TaxTMI 
TaxTMI 
2001 (11) TMI 976
X X X X Extracts X X X X
X X X X Extracts X X X X
....peals). In response to the show-cause notice it was contended on behalf of the assessee that the charge has not been specified in the show-cause notice given. According to the assessee, the notice issued was for failure to comply with the provisions of section 209A. He also contended that the additions made in the assessment did not form part of the assessee's income liable for advance tax. It was also claimed that the penalty for similar default has been levied in the case of the firm in which the assessee was a partner and accordingly no such penalty could be levied on the assessee. The Assessing Officer was not satisfied with the explanation so given. He came to the conclusion that the assessee was in default for not filing the statement of advance tax payable by him and accordingly liable for penalty under section 273(2)(b). He thus levied the penalty at the minimum leviable at Rs. 90,877. The Commissioner of Income-tax (Appeals) confirmed the penalty levied with the following observations : "The Assessing Officer has reported that the appellant has been previously assessed by way of regular assessment under the Income-tax Act. His current income was likely to exceed the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der section 250/143(3) dated May 23, 1990, as already discussed above." The assessee is now in appeal before us against the finding given by the Commissioner of Income-tax (Appeals). Learned counsel for the assessee has made a submission that the showcause notice issued under section 273 did not specify particular default committed under section 273 and accordingly the assessee having not known the particular charge, could not give proper reply to the show-cause notice. This amounts to denial of opportunity of being heard before the penalty was levied. The levy of penalty is, therefore, in violation of the principles of natural justice and the provisions of section 273B of the Income-tax Act. The penalty levied is, therefore, not valid. Learned counsel has further submitted that the penalty notice issued was in old form, not relevant or prescribed for the current year as per the rules and the notice issued being defective also invalidated the penalty levied. Arguing further learned counsel has submitted that according to the Assessing Officer the assessee failed to file statement of advance tax. Though the Assessing Officer has mentioned that the assessee was an existing a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e out for failure on the part of the assessee to file a statement of advance tax. The penalty thus in fact had been levied under section 273(1)(b) and this was only a procedural irregularity and is curable under section 292B of the Income-tax Act and in support she also cited the decisions in the cases of Kimtee v. CIT [1985] 151 ITR 73 (MP) ; H. H. Maharaja Raja Pawer Dewas v. CIT [1982] 138 ITR 518 (MP) and Prabhudayal Amichand v. CIT [1989] 180 ITR 84 (MP). The learned Departmental Representative further argued that use of old form in issue of notice would also not invalidate the proceedings initiated for the above reasons. The learned Departmental Representative, therefore, pleaded that on merits the levy of penalty is fully justified and the same deserves no interference. We have carefully considered the facts, material on record and the rival submissions made by both the parties. It is evident from the facts given that return in this case was filed declaring an income of Rs. 7,750. The income was however assessed in the second round at Rs. 18,70,561. This assessed income is subject to the relief granted by the Commissioner of Income-tax (Appeals) as according to learned....
X X X X Extracts X X X X
X X X X Extracts X X X X
....come-tax Act. Non-issue of proper show-cause notice clearly making out the charge of failure to file statement of advance tax made the proceedings vitiated and penalty levied is therefore held to be invalid. In the case of Sunrolling Mills Pvt. Ltd. [1980] 160 ITR 412 (Cal), the Assessing Officer initiated proceedings under section 147(b) but he sought to justify the reopening under section 147(a). Such action of the Assessing Officer was not found valid. Further, in the case of Smt. Kaushalya [1995] 216 ITR 660, the Bombay High Court held the view that condition precedent to the imposition of penalty is of making the assessee aware of the charge levelled and offering an opportunity of being heard. The view taken by us above is fully supported by the ratio of the aforecited decisions. In this view of the matter, we cancel the penalty levied holding it as invalid. In the result, I. T. A. Nos. 3929 and 3931/Delhi of 1992 are treated to have been dismissed and I. T. A. No. 3930/Delhi of 1992 is allowed. U. B. S. Bedi (Judicial Member).-I have gone through the proposed order of the learned Brother and despite my best efforts and persuasion, I am not able to agree with his f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Act dated May 23, 1990, effect has already been given by the Assessing Officer to the appellate order of the Commissioner of Income-tax (Appeals)-XIII, New Delhi, dated September 11, 1989, in Appeal No. 369 of 1988-89, through which the assessee's appeal was partly allowed and while giving effect to the said appellate order, total income of the appellant has been determined at Rs. 18,70,561. However, if as a result of decision of the appellant's further appeal against the aforesaid order under section 250/ 143(3) dated May 23, 1990, the appellant's income and tax thereon undergoes any change, the quantum of the penalty will be accordingly modified as per law and the penalty will be calculated at the same rate at which the present penalty has been levied. This finding is considered necessary in the interest of justice because the aforesaid appeal is yet to be decided. It is seen that the appellant's income has been rightly determined at Rs. 18,70,560 for the assessment year under consideration after giving effect to the appellate order of the Commissioner of Income-tax (Appeals) against the assessment order dated March 30, 1985. This amount, in fact, rightly represented the curr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt cannot be upheld and it is rejected. Looking to all the facts and circumstances of the appellant's case, there is found no reasonable cause which prevented the appellant from furnishing the required statement of advance-tax as per provisions of section 209A(1)(a) of the Act. Hence, imposition of the penalty under section 273(1)(b) of the Act is found justified and the same is upheld against the appellant. As regards the quantum of the penalty, the same may have to be modified as per law, if necessary, depending upon the decision of the appeal against the order under section 250/143(3) dated May 23, 1990, as already discussed above." The assessee took up the matter in further appeal and while reiterating the submissions as made before the authorities below has pleaded that showcause notice issued under section 273 did not specify particular default committed under section 273 and the assessee having not known the particular charge could not give proper reply to the show-cause notice. This resulted in denial of opportunity to be given before the penalty was levied. It was further submitted that levy of penalty is in violation of the principles of natural justice and the prov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee did not file a statement of advance tax when she was already an existing assessee and this fact has not been denied by him. The income has been assessed at Rs. 18,70,560 and evidently the assessee was required to file statement of advance tax and to pay advance tax according to law. She has further submitted that in penalty order the Assessing Officer through an oversight has mentioned section 273(2)(b) while levying the penalty whereas as per discussions made in the order, a clear charge has been made out for failure on the part of the assessee to file a statement of advance tax. The penalty thus in fact had been levied under section 273(1)(b) and this was only a procedural irregularity and is curable under section 292B of the Income-tax Act and in support she also cited the decisions in the cases of Kimtee v. CIT [1985] 151 ITR 73 (MP) ; H. H. Maharaja Raja Pawer Dewas v. CIT [1982] 138 ITR 518 (MP) and Prabhudayal Amichand v. CIT [1989] 180 ITR 84 (MP). The learned Departmental Representative further argued that use of old form in issue of notice would not invalidate the proceedings initiated and concluded for imposition of penalty when default was committed by the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the facts and circumstances and after considering the case laws as cited by the rival parties, imposition of penalty under section 273(1)(b) of the Act is found justified and the same is upheld. The action of the Commissioner of Income-tax (Appeals) gets confirmed and this appeal of the assessee is dismissed. Order of reference to Third Member Since in the above captioned appeal we have difference of opinion on the following point, the matter is submitted to the President for reference to the Third Member : "Whether, on the facts and circumstances of the case, the penalty levied at Rs. 90,877 under section 273(2)(b) of the Income-tax Act, 1961, for the assessment year 1982-83 was valid ?" Order of Third Member R. M. Mehta (Vice-President).-On a difference of opinion between the Members constituting the Division Bench the following point was referred to me under section 255(4) of the Income-tax Act, 1961. "Whether, on the facts and circumstances of the case, the penalty levied at Rs. 90,877 under section 273(2)(b) of the Income-tax Act, 1961, for the assessment year 1982-83 was valid ?" This reference had been fixed up for hearing on August 29, 2001, for which a no....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is seen that a show-cause notice dated April 17, 1990, was issued fixing the case for hearing on April 26, 1990, but on which date no one attended and nor was any written reply filed. The assessee's counsel, however, filed written submissions on May 28, 1990, and the penalty order itself was passed on May 30, 1990. It is seen from the penalty order that the assessee in the written submissions in addition to various other arguments took the stand that the charge on which he was proposed to be penalised had not been specified. The other submissions were (1) that the additions made in the assessment did not form part of the assessee's income liable to advance tax and (2) penalty had been levied on the firm in which the assessee was a partner and accordingly no penalty could be levied on the assessee. The aforesaid pleas were rejected on the ground that there were huge additions to the assessee's returned income and such additions were not in respect of the share income from the firm. Being aggrieved with the levy of penalty the assessee filed an appeal before the Commissioner of Income-tax (Appeals) who on more or less the same line of reasoning as adopted by the Assessing Offi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tta High Court in the case of Sunrolling Mills Pvt. Ltd. v. ITO [1986] 160 ITR 412, the judgment of the Bombay High Court in the case of CIT v. Kaushalya (Smt.) [1995] 216 ITR 660 and lastly the judgment of the Punjab and Haryana High Court in the case of CIT v. Pratap Chand Maheshwari [1980] 124 ITR 653. As against the aforesaid the learned Departmental Representative relied heavily on the orders passed by the Assessing Officer as well as the Commissioner of Income-tax (Appeals). The main arguments were as follows : 1. The assessee admittedly did not file a statement of advance tax which he was required to do as income had been assessed at Rs. 18,70,560. 2. The Assessing Officer through an oversight had mentioned section 273(2)(b) while levying the penalty whereas the charge was one of failure to file statement of advance tax and the penalty, in fact, had been levied under section 273(1)(b). It was argued that this was a procedural irregularity curable under section 292B of the Income-tax Act. 3. That the use of the old form while issuing the penalty notice would not invalidate the proceedings. In support of the aforesaid arguments, the learned Departmental Represen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e initially set out the facts as also the arguments advanced by the parties which have been recorded in identical terms to those of the learned Accountant Member. The learned Judicial Member was, however, of the view that the penalty had been rightly levied by the Assessing Officer and confirmed by the Commissioner of Income-tax (Appeals) and his observations were as follows : "5. After considering the facts and circumstances, arguments of the parties and case law as cited, it is observed that assessee in this case filed the return declaring an income of Rs. 7,750 and income was finally assessed in second round at Rs. 18,70,561. The assessee, as facts show, derived income from house property, share income from the firm A. R. Chadha and Co. and income from interest. The Assessing Officer while completing the assessment on March 30, 1985, initiated penalty proceedings among others under section 273. According to the Assessing Officer, the assessee had been assessed previously by way of regular assessment and he failed to file statement of advance tax within the meaning of section 209A(1)(a) and these facts have not been denied by the assessee either before the Assessing Officer or be....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the various arguments reliance was placed on the following decisions : 1. Steel Containers Ltd. v. CIT [1978] 112 ITR 995 (Cal) ; 2. Nandlal Jaiswal and Co. v. CIT [1998] 232 ITR 540 (MP) ; and 3. Pushpa Devi Bhojnagarwala v. ITO [1996] 56 ITD 302 (Cal). I have examined the facts of the case as also the legal position canvassed by both the parties, the learned Departmental Representative in the present hearing and the assessee at the stage of arguing the matter before the Division Bench of the Tribunal. At the outset, I would like to deal with the three decisions relied upon by the learned Departmental Representative before me. (1) Steel Containers Ltd. v. CIT [1978] 112 ITR 995 (Cal) : In the aforesaid judgment the scope of the powers of the Tribunal were under consideration with reference to the facts of the case and this is what their Lordships observed at page 995 (headnote) : "Though the powers of the Appellate Tribunal may be said to be limited to the subject-matter of the appeal before it, the Tribunal is competent to pass such orders on appeal 'as it thinks fit'. There is nothing in the Act which restricts the Tribunal to the determination of the questions r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt, that the provision has been deleted and hence the Income-tax Officer should not have proceeded in the matter and imposed the penalty under section 271(1)(c) of the Act. This is what their Lordships observed in rejecting the reference application." (at page 540 of the headnote) : "that the Income-tax Officer might have made a reference to an unamended provision on the basis of facts which were relevant but the Tribunal had found that the penalty was justified with reference to the existing provision. Simply by referring to a wrong provision of law which was non-existent, it could not be said that penalty could not be imposed under the existing provision. In the present case, penalty could be levied under section 271(1)(c) of the Act." It is observed from page 540 of the report that the Madhya Pradesh High Court at the outset held that the question which has been referred for opinion was a question of fact and no question of law arose. It was only at this stage that the assessee's counsel made submissions pertaining to the non-existing provision of law/wrong provision of law and the observations of their Lordships already reproduced earlier were made with reference to the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... no longer on the statute book as the same was omitted with effect from June 1, 1978. The illegality was compounded by passing an order under section 273(2)(c), inasmuch as it could neither be connected to failure under the omitted provision of section 212(3) nor was it the concerned provision penalising the assessee for short payment of advance tax and thus, the mistake, if any, in mentioning the provision of section 273(2)(c) could not be considered a technical mistake so as to take recourse to section 292B as the mistake hit the jurisdiction of levy of penalty itself. Thus, the mistake in the notice and the penalty order touched the root of the matter, making the proceedings void ab initio, which could not be cured by taking recourse of section 292B, much less by the first appellate authority. At any rate, even going by the approach of the first appellate authority, the penalty, if any, was leviable for wilful short payment of the advance tax. However, penalty proceedings under section 273 being quasi criminal in nature, the Assessing Officer could not impose penalty without giving a reasonable opportunity to the assessee of being heard, on the alleged wilful short payment of ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....section 144B of the Act did not cause any prejudice to the Revenue since the Income-tax Officer made the assessment at a figure which was much higher than the returned income and the matter could be treated as a procedural irregularity. The present case, in my opinion, does not fall under the said category as it is a question of penalty for which not only a proper opportunity of being heard has to be allowed but the assessee has to be made aware of the charge for which he is being penalised. In the present reference before me the learned Departmental Representative has stated that on two occasions at the penalty stage before the Assessing Officer the assessee did not respond but nothing on the record was produced and which would show that the specific charge was confronted to the assessee to enable him to give a suitable reply. The judgment of the Madhya Pradesh High Court in Kimtee v. CIT [1985] 151 ITR 73 relied upon by the Revenue is on the same facts and, therefore, not applicable. Another decision which was relied upon before the Division Bench was that of the Madhya Pradesh High Court in Prabhudayal Amichand v. CIT [1989] 180 ITR 84 but, a reading of the same shows that it....