Commissioner Of Income-Tax vs Jain Brothers
2001 Latest Caselaw 1192 Del

JUDGMENT

Arijit Pasayat, C.J.

1. These three reference applications involve identical questions and are, therefore, disposed of by this common judgment.

2. Pursuant to the direction given by this court under Section 256(2) of the Income-tax Act, 1961 (in short, "the Act"), by order dated October 21, 1981, the Income-tax Appellate Tribunal, Delhi Bench-D ("the Tribunal" in short), has referred the following questions for the opinion of this court :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in deleting the penalty of Rs. 46,135, Rs. 52,210 and Rs. 58,065 for the assessment years 1967-68, 1968-69 and 1969-70, respectively, levied under Section 271(1)(c) ?

2. Whether, on the facts and in the circumstances of the case, did not the Income-tax Officer have jurisdiction to initiate the penalty proceedings under Section 271(1) again, after he had decided the case afresh ?"

3. The factual position is almost undisputed and is as follows : For the three assessment years involved, i.e., 1967-68, 1968-69 and 1969-70, the assessed had filed its returns of income. For the assessment year 1967-68, the return was filed on October 28, 1968, declaring an income of Rs. 3,46,900. The Income-tax Officer ("the ITO" in short) completed the assessment on March 30, 1972, on a total income of Rs. 7,52,304. The matter was carried in appeal before the Appellate Assistant Commissioner ("the AAC" in short). Vide his order dated March 7, 1973, the Appellate Assistant Commissioner granted partial relief and directed the Income-tax Officer to look into the genuineness of certain deposits on which interest was disallowed by the Income-tax Officer. While giving effect to the order passed by the Appellate Assistant Commissioner, the Income-tax Officer passed an order on June 27, 1974, and also initiated proceedings under Section 271(1)(c) of the Act. The matter was referred to the Inspecting Assistant Commissioner ("the IAC" in short) under Section 274(2) of the Act as the amount, in respect of which there was alleged furnishing of inaccurate particulars of income, exceeded Rs. 25,000. For the assessment year, 1968-69, the position was factually the same except that the return was filed on March 20, 1969, declaring an income of Rs. 2,95,517 against which the Income-tax Officer completed the assessment on a total income of Rs. 4,43,937. For the assessment year 1969-70, similar was the factual position. The assessed had furnished its return of income on June 26, 1969, declaring an income of Rs. 3,59,650 as against which the assessment was completed on a total income of Rs. 4,69,839. The main addition which was the basis for levy of penalty was on account of disallowance of interest on loans which had been surrendered earlier by the assessed and those which were surrendered before the Income-tax Officer, when he was giving effect to the order passed by the Appellate Assistant Commissioner. The interest on account of the amounts surrendered earlier came to Rs. 45,463, Rs. 50,420 and Rs. 56,415, respectively, for the three assessment years. There were other amounts for the three assessment years in question which amounted to Rs. 13,312, Rs. 39,412 and Rs. 50,294, respectively. While giving effect to the order passed by the Appellate Assistant Commissioner, the Income-tax Officer found that the figures would be Rs. 672, Rs. 1,790 and Rs. 1,650, respectively. As noted above the original assessments were completed on March 30, 1972, and the matter was referred to

the Inspecting Assistant Commissioner under Section 271(1)(c) read with Section 274(2) of the Act for alleged concealment of income and for furnishing inaccurate particulars thereof. The Inspecting Assistant Commissioner by order dated March 26,1974, dropped the proceedings. His order was : "The penalty proceedings started under Section 271(1)(c) in this case are hereby dropped." Obviously, the order was in relation to the assessments which were originally completed on March 30, 1972. Proceedings were again initiated under Section 271(1)(c) and rejecting the assessed's contention regarding non-desirability of continuing with the proceedings, the Inspecting Assistant Commissioner imposed penalties which were challenged before the Tribunal by the assessed. The Tribunal considered the effect of the order passed by the Inspecting Assistant Commissioner earlier and held that the penalties levied could not be sanctioned. The prayer for reference under Section 256(1) of the Act was rejected. However, as stated above, pursuant to the direction given by this court, the questions as set out above have been referred for the opinion of this court.

4. We have heard learned counsel for the Revenue. There is no appearance on behalf of the assessed in spite of notice. Learned counsel for the Revenue submitted that there is no bar on fresh initiation of proceedings and merely because the proceedings had been dropped earlier, that is no reason to hold that subsequently penalty proceedings cannot be initiated.

5. Though there cannot be any bar and proceedings under Section 271(1)(c) of the Act can be initiated at any stage of the proceedings, on the facts of the case we find that the Tribunal's conclusions are in order. Proceedings initiated on the basis of the orders passed on March 30, 1972, were in respect of the higher figures of income. Subsequently, what has been found to be disallowable was Rs. 672, Rs. 1,790 and Rs. 1,650, respectively. Even if these figures are taken into account, the Explanation appended to Section 271(1)(c) cannot be made applicable. As noted above, the Inspecting Assistant Commissioner, after consideration of the factual position, held that proceedings were to be dropped in respect of the amounts noted above which subsequently came to be reduced to much lesser figures. In the circumstances, the question of imposition of penalty under Section 271(1)(c) does hot arise. Accordingly, the first question is answered in the affirmative, in favor of the assessed and against the Revenue. So far as the second question is concerned, that is really of academic interest, and we decline to answer the same.

6. The references stand disposed of accordingly.