Psb Finance And Investment Co. ... vs Commissioner Of Income-Tax
1990 Latest Caselaw 505 Del

JUDGMENT

B.N. Kirpal, J.

1. In this petition under section 256(2) of the Income-tax Act, 1961, the petitioner is seeking reference of the following questions to this court :

"(a) Whether the Income-tax Department is empowered/entitled to initiate proceedings simultaneously under sections 221 and 140A of the Income-tax Act 1961 ? Whether penalty imposed pursuant to the said proceedings amounts to imposition of 'double penalty' for a default of an assessed ?

(b) Whether having passed an order in proceedings under sections 221 and 140A of the Income-tax Act, 1961, the Department is justified in law in re-initiating proceedings under section 140A for imposing penalty ?

(c) Whether an Assessing Officer ceases to exercise jurisdiction and the Act ? Whether an incumbent is empowered under section 129 of the Income-tax Act to issue a fresh notice and conduct further proceedings is respect to the matter dealt with by the predecessor-in-office ?

(d) What is the true nature, scope and ambit of section 129 of the Income-tax Act ? Whether, under the said provisions, an incumbent is empowered to initiate and conduct fresh proceedings and/or whether the said provision provides for the continuation of proceedings pending ?

(e) Whether, under the provisions of section 129 of the Income-tax Act, 1961, an incumbent is empowered to issue fresh notice and/or grant a fresh opportunity sue moto and/or whether the power under the said provision can be exercised at the instance of the assessed ?

(f) Whether having passed an order imposing penalty under section 221 and section 140A of the Income-tax Act, 1961, in proceedings initiated against an assessed, an incumbent under section 129 of the Income-tax Act, is entitled to issue and initiate fresh proceedings under section 140A ?

(g) Whether, in the facts and circumstances of the case the order dated March 31, 1983, passed by the Inspecting Assistant Commissioner was an order under sections 221 and 140A of the Income-tax Act ?

(h) Whether the Income-tax Appellate Tribunal is empowered to review its orders and whether, in the facts and circumstances of the case, the order dated July 11, 1986, passed by the Tribunal is justified in law ?"

2. Briefly stated, the facts are that, in respect of the assessment pH year 1982-83, the petitioner neither paid the advance tax not did it deposit the full tax in accordance with the provisions of section 140A of the Income-tax Act. Two separate proceedings were initiated against the petitioner. On March 16, 1983, a notice under section 140A was issued. To this a reply was sent on sent on March 21, 1983. Thereafter on March 22, 1983, a notice under section 221 was issued. On March 31, 1983, an order was passed by the Income-tax Officer imposing a penalty of Rs. 1,40,000. According to the said order, the same was being passed under section 221 of the Act though in the order, a reference is also made to the show-cause notice issued under section 140A.

3. On January 22, 1985, another notice under section 140A was issued. The Officer who issued this notice was different from the one who had earlier issued the notice on March 16, 1983. Thereafter, penalty of Rs. 1,89,860 was levied under section 140A. An appeal was filed against the said order but without success. Second appeal was filed to the Income-tax Appellate Tribunal which met the same fate. We may note here that one of the contentions raised by the assessed before the Tribunal was that the order which was passed on March 31, 1983, pertained to the notice which had been issued under section 140A as well as under section 221. It was submitted that this composite order dealt with both the penalty notices and, therefore, fresh proceedings could not have been initiated under section 140A. The basis for making this submission was that, in the order of March 31, 1983, a reference was specifically made to the replay filed by the assessed to the notice dated March 16, 1983, issued under section 140A. It was also contended that a fresh notice could not have been issued in 1985 under section 140A because the successor-officer could only take recourse to the proceedings under section 129 of the Income-tax Act. The Tribunal repelled these arguments and upheld the levy of penalty.

4. The petitioner thereafter filed an application under section 256(1) requiring the Tribunal to state the case and refer the following question to this court :

"Whether, on the facts and in the circumstances of the case, the inspecting Assistant Commissioner was justified in law in imposing penalty of Rs. 1,89,860 on the applicant under section 140A of the Income-tax Act, 1961 ?"

5. Vide order dated February 17, 1988, the application of the petitioner under section 256(1) was dismissed. It is thereafter that the present petition has been filed.

6. At the outset, it was put to learned counsel for the petitioner that it is not open to the petitioner to seek reference of those questions which had not been raised before the Tribunal. It was submitted by learned counsel for the petitioner that the questions now proposed in the application under section 256(2) are different aspects of the question which was sought to be referred in the application under section 256(1). We are unable to agree with this contention. Only one question was sought in the application under section 256(1) and curiously enough this is the only question which is not specifically mentioned or raised in the application under section 256(2). In the present petition under section 256(2), the petitioner has sought reference of as many as eight questions. Jurisdiction under section 256(2) is exercised if the High Court comes to the conclusion that the order passed by the Tribunal under section 256(1) is not in accordance with law. It is only if there is an infirmity in the order under section 256(1) that the High Court will call for a reference under section 256(2). The correctness of the decision of the Tribunal can be judged with reference to the question which was sought to be raised before the Tribunal. It is only that question which can thereafter be raised in the application under section 256(2) and none else. It is true that if there are different aspects of the same question then the High Court can reform the question of law. The question can be reformed not only while dealing with the application under section 256(2) but also while hearing the reference, if a reference is made. In the present case, however, the only question of law which was sought to be raised in the application under section 256(1) is not mentioned in the Application under section 256(2). On this ground alone, the present petition is, therefore, liable to be dismissed.

7. Even otherwise, we are of the opinion that there is no merit in this petition. The order passed on March 31, 1983, specifically states that it is passed under section 221 of the Act. It is no doubt true that a reference is made to the notice issued under section 140A, in the said order, but that was only by way of indicating as to the conduct of the assessed who obviously does not believe in paying tax in time, it is by taking this conduct into consideration that a penalty of Rs. 1,40,000 was levied under section 221. Furthermore, there is no impediment or embargo on the Income-tax Officer issuing a fresh notice under section 140A. Reliance on section 129 is completely misplaced. That section only enables a successor-officer to continue the proceedings which have already been initiated from the stage at which they were left by the predecessor-officer. Merely because this enabling provision exists it does not mean that the successor-officer is not empowered to issue a fresh notice especially when he wants to afford the assessed an opportunity of being heard. In any case, these are the questions which are not specifically sought to be raised in the application under section 256(2). Even if they were sought to be raised, the answer to these questions is self-evident.

8. The question sought to be raised really relates to the merit of the decision with regard to the imposition of penalty. The Tribunal has observed that the assessed had sufficient funds before the filing of the return and also at the time when the advance tax was required to be paid and, therefore, there was no justification for the tax not being paid within time. This conclusion of the Tribunal is one of fact and, therefore, no question of law arises.

9. As a last ditch effort, learned counsel for the petitioner sought to raise a point, which has only to be stated to be rejected. The Tribunal had passed an order on February 6, 1986, where, while dealing with the contention raised with regard to section 129 of the Act, it had observed as follows :

"The issue of two notices under section 140A also does not in any way affect the imposition of penalty. The first notice had been issued by the Income-tax Officer along with the assessment order. The second notice was issued by the new Income-tax Officer as per provisions contained in section 129 of the Act. There being a change in the incumbent. It was necessary for the new Income-tax Officer to hear the assessed before deciding for or against the imposition of penalty."

10. The aforesaid observations were rectified and the Tribunal, vide its order dated July 11, 1986, substituted the same by the following :

"The second notice was issued by the new Income-tax Officer having regard to the provisions contained in section 129 of the Act. There being a change in the incumbent, it was desirable for the new Income-tax Officer to hear the assessed before deciding for or against the imposition of penalty."

11. It is contended by learned counsel for the petitioner that the observations as corrected show that the Tribunal held that it was desirable for the new Income-tax Officer to give a hearing to the petitioner. Learned counsel contends that no opportunity of hearing was given after the second notice. We are surprised that such a submission has been made because in the order passed by the Inspecting Assistant Commissioner imposing penalty under section 140A, it is specifically stated that the assessed's counsel wrote letters dated February 1, 1985, and February 8, 1985, in which it was contended that the company's liquidity had diminished. Furthermore, no such question of law is sought to be raised either in the application under section 256(1) or 256(2).

12. The petition is wholly without any merit. The same is dismissed.

13. Petition dismissed.