Commissioner of Income Tax vs Free Wheel India Ltd.

S. Ranganathan, J.—These three income tax cases can be disposed of by a common order. The assessment of Free Wheel (India) Ltd. for the assessment year 1970-71 was completed on 31-3-1973 by the ITO who also initiated penalty proceedings u/s 271(1)(c) of the income tax Act, 1961 (''the Act''). The assessment became final with an order of the Tribunal dated 18-12-1979 which was served on the Commissioner on 16-1-1980. But, by then, the jurisdiction over the assessee''s case had been transferred to the Commissioner (Central) who received the Tribunal''s order on 13-3-1980. After the appeals against the assessment were disposed of, the IAC continued the penalty proceedings initiated by the ITO and on 29-9-1980 passed an order levying a penalty of Rs. 1,12,065. The penalty was imposed for the reason that the assessee had, in filing its return of income, omitted to take into account any value for the closing stock of scrap lying with it at the end of the previous year.

The assessee filed an appeal to the Tribunal, from the order of penalty. The Tribunal, by an order dated 25-1-1981, held in paragraph Nos. 10 to 12 of its order that the imposition of a penalty was justified on the facts and circumstances of the case but cancelled the penalty accepting the assessee''s pleas (i) that the IAC had no jurisdiction to impose the penalty, and (ii) that the penalty order was time barred. The assessee moved an application u/s 254(2) of the Act contending that the Tribunal''s findings in paragraph Nos. 10 to 12 were vitiated by the failure to consider certain material facts that had been placed before the Tribunal. The Tribunal accepted this application by its order dated 23-10-1982, recalled paragraph Nos. 10 to 12 of its earlier order and directed the appeal to be heard afresh on this point. After rehearing, the Tribunal, by its order dated 18-5-1983, accepted the assessee''s plea and held that, even on the facts, no penalty u/s 271(1)(c) was leviable.

The Commissioner challenges the correctness in law of all the above conclusions of the Tribunal. In income tax case 101 of 1984, which pertains to the order dated 25-1-1981, the questions on which reference sought are:

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty order on the ground that the IAC had no jurisdiction to levy the penalty?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty order on the question of period of limitation by holding that limitation should be counted from the date of service of the Tribunal''s order on the Commissioner, New Delhi and not on the Commissioner (Central), with whom the jurisdiction over the case actually vested?"

In income tax case 100 of 1984 which pertains to the order dated 23-10-1982 u/s 254(2) the question raised is as follows:

"Whether, on the facts and in the circumstances of the case, the Tribunal was correct both on facts and in law in recalling paragraph Nos. 10 to 12 of their order dated 25-9-1981 for reconsideration after particularly upholding the fact that the penalty u/s 271(1)(c) was exigible and the assessee was guilty of wilful omission and undervaluation of the closing stock?"

In income tax case 25 of 1985 which pertains to the order of the Tribunal dated 22-8-1983 the question of law framed by the Commissioner reads as follows:

"Whether, on the facts and in the circumstances of the case, the income tax Appellate Tribunal was correct both on facts and in law in holding that the penalty u/s 271(1)(c) of the income tax Act, 1961 was not exigible in this case?"

The first question raised in income tax case 101 of 1984 is clearly a question of law and, that too, one on which there is a difference of judicial opinion. So far as question No. 2 is concerned, prima facie, it would appear, reading sections 253(4), 254(3) and 275 of the Act, that the Tribunal''s conclusion is correct but the position in a case where there is a change in the Commissioner having jurisdiction over a case needs examination and so we think that this is also a question on which a reference is justified.

It is contended for the assessee that, even if the above questions are questions of law, they would be academic in view of the finding of the Tribunal that no penalty is leviable, which is a finding of fact. The position is not so simple. The Tribunal''s finding on this aspect was arrived at after recalling its earlier finding and we think, in the circumstances of the case, that the question whether the Tribunal was right in recalling the earlier order is a question of law. The Commissioner''s contention is that the Tribunal had reached its findings after considering all the facts placed before it and that the assessee is not right in saying that the Tribunal had overlooked any of these. We have heard the counsel at some length on this and considered the three orders of the Tribunal and the grounds on which the assessee requested the Tribunal to recall its earlier findings. We think that the contention that the Tribunal has really reviewed its earlier order which it had no jurisdiction to do needs examination and that the question raised in income tax Case No. 100 of 1984 should be directed to be referred.

The question raised in income tax case 25 of 1985 is normally a question of fact. But, in this case, the answer to it would depend on the answers to the other three questions on which we are calling for a reference. We would, therefore, direct the Tribunal to refer this question as well. In the result, these applications are allowed. The Tribunal is directed to submit a consolidated statement of case in all the three income tax cases and refer for our decision all the four questions set out earlier. There will be no order as to costs.