Commissioner Of Income-Tax vs Free Wheel (India) Ltd.
1987 Latest Caselaw 195 Del

JUDGMENT

S. Ranganathan, J.

1. These three income-tax cases can be disposed of by a common order.

2. The assessment of Free Wheel (India) Ltd. for the assessment year 1970-71, was completed on March 31, 1973, by the Income-tax Officer (for short, "the ITO") who also initiated penalty proceedings under section 271(1)(c). The assessment became final with an order of the Income-tax Appellate Tribunal (for short, "the ITAT") dated December 18, 1979, which was served on the commissioner of Income-tax, Delhi-I, on January 16, 1980. But, by then, the jurisdiction over the assessed's case had been transferred to the Commissioner of Income-tax, Central, who received the Tribunal's order on March 13, 1980. After the appeals against the assessment were disposed of, the Inspecting Assistant Commissioner continued the penalty proceedings initiated by the Income-tax Officer and on September 29, 1980, passed an order laying a penalty of Rs. 1,12,065. The penalty was imposed for the reason that the assessed 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.

3. The assessed filed an appeal to the Income-tax Appellate Tribunal from the order of penalty. The Tribunal, by an order dated January 25, 1981, held in paragraphs 10 to 12 of its order that the imposition of penalty was justified on the facts and circumstances of the case but cancelled the penalty accepting the assessed's pleas (i) that the Inspecting Assistant Commissioner had no jurisdiction to impose the penalty, and (ii) that the penalty order was time-barred. The assessed moved an application under section 254(2) contending that the Tribunal's findings in paragraphs 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 October 23, 1982, recalled paragraphs 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 May 18, 1983, accepted the assessed's plea and held that, even on facts, no penalty under section 27(1)(c) was leviable.

4. The Commissioner of Income-tax challenges the correctness in law of all the above conclusions of the Tribunal. In ITC No. 101 of 1984, which pertains to the order dated January 25, 1981, the question on which reference is 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 Inspecting Assistant Commissioner had no jurisdiction to levy the penalty ?

2. 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 CIT-I, New Delhi, and not on CIT (Central), New Delhi, with whom the jurisdiction over the case actually vested ?"

5. In ITC No. 100 of 1984 which pertains to the order dated October 23, 1982, under section 254(2), the question raised is 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 recalling paras. 10, 11 and 12 of their order dated September 25, 1981, for reconsideration after particularly upholding the fact that the penalty under section 271(1)(c) was exigible and the assessed was guilty of willful omission and under valuation of closing stock ?"

6. In ITC No. 25 of 1985 which pertains to the order of the Tribunal dated August 22, 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 under section 271(1)(c) of the Income-tax Act was not exigible in this case ?"

7. The first question raised in ITC No. 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 section 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 of Income-tax having jurisdiction over a case needs examination and so we think that this is also a question on which a reference is justified.

8. It is contended for the assessed that, even if the above questions are questions of law, they would be only 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 contention of the Commissioner of Income-tax is that the Tribunal had reached its findings after considering all the facts placed before it and that the assessed is not right in saying that the Tribunal had overlooked any of them. We have heard counsel at some length on this and considered the three orders of the Tribunal and the grounds on which the assessed 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 ITC No. 100 of 1984 should be directed to be referred.

9. The question raised in ITC No. 25 of 1985 is normally a question of fact. But, in this case, the answer to it would depend upon 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.

10. 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 our earlier. There will be no order as to costs