal and void. The High Court emphasized that it was the department's responsibility to challenge the Tribunal's decision, and the assessee had the right to challenge the order.Issue 3: Competency of the Tribunal to review its previous orderRegarding the competency of the Tribunal to review its previous order, the High Court clarified that the present order was not a review of the previous order dated December 7, 1968. The Tribunal's decision to grant relief did not amount to a review but was a separate order based on a different matter. The High Court affirmed that the effect of the present order would make the earlier order of the Tribunal innocuous.In conclusion, the High Court found the penalty order to be time-barred, clarified the assessee's right to challenge the order, and confirmed that the Tribunal's decision did not constitute a review of its previous order. The parties were directed to bear their respective costs, and a copy of the judgment was to be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.