2004 (9) TMI 45

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....on of the entire assessment order to enable the Department to initiate penalty proceeding, while upholding the order of the Commissioner of Income-tax under section 263 of the Income-tax Act, regarding direction to the Income-tax Officer to charge interest under section 217(1A) of the Income-tax Act?" Briefly stated the facts giving rise to the present reference are as follows: The reference relates to the assessment year 1977-78. The respondent is assessed to income-tax as an individual. For the assessment year 1977-78, a notice under section 210 was issued by the Income-tax Officer on November 18, 1976, calling upon the respondent to pay advance tax of Rs. 1,153 during the financial year 1976-77. The respondent, however, paid a sum of Rs. 600 only and also did not file any estimate of advance tax as required by section 212 of the Act. He had filed his return showing an income of Rs. 14,870. However, the income was assessed at Rs. 45,140. While passing the assessment order, the Income-tax Officer omitted to charge interest under section 217(1A) and to initiate penalty proceedings under section 273 (c) of the Act. The Commissioner of Income-tax on examination of the assess....

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....unal, he relied upon the following decisions: (1) Addl. CIT v. J. K. D'Costa [1982] 133 ITR 7 (Delhi); (2) Addl. CIT v. Achal Kumar Jain [1983] 142 ITR 606 (Delhi); and (3) CIT v. Nihal Chand Rekyan [2000] 242 ITR 45 (Delhi). Having heard learned counsel for the parties, we find that the Delhi High Court in the case of J. K. D'Costa [1982] 133 ITR 7 has held that the assessment cannot be said to be erroneous or prejudicial to the interests of the Revenue because of the failure of the Income-tax Officer to record his opinion about the leviability of penalty in the case. It has held as follows: "The only question before us is whether the Tribunal was right in revoking the order of the Additional Commissioner in so far as it pertains to the question of penalties under sections 271(1)(a) and 273(b). Here, we find ourselves in complete agreement with the view taken by the Tribunal. It is well established that proceedings for the levy of a penalty whether under section 271(1)(a) or under section 273(b) are proceedings independent of and separate from the assessment proceedings. Though the expression 'assessment' is used in the Act with different meanings in different conte....

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....udershan Talkies [1993] 201 ITR 289 and CIT v. Nihal Chand Rekyan [2000] 242 ITR 45. A similar view has been taken by the Rajasthan High Court in the case of CIT v. Keshrimal Parasmal [1986] 157 ITR 484 the Gauhati High Court in the case of Surendra Prasad Singh v. CIT [1988] 173 ITR 510, the Calcutta High Court in the case of CIT v. Linotype and Machinery Ltd. [1991] 192 ITR 337 and the Madras High Court in the case of CIT v. C.R.K. Swamy [2002] 254 ITR 158. On the other hand the Madhya Pradesh High Court has taken a contrary view in the case of Addl. CIT v. Indian Pharmaceuticals [1980] 123 ITR 874; Addl. CIT v. Kantilal Jain [1980] 125 ITR 373 (MP); Addl. CWT v. Nathoolal Balaram [1980] 125 ITR 596 (MP) and CIT v. Narpat Singh Malkhan Singh [1981] 128 ITR 77 (MP). This court in the case of Saraya Distillery [1978] 115 ITR 34 has held that an order can be said to be erroneous either when it does not decide a point or record a finding on an issue which ought to have been done or decides it wrongly. In the aforesaid case the Assessing Officer had not charged interest while passing the assessment order. This court following the decision of the Kerala High Court in the case ....

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....is court is concerned. In Addl. CIT v. J. K. D.'Costa, Income-tax Reference No. 82 of 1974, disposed of by us on April 27, 1981-reported in [1982] 133 ITR 7 (Delhi), we held on similar facts that the Commissioner could not pass an order pertaining to penalty under section 263 of the Act. We held that the penalty proceedings do not form part of the assessment proceedings. Further, the failure of the Income-tax Officer to record his satisfaction or the lack of it in the assessment order, with regard to the leviability of penalty cannot be a factor vitiating the assessment orders." The other High Courts, namely, Rajasthan, Gauhati, Calcutta and Madras High Court have followed the view taken by the Delhi High Court in the cases of J. K. D' Costa [1982] 133 ITR 7 and Achal Kumar Jain [1983] 142 ITR 606. We also find that the hon'ble Supreme Court had dismissed the special leave petition filed by the Revenue against the decision of the Delhi High Court in J. K. D' Costa [1984] 147 ITR (St.) 1. So far as the dismissal of the special leave petition by the hon'ble Supreme Court is concerned it may be mentioned here that the nature and the jurisdiction exercised by the hon'ble Supreme ....

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....e on the respondent. The petition shall be accompanied by a certified copy of the judgment or order appealed from and an affidavit in support of the statement of facts contained in the petition. Under rule 10, the petition for grant of special leave shall be put up for hearing ex parte unless there be a caveat. The court, if it thinks fit, may direct issue of notice to the respondent and adjourn the hearing of the petition. Under rule 13, the respondent to whom a notice in special leave petition is issued or who had filed a caveat, shall be entitled to oppose the grant of leave or interim orders without filing any written objections. He shall also be at liberty to file his objections only by setting out the grounds in opposition to the questions of law or grounds set out in the special leave petition. On hearing the court may refuse the leave and dismiss the petition for seeking special leave to appeal either ex parte or after issuing notice to the opposite party. Under rule 11, on the grant of special leave, the petition for special leave shall, subject to the payment of additional court fee, if any, be treated as the petition of appeal and it shall be registered and numbered as s....

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....expressed in the impugned order does not become the view of this court. The dismissal of the special leave petition by a non-speaking order would remain a dismissal simpliciter in which permission to file the appeal to this court is not granted. This may be because of various reasons. It would not mean to be the declaration of law by this court. In a recent judgment of a three-member Bench in Kunhayammed v. State of Kerala [2000] 245 ITR 360 (SC) after exhaustive consideration of the entire case law this court has reaffirmed this position. The apex court in the case of Justice P. Venugopal v. Union of India [2003] 7 SCC 726 has held that it may be treated that this court did not grant special leave petition from the judgment of Justice Nand Lal Ganguly but the same by itself would not render the decision as a binding precedent in terms of article 141 of the Constitution of India. Thus the dismissal of the special leave petition by the apex court in the case of J. K. D'Costa [1984] 147 ITR (St.) 1 cannot be treated as a binding precedent under article 141 of the Constitution of India. In the case of Malabar Industrial Co. Ltd. [2000] 243 ITR 83, the apex court has held as foll....