Commissioner of Income Tax vs Fakirchand Dayaram

Sohani, J.—This is a reference u/s 256(1) of the I.T. Act, 1961, hereinafter called "the Act", made by the Income Tax Appellate Tribunal, Indore Bench. The following duestion of law has been referred to this court for its opinion :

"Whether the Tribunal; was justified in law in holding that the penalty proceedings having been referred to the Inspecting Assistant Commissioner of Income Tax on February 22, 1971, i.e., prior to the amendment of Section 275 of the Income Tax Act, 1961, w.e.f. April I, 1971, Section 275 as it stood prior to its amendment was applicable to the proceedings and that the penalty order passed by the IAC on March 15, 1973, was illegal being beyond time) ?

The material facts giving rise to this reference briefly are as follows: For the assessment year 1968-69, the assessee had submitted a return disclosing his income as Rs. 20,981. The ITO, however, assessed the income at Rs. 26,250. The ITO, being satisfied that the assessee was liable to an imposition of penalty u/s 271(1)(c) of the Act, directed by the assessment order dated 22nd February, 1971, initiation of penalty proceedings against the assessee. The ITO referred the penalty proceedings to the IAC on 9th March, 1971, as, in the opinion of the ITO, the minimum penalty imposable exceeded Rs. 1,000. The IAC was satisfied that the assessee had furnished inaccurate particulars of his income and the IAC accordingly imposed a penalty of Rs. 7,524 by his order dated 15th March, 1973. Aggrieved by that order, the assessee preferred an appeal before the Tribunal. It was contended on behalf of the assessee before the Tribunal that u/s 275 of the Act an order imposing a penalty could be passed by the IAC after the expiry of a period of two years from 22nd February, 1971, the date on which the assessment proceedings were completed. It was, therefore, contended that as the order of penalty was passed by the IAC after the expiry of the period of two years, the order imposing penalty was illegal. This contention was upheld by the Tribunal. The Tribunal, therefore, set aside the order of imposition of penalty and allowed the appeal. Aggrieved by that order, the Department submitted an application u/s 256(1) of the Act, and it is at the instance of the Department that the aforesaid question of law has been referred to this court for its opinion.

Having heard learned counsel for the parties, we have come to the conclusion that the reference must be answered in the negative and against the assessee. Section 275 of the Act, which lays down the period of limitation for imposing a penalty, was amended with effect from 1st April, 1971. It is not disputed that if the amended provision is applicable in the instant case, then the imposition of penalty could not be held to be barred by time. It has been held by the Allahabad, Andhra Pradesh, Gujarat, Karnataka and Orissa High Courts in Hargu Charan Srivastava Vs. Commissioner of Income Tax, , The Additional Commissioner of Income Tax, Andhra Pradesh, Hyderabad Vs. Watan Mechanical and Turning Works, Hyderabad, , Commissioner of Income Tax Vs. Royal Motor Car Co, , Commissioner of Income Tax (Central), Madras Vs. M. Nagappa, , Commissioner of Income Tax Vs. Soubhagya Manjari Devi, and Commissioner of Income Tax Vs. Bhikari Charan Panda, , that if in a particular proceeding the period of limitation was still running on 1st April, 1971, the amended provision enlarging the period of limitation would apply. We respectfully agree with these decisions.

For these reasons, our answer to the question referred to us is in the negative and against the assessee. In the circumstances of the case, parties shall bear their own costs.