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Judgment
D.K. Mahajan, C.J.—After the income tax Officer had passed the assessment order regarding assessment year 1961-62, the following note was recorded:
The Assessee concealed income of Rs. 8,000/- from undisclosed sources. Therefore, the penalty proceedings u/s 271(1)(c) had been started separately.
As the minimum penalty imposable was more than Rs. 1,000/- the case was referred to the Inspecting Assistant Commissioner u/s 274(2) of the income tax Act, 1961 (hereinafter referred to as the Act). After hearing the Assessee, the Inspecting Assistant Commissioner came to the conclusion that the escapement was with regard to Rs. 69,228/- in addition to Rs. 8,000/-. He, therefore, levied a penalty of Rs. 25,000/-. The Assessee appealed to the Appellate Tribunal and the Appellate Tribunal reduced the quantum of penalty. With regard to the sum of Rs. 8,000/- it held that a sum of Rs. 3,000 had not been concealed. With regard to the balance amount of Rs. 5,000/-, it took the view that in view of the Supreme Court decision in Commissioner of income tax West Bengal and Anr. v. Anwar Ali (1970) 76 ITR 696, no penalty was exigible. However, it reduced the amount of undisclosed income from Rs. 69,228/- to Rs. 35,419/- and added to it a sum of Rs. 6,800/- which had been received by the directors of the firm as salaries. The Assessee was dissatisfied with this order and moved the Tribunal u/s 256(1) of the Act for referring the following question of law for the opinion of this Court:
(1) Whether on the facts and in the circumstances of the case, the Tribunal, was right, in law, in holding that penalty u/s 271(1)(c) was exigible?
(2) Whether on the facts of the case, the income tax Officer''s observation that the penalty proceedings were started for concealment of Rs. 8,000/-, the Inspecting Assistant Commissioner could treat the amount of Rs. 69,228/- as an item of concealment? and
(3) Whether on the facts of the case, the Tribunal was right, in law, in directing that the penalty be recomputed with respect to the sustained addition of Rs. 35,419/- out of commission and 6,800/- on account of salary and when the amount of Rs. 6,800/- was not treated as an item of concealment by the Inspecting Assistant Commissioner who levied the penalty?
This is how the reference has been placed before us.
The short contention of the learned Counsel for the Assessee is that the income tax Officer had merely determined that the concealment was with regard to the item of Rs. 8,000/-. Therefore, according to the learned Counsel, no penalty could be levied on any other amount. On the other hand, Mr. Awasthy, learned Counsel for the Department contends that in view of the following expression used in Section 274(2) of the Act.
...shall...have all the powers conferred under this Chapter for the imposition of penalty.
it necessarily follows that the Inspecting Assistant Commissioner could determine whether there were other amounts of concealed income besides the one determined by the income tax Officer for the purpose of Section 271(1)(c) of the Act. In this connection, it would be proper to set out the relevant provisions of Section 271(1)(c) and Section 274(2) of the Act. These are to the following effect:
271(1) If the income tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person--
(a)
to
(b)
(c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty--
(i)
to
(ii)
(iii) in the cases referred to in Clause (c), in addition to any tax payable by him, a sum which shall not be less than twenty per cent, but which shall not exceed one and a half times the amount of the tax, if any, which would have been avoided if the income as returned by such person had been accepted a? the correct income,
274 (2) Notwithstanding anything contained in Clause (iii) of Sub-section (1) of Section 271, if in a case falling under Clause (c) of that sub-section, the minimum penalty imposable exceeds a sum of rupees one thousand, the income tax Officer shall refer the case to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty.
As we read Section 271(1) of the Act, it confers power on two authorities, namely, the income tax Officer or the Appellate Asstt. Commissioner in the matter of determining whether the income has not been returned without reasonable cause or that the notices under Sections 142(1) and 143(2) of the Act have not been complied with without reasonable cause or there has been a concealment of particulars of income or inaccurate particulars of income have been furnished. It will be significant to note that there is no mention so far as the Inspecting Assistant Commissioner is concerned in Sub-section (1) of Section 271 of the Act. The reason for this is obvious. It is only the income tax Officer or the Appellate Assistant Commissioner who are concerned with the assessment and it is not disputed that so far as the Inspecting Assistant Commissioner is concerned, he is not concerned with the assessment. Therefore, the question whether any income has been concealed or inaccurate particulars of any income have been furnished is a matter which primarily and necessarily rests with the income tax Officer or the Appellate Assistant Commissioner. It is well known that an appellate authority normally has the same powers as the original authority. Unless these powers were specifically conferred upon the Inspecting Assistant Commissioner, it would not be proper to hold that he can probe into the question of concealment of any income or furnishing of inaccurate particulars of any income. If we examine the language of Section 274(2) of the Act, it is clear that if the minimum penalty imposable exceeds a sum of Rs. 1,000/- which in the (sic) instant case, it did, the income tax Officer shall refer the case to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty. This provision clearly shows that all the powers conferred by Section 274(2) of the Act on him do not clothe him with the power to assess which is a pre-requisite so far Section 271(1)(c) of the Act, is concerned. If Section 274 of the Act, on which, Mr. Awasthy, learned Counsel for the Department relies for his contention, is read as a whole, it shall be obvious that the powers conferred by it upon the Inspecting Assistant Commissioner are in the matter of imposition of penalty and not for purposes of assessment. That is why Section 271(1) of the Act mentions the income tax Officer and the Appellate Assistant Commissioner. It is also significant that the question whether the penalty should or should not be imposed is again by Section 271(1) of the Act left to the domain of the aforesaid two authorities. It is only after these authorities settle the question that income has been concealed etc., then the matter as to the imposition of the penalty is left to the Inspecting Assistant Commissioner. To hold otherwise would mean that the Inspecting Assistant Commissioner can sit in judgment over the income tax Officer or the Appellate Assistant Commissioner and be a sort of appellate authority when the Act does not make it one. In fact, Mr. Awasthy admits that the powers of the authorities mentioned in Section 271(1) and Section 274(2) of the Act are the same. The correct position is that the power u/s 274(2) of the Act is a power of reference and unless a case is referred, the Inspecting Assistant Commissioner will have no power to examine it. For instance, if the income tax Officer had come to the conclusion that Rs. 8,000/- was not a concealed income, there would have been no reference and in that situation, on the facts of the present case, the Inspecting Assistant Commissioner would be coram non judice to examine whether a sum of Rs. 69,228/- had been concealed. If the argument of Mr. Awasthy, learned Counsel for the Department was correct, then he could suo motu have done so, but the learned Counsel concedes that there is no such "suo motu" power vested in the Inspecting Assistant Commissioner in the matter of levy of penalty. Mr. Awasthy, however, maintains that his powers are co-terminus with the powers of the income tax Officer. This argument is partially correct and not wholly, because there are certain powers which, in the very nature of things, are not conferred upon the Inspecting Assistant Commissioner. Moreover, the rule is well settled that the powers which are expressly conferred on one authority cannot be deemed to have been conferred on a totally different authority unless it can be so held by necessary implication. This cannot be said of Section 274 of the Act. Section 274 of the Act is merely an enabling provision and the logic of it is that instead of the income tax Officer, a higher authority is given the power to determine as to what penalty should be levied in the given circumstances of a case where the quantum of penalty to be leviable exceeds Rs. 1,000/-. The view we are taking finds support from the decision of the Supreme Court in D.M. Manasvi Vs. Commissioner of Income Tax, Gujarat, II Ahmedabad, , wherein it was observed as follows:
It would, in deed, be the satisfaction of the income tax Officer in the course of the assessment proceedings regarding the concealment of income which would constitute the basis and foundation of the proceedings for levy of penalty.
In this view of the matter, we are of the opinion that no penalty was exigible in the circumstances of this case because the amount of Rs. 8,000/- which was held to be exigible for penalty was found by the Tribunal not to be so exigible.
For the reasons recorded above, we answer all the three questions referred to us in the negative, that is, in favour of the Assessee and against the Department. No costs.