UTTUMAL GAGUMAL v. INSPECTING ASSISTANT COMMISSIONER OF INCOME TAX
[Citation -1984-LL-1019-2]

Citation 1984-LL-1019-2
Appellant Name UTTUMAL GAGUMAL
Respondent Name INSPECTING ASSISTANT COMMISSIONER OF INCOME TAX
Court ITAT
Relevant Act Income-tax
Date of Order 19/10/1984
Assessment Year 1968-69
Judgment View Judgment
Keyword Tags tax sought to be evaded • imposition of penalty • genuineness of loan • single member • special bench • time-limit • motor car
Bot Summary: According to Mr. Ranka, the penalty order by the IAC is without any jurisdiction as due to the amended law it was only the ITO who was empowered to levy the penalty after 1st April, 1976. The penalty levied on 7th June, 1982 which is almost after six years after the expiry of the period of within which penalty could have been levied is clearly barred by time and invalid. Mr. Ranka submitted that the second limb of the penalty order is Rs. 34,800 added as income by ITO on 11th March ,1982 and penalty being levied by IAC. He stated that s. 274(2) which had empowered the IAC to levy the penalty if the amount exceeds Rs. 25,000, had been deleted from the statute book w.e.f. 1st April, 1976. Since as per the changed law after 1st April, 1976, the IAC has been divested of the powers of imposition of penalty he could not have imposed the penalty at all and the order of penalty by IAC is without any jurisdiction, and needs only to be quashed. According to us, the following questions arise in the present case: Can order of levy of penalty be postponed by delaying of giving effect to Tribunal s order Is not the penalty order dt. First element is the power or right to impose a penalty and the second being as to who shall levy the penalty. We accordingly quash the penalty order of the IAC imposing the penalty of Rs. 50,900.


A. KALYANASUNDARAM, A.M.: appeal by assessee is against levy of penalty under s. 271(1)(c) of Rs. 50,900 for asst. yr. 1968-69. Mr. Ranka, ld. representative of assessee stated that penalty was levied on 7th June, 1982 by IAC after ITO had completed reassessment on 11th March, 1982 as per directions of Tribunal vide its order dt. 29th Nov., 1975. He further stated that Tribunal vide its order dt. 29th Nov., 1975 had confirmed addition of Rs. 16,100 made as undisclosed sources by ITO. Tribunal had remanded case of ITO to examine genuineness of loan from two parties Sri Rahumal and Sri Nihalchand aggregating to Rs. 34,800. ITO vide his order dt. 11th March, 1982 had held that loans to be non-genuine and added same to income of assessee. Appeal against this addition made to CIT(A) had failed and appeal is now pending in Tribunal. Mr. Ranka, stated that original assessment wherein income on account of addition of Rs. 50,900 was made was on 20th Aug., 1971. In assessment order it had been mentioned penalty proceedings under s. 271(1)(c) are being initiated separately. Reference was also made on 19th Aug., 1973 to IAC. In final assessment made on 11th March, 1982, it was again mentioned that penalty proceedings under s. 271(1)(c) are being initiated separately. On same day of passing of order, ITO made reference to IAC and sent notice to assessee to send all replies to IAC and that all penalty proceedings shall henceforth take place before IAC. IAC vide his order dt. 7th June, 1982 had levied penalty of Rs. 50,900 which included Rs. 16,100 addition that was confirmed by Tribunal vide its order dt. 29th Nov., 1975 and another sum of Rs. 34,800 added as income by ITO vide his order dt. 11th March, 1982. Mr. Ranka submitted that in present appeal issues on legality of levy of penalty as well as quantum has been raised. According to Mr. Ranka, penalty order by IAC is without any jurisdiction as due to amended law it was only ITO who was empowered to levy penalty after 1st April, 1976. He further stated that penalty order has two parts. first being in respect of addition of Rs. 16,100 that was confirmed by Tribunal on 29th Nov., 1975. Mr. Ranka submitted that penalty levied to this extent was beyond time. He submitted that for levy of penalty, time-limit prescribed under s. 275 must have strictly adhered to by ITO. ITO had two courses open for levy of penalty, one being to levy penalty under s. 275(a)(i), i.e., by 31st March, 1974 as original assessment was done on during year ended on 31st Mach, 1972. second was to levy penalty under s. 275(2)(a)(ii), i.e., by 30th June, 1976 as order of Tribunal was received by CIT in December, 1975. This fact was brought to notice, vide letters of reply to penalty notices dt. 5th Oct., 1977, 1st Sept., 1979 as well as 15th April, 1982. penalty levied on 7th June, 1982 which is almost after six years after expiry of period of within which penalty could have been levied is, therefore, clearly barred by time and, therefore, invalid. Mr. Ranka submitted that second limb of penalty order is Rs. 34,800 added as income by ITO on 11th March ,1982 and penalty being levied by IAC. He stated that s. 274(2) which had empowered IAC to levy penalty if amount exceeds Rs. 25,000, had been deleted from statute book w.e.f. 1st April, 1976. He, therefore, pleaded that order of IAC dt. 7th June, 1982 is without any jurisdiction and needs only to be annulled. For this proposition reliance was placed on several High Court decisions: (i) CIT vs. Om Sons 1978 CTR (All) 407: (1979) 116 ITR 215 (All). (ii) Mohd. Oair & Co. vs. CIT (1983) 37 CTR (All) 218: (1983) 142 ITR 104 (All) (iii) Banwarilal Chowkhani vs. CWT (1982) 31 CTR (Gau) 143: (1983) 142 ITR 264 (Gau). (iv) R. Abdul Azeez vs. CIT (1981) 128 ITR 547 (Kar). As well as Special Bench decision of Tribunal in case of Joseph John vs. ITO (1983) 3 ITD 571 (Coch) (SB). He also submitted jurisdiction being procedural matter was considered by Rajasthan High Court in case of State of Rajasthan vs. Badrilal, Vol. II 1983 Rajasthan Law Reporter 920. He pointed out that this judgment is of paramount importance as issue involved was jurisdiction of passing of order by single member or by Division Bench. According to this judgment, once law maker changes law, any action done after amendment must be in accordance with law in force then. Since as per changed law after 1st April, 1976, IAC has been divested of powers of imposition of penalty he could not have imposed penalty at all and, therefore, order of penalty by IAC is without any jurisdiction, and needs only to be quashed. (i) Mr. Ruhela, ld. departmental representative submitted that penalty order must be read as whole. It had been passed giving effect to following directives of Tribunal s order; (ii) Mention in order re: initiation of penalty is indicative of fact that issue of penalty was alive; and (iii) Reference was made to IAC on 19th Aug., 1973 and once IAC assumes jurisdiction on issue, he continues to enjoy jurisdiction and no amendment could take away his powers. For this proposition he relied on cases i n Rattan Chand & Krishan Lal vs. CIT (1984) 43 CTR (P&H) 219: (1984) 148 ITR 597 (P&H), CIT vs. Daropdi Devi (1984) 149 ITR 178 (Del), CIT vs. A.N. Tiwari (1980) 15 CTR (MP) 142: (1980) 124 ITR 680 (MP), CIT vs. Mela Raj Jagdish Raj & Co. (1980) 18 CTR (P&H) 218: (1981) 132 ITR 897 (P&H), CIT vs. Royal Motor Car Co. (1977) 107 ITR 753 (Guj), CIT vs. Manu Engg. Works (1979) 8 CTR (Guj) 141: (1980) 122 ITR 306 (Guj) and Addl. CIT vs. Dr. Khaja Khutabuddinkhan (1978) 114 ITR 905 (AP) which decisions have upheld view expressed by him; (iv) Since decisions under IT Act are available on issue preference should be given to these decisions rather than decision of Rajasthan High Court decision relied upon by assessee. Therefore, Mr. Ruhela pleaded that order of penalty is within time and passed by proper authority and assessee s appeal should only be dismissed. We have heard rival submissions. According to us, following questions arise in present case: (a) Can order of levy of penalty be postponed by delaying of giving effect to Tribunal s order? (b) Is not penalty order dt. 7th June, 1982 in respect of Rs. 16,100 confirmed by Tribunal vide its order dt. 9th Nov., 1975 beyond time-limit prescribed under s. 275? (c) Can it be said that since IAC assumed jurisdiction on 19th Aug., 1973, h e continues to have jurisdiction even after amendment by which s. 274(2) has been deleted w.e.f. 1st April, 1976? Sec. 153(2A) has prescribed time limit of two years of giving effect to Tribunal s order for and from asst. yr. 1971 only. This provision has not been so provided to overrule s. 275. When it comes to levying of penalty, order must be passed in consonance with provisions contained in s. 275. Sec. 275 reads as under: "No order imposing penalty under this Chapter shall be passed: (a) in case where relevant assessment or other order is subject- matter of appeal to AAC under s. 246 or appeal to Tribunal under sub-s. (2) of s. 253, after expiration of period of: (i) two years from end of financial year in which proceedings, in course of which action for imposition of penalty has been initiated, are completed, or (ii) six months from end of month in which order of AAC or, as case may be, Tribunal is received by CIT, whichever period expires later: (b) in any other case, after expiration of two years from end of financial year in which proceedings, in course of which action for imposition of penalty has been initiated, are completed." From reading of section, there are two courses open for levy of penalty. first being to levy penalty by 31st March, 1974, i.e., two years from end of financial year, 31st March, 1972, i.e., assessment was completed on 20th Aug., 1971. Penalty was perhaps not imposed by 31st March ,1974 as department desired to wait till disposal of appeal by Tribunal. Since time-limit expired as per first course of action, penalty could only be levied by second available course. As per second proviso, penalty could be levied by 30th June, 1976 only as order of Tribunal dt. 29th Nov. 1975 was received by CIT s office on 12th Dec., 1975. argument of Department that since order of Tribunal was given effect to only vide order dt. 11th March, 1982, penalty could only be levied after March, 1982 is not at all well founded. reason being, addition of Rs. 15,100 made by ITO was confirmed by Tribunal vide its order dt. 29th Nov., 1975. To this extent order of ITO has culminated to finality. penalty could, therefore, be levied only by 30th June, 1976. Therefore, it has to be held that penalty order dt. 7th June, 1982 to extent of Rs. 16,100 is, barred by time and needs only to quashed. second legal question is whether IAC continues to enjoy jurisdiction for levying of penalty even after 1st April, 1976 or not when s. 274(2) before being deleted from 1st April, 1976 read as under: "(2) Notwithstanding anything contained in cl.(iii) of sub-s. (1) of s. 271, if in case falling under cl. (c) of that sub-section, amount of income (as determined by ITO on assessment). In respect of which particulars have been concealed or inaccurate particulars have been furnished exceeds sum of twenty-five thousand rupees, ITO shall refer case to IAC who shall, for purpose, have all powers conferred under this Chapter for imposition of penalty." Sec. 271(1)(c)(iii) reads as under: "271(1). If ITO or AAC in course of any proceedings under this Act is satisfied that any person: (a) .................. (b) ................. (c) has concealed particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty. (i) xxxxxxxxxxxx (ii) xxxxxxxxxxxx (iii) in cases referred to in cl. (c) in addition to any tax payable by him, sum which shall not be less than, but which shall not exceed twice, amount of tax sought to be evaded by reason of concealment of particulars of his income or furnishing of inaccurate particulars of such income: Provided, that if in case falling under cl. (c), amount of income (as determined by ITO on assessment) in respect of which particulars have been concealed or inaccurate particulars have been furnished exceeds sum of twenty-five thousand ITO shall not issue any direction for payment by way of penalty without previous approval of IAC." There are twelve elements in s. 274(2). First element is power or right to impose penalty and second being as to who shall levy penalty. right of levy of penalty can be exercised only by such person who has been so empowered. This power of who shall levy penalty cannot be vested right of any one. Just like any assessee cannot choose that particular authority only shall decide particular issue, any authority or person who has been divested of his powers under Act cannot also say that he continues to enjoy same powers. This has been aptly so said by Supreme Court in Union of India vs. Sukumar AIR 1966 SC 1206. Their Lordships observed that "a person accused of commission of offence has no vested right to be tried by particular Court or particular procedure, except in so far as there is any constitutional objection by way of discrimination or violation of any other fundamental right is involved." department s contention that amendment to statute by deletion of s. 274(2) cannot deprive of jurisdiction already conferred on IAC when he had initiated proceedings is ill-founded. There is no denial of fact that when reference was made to him on 19th Aug., 1973, he had jurisdiction which he normally could have exercised. But he cannot definitely say that powers once conferred on him cannot be withdrawn. He thus cannot say that he could have done before amendment, even though ,carried out by him afterwards would be legally valid. This is further emphasised by statute itself which has allowed him power of granting or refusing of approval on penalty matter referred to him. identical issue came up for consideration before their Lordships of Rajasthan High Court in case of State of Rajasthan vs. Badrilal 1983 Rajasthan Law Reporter 920. Their Lordships were confronted with question of jurisdiction of bench of High Court under Rajasthan ST Act. Sub-s. (3) of s. 14 of Rajasthan ST Act was amended and according to this amendment all revision applications on case heard by single member bench shall be heard b y division bench only. But single member assumed jurisdiction on ground that he had heard matter earlier. matter was, therefore, taken up to division bench on question of jurisdiction and validity of order of single member on revision application. Their Lordships while coming to conclusion that single member had no jurisdiction after amendment and order void, observed thus: "Supreme Court in case of Anand Gopal Sheorey vs. State of Bombay (AIR 1958 SC 915) had observed "No person has vested right in any course of procedure. He has only right of prosecution or defence in manner prescribed for time being by or for Court in which case is pending and if by act of parliament, mode of procedure is altered, he has no other right then to proceed according to allotted made." Supreme Court in Yavira Mathar vs. Varkey Varkey AIR 1964 SC 907 had observed: "that right of appeal, however, cannot exist without existence of Court to which appeal is to be taken; and litigant has no right to content that Tribunal before whom he should have taken appeal when he instituted suit, should not be abolished, for legislatures is fully competent to enact law of that kind." From above observations, it could only be concluded that IAC cannot and does not continue to enjoy same powers after amendment. If contention of department is to be upheld then it would mean that as administrator of law, he questions right of Parliament to enact law which is nothing but absurd situation. In view of Supreme Court s ratio (supra) that Parliament is fully competent to enact law, and that law having been enacted, respectfully following Supreme Court s order referred to above, we hold that IAC would have no jurisdiction to levy penalty after 1st April, 1976. In coming to this conclusion, we had also relied on Rajasthan High Court s decision (supra), and other High Court decisions as well as Special Bench s decision in case of Joseph John vs. ITO (1983) 3 ITD 571 (Coch) (SB) referred to by assessee in preference to other dissenting judgments relied by department with which we respectfully find ourselves unable to agree due to ratio of Supreme Court judgment (supra). We accordingly quash penalty order of IAC imposing penalty of Rs. 50,900. assessee s appeal is hereby fully allowed. *** UTTUMAL GAGUMAL v. INSPECTING ASSISTANT COMMISSIONER OF INCOME TAX
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