COMMISSIONER OF INCOME-TAX VS D. PUSHPAM AMMAL
1999 P T D 92
[225 I T R 47]
[Madras High Court (India)]
Before K.A. Thanikkachalam and N. V. Balasubramanian, JJ
COMMISSIONER OF INCOME-TAX
Versus
D. PUSHPAM AMMAL
Tax Case No.497 (Reference No_.439 of 1984), decided on 13/03/1996.
Income-tax---
----Penalty---Concealment of income---Jurisdiction to levy penalty---Law applicable to assessment---Effect of amendment of S.274 with effect from 1-4-1971---Return filed in December, 1969, and reassessment completed in July, 1974---Quantum of penalty less than Rs.25,000---Jurisdiction to levy penalty had to be determined with reference to the date of assessment-- I.T.O. had jurisdiction to levy penalty---Indian Income Tax Act, 1961, Ss.271(c) & 274.
Proceedings for imposition of penalty can be initiated only after an assessment order has been made which finds such concealment or furnishing of inaccurate particulars. Who, at this point of time, has the authority to impose the penalty is what is relevant. Whoever this authority may be, he is obliged to impose such penalty as 'was permissible under the law in that behalf on the date on which the offence of concealment was committed, that is to say on the date of the offending return.
For the assessment year 1965-66, the assessee filed a return on December 8, 1969, and the assessment was completed on March 20, 1970. Penalty proceedings for concealment of income in that return were initiated. Subsequently, reassessment proceedings were started and Rs.10,000 was added as income from other sources by reassessment, dated July 22, 1974. Then penalty proceedings for concealment of this sum were initiated under section 271(1)(c) of the Act. The Income-tax Officer himself levied the penalty. The Tribunal cancelled the penalty on the ground that the Income tax Officer did not have jurisdiction to levy the penalty. On a reference:
Held, that the reassessment was completed on July 22, 1974. Thereafter, penalty proceedings were initiated under section 271(1)(c) of the Act. The penalty was levied at Rs.10,000. Section 274(2) of the Income Tax Act, 1961, was amended by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971. Under the amended provision, the Income tax Officer could levy a penalty of up to Rs.25,000. In the present case, the penalty levied was Rs.10,000. Therefore, the Income-tax Officer was perfectly justified in levying the penalty of Rs.10,000 in the present case.
Varkey Chacko v. CIT (1993) 203 ITR 885 (SC) and CIT v. Dhadi Sahu (1993) 199 ITR 610 (SC) fol.
CIT v. Anwar Ali (1970) 76 ITR 696 (SC) ref.
C.V. Rajan for the Commissioner.
K.I. Mani for the Assessee.
JUDGMENT
K. A. THANIKKACHALAM, J.---In pursuance of the direction given by this Court, the Tribunal referred the following question for the opinion of this Court, under section 256(2) of the Income Tax Act, 1961:
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the Income-tax Officer had no jurisdiction to levy penalty under section 271(1)(c) in this case, for the assessment year 1965-66?"
For the assessment year 1965-66, the assessee filed a return on December 8, 1969, and the assessment was completed on March 20, 1970. Penalty proceedings for concealment of income in that return were initiated. But the original assessment completed on March 20, 1970, was set aside by the Appellate Assistant Commissioner on appeal. Then, it was redone on November 13, 1972. Penalty proceedings were again initiated and a minimum penalty of Rs.21,831 was levied by the Income-tax Officer. There was also a search in the premises of the assessee on October 18, 1973, when fixed deposit receipt for Rs.10,000 was recovered. The deposit relates to the accounting year relevant to this assessment year, but being when discovered in 1973 only a renewal from time to time. As the source for this deposit was not satisfactorily explained, that Rs.10,000 was added as income from other sources by reassessment, dated July 22, 1974. Then penalty proceedings for concealment of this sum were initiated under section 271(1)(c) of the Act. The Income-tax Officer himself levied the penalty. The assessee appealed to the Appellate Assistant Commissioner against the levy of penalty by the Income-tax Officer and the Appellate Assistant Commissioner cancelled the penalty, on the principal reasoning, that the Supreme Court judgment in Anwar Ali's case (1970) 76 ITR 696, about income nature applies to the facts of this case.
Aggrieved, the Department filed appeal before the Appellate Tribunal and the same was dismissed. The Tribunal found that the concealment was in the original return and not in the revised return and, therefore, the law as on the date of filing the return should have been applied. Under the law, as on the date of filing the original return, the Income-tax Officer had no jurisdiction to levy the penalty, as the minimum penalty leviable was about Rs.10,000 and this should have been referred to the Inspecting Assistant Commissioner for levy of penalty. Thus, the penalty was cancelled by the Tribunal on the ground of jurisdiction and it did not express any opinion on the merits of the case levy of penalty.
Before us, learned standing counsel for the Department submitted that the penalty proceedings under section 271(1)(c) were initiated after the reassessment was completed on July 22, 1974. Therefore, as per the law applicable as on that date as per the provisions of section 274(2) of the Act, the Income-tax Officer would have jurisdiction to levy penalty if the quantum of penalty is less than Rs.25,000.
In the present case, the penalty levied was only Rs.10,000. Therefore, the penalty levied by the Income-tax Officer is in order and the Tribunal was not correct in stating that the penalty ought to have been levied by the Inspecting Assistant Commissioner, since the levy of penalty of Rs.10,000 was above Rs.1,000 as per the law as it stood earlier to the amended provision of section 274(2) by the Taxation Law (Amendment) Act, 1970, with effect from April 1, 1971. It was, therefore, submitted that the Tribunal was not correct in cancelling the penalty on the quest'-on of jurisdiction.
We have also heard learned counsel appearing for the assessee, who supported the order passed by the Tribunal.
The fact remains that the reassessment was completed on July 22, 1974. Thereafter, the penalty proceedings were initiated under section 271(1)(c) of the Act. The penalty was levied at Rs. 10,000. Section 274(2) of the Income Tax Act, 1961, was amended by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971. As per the amended provision, the Income-tax Officer can levy penalty up to Rs.25,000. In the present the penalty levied was Rs.10,000. Therefore, the Income-tax Officer was perfectly justified in levying the penalty of Rs.10,000 in the present case.
In Varkey Chacko v. CIT (1993) 203 ITR 885, the Supreme Court while considering the provisions of section 271(1)(c) and section 274(2) (before and after amendment by the Taxation Laws (Amendment) Act, 1970), held as under (headnote):
"Penalty for concealment of particulars of income or for furnishing inaccurate particulars of income can be imposed only when the assessing authority is satisfied that there has been such concealment or furnishing of inaccurate particulars. Proceedings for the imposition of penalty can, therefore, be initiated only after an assessment order has been made which finds such concealment or furnishing of inaccurate particulars. Who, at this point of time, has the authority to impose the penalty is what is relevant. Whoever this authority may be, he is obliged to impose such penalty as was permissible under the-law in that behalf on the date on which the offence of concealment was committed, that is to say, on the date of the offending return. The two aspects must be firmly borne in mind, namely, who may impose the penalty and in what measure."
A similar view was also taken by the Supreme Court in the decision reported in C. I. T. v. Dhadi Sahu (1993) 199 ITR 610.
In view of the amended provision, in the present case, the Income tax Officer was justified in levying penalty of Rs.10,000. Therefore, the Tribunal was not correct in stating the law as it stood on the date when the original return was filed alone would be applicable in levying penalty under section 271(1)(c). However, it remains to be seen that the Tribunal has not dealt with the appeal on the merits. Therefore, when passing the consequential order, it is open to the assessee to contest the appeal on the merits. Accordingly, we answer the question referred to us in the negative and in favour of the Department. No costs.
M.B.A./1651/FCOrder accordingly.