Commissioner of Income Tax vs Prem Kumar Sethia

G.G. Sohani, J.—By this reference u/s 256(1) of the Income Tax Act, 1961 (hereinafter referred to as "the Act "), the Income Tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that since penalty proceedings were not initiated during the course of the regular assessment proceedings but were initiated while revising the assessment u/s 155(1) of the Income Tax Act, the levy of penalty u/s 273(b) of the Income Tax Act is bad in law ?"

The material facts giving rise to this reference, briefly, are as follows :

The assessee, who is a partner in a registered firm, filed returns of income for the assessment years 1974-75 to 1976-77 declaring his share income from the firm. The Income Tax Officer completed the assessment and did not initiate any action against the assessee u/s 273 of the Act. Later on, on completion of the assessment of the firm, the Income Tax Officer proceeded to rectify the assessments u/s 155 of the Act and at that stage, proceedings u/s 273(b) of the Act were initiated against the assessee. The objection raised on behalf of the assessee that as the penalty proceedings were not initiated against the assessee in the course of regular assessment, the proceedings commenced by the Income Tax Officer were not valid, was not upheld by the Income Tax Officer who levied penalty u/s 273(b) of the Act. Aggrieved by those orders, the assessee preferred appeals. The Appellate Assistant Commissioner upheld the contention urged on behalf of the assessee and the orders imposing penalty passed by the Income Tax Officer were set aside. Aggrieved by those orders, the Revenue preferred appeals before the Tribunal which dismissed the appeals. The Revenue, therefore, sought a reference and it is at the instance of the Revenue that the aforesaid question of law has, been referred to this court for its opinion.

At the time of hearing, learned counsel for the parties conceded that the facts and the question of law arising in this case are similar to those which arose in Commissioner of Income Tax Vs. Mamta Tiwari and Others, . We see no valid reason to take a view different from that taken in Misc. Civil Case No. 63 of 1985 (supra p. 59). Following that decision, therefore, the penalty proceedings in the instant case must be held to have been initiated during the course of proceedings in connection with the "regular assessment" within the meaning of that expression as defined by Section 2(40) of the Act. In our opinion, therefore, the Tribunal was not justified in holding that the levy of penalty u/s 273(b) of the Act was bad in law.

Our answer to the question referred to this court is, therefore, in the negative and against the assessee. In the circumstances of the case, parties shall bear their own costs of this reference.