Srinivasa Iyengar, J.
1. The Income-tax Appellate Tribunal, Bangalore Bench, has stated a case under section 256(1) of the Income-tax Act, 1961, and referred the following question of law for the opinion of this court :
'On the facts and in the circumstances of the case, whether, within the meaning of section 275 of the Income-tax Act, 1961, penalty order must not only be made within two years of the completion of proceedings for the imposition of penalty concerned but also communicated to the assessee within the said period of limitation?'
2. The facts relating to the said question may briefly be stated. The Income-tax Officer, City Circle, Bangalore, imposed a penalty under section 271(1)(c) of the Income-tax Act, 1961, against the assessee in relation to the assessment for 1963-64. The assessment for the said year was made on 22nd January, 1964. Certain cash credits were noticed in the books of the assessee amounting to Rs. 11,500 and the sources for these were not explained by the assessee. The Income-tax Officer included a sum of Rs. 12,500 as concealed income of the assessee in the computation of the total income. On the ground that the assessee had concealed the said income, the Income-tax Officer initiated proceedings under section 271(1)(c) and a notice to show cause why penalty should not be imposed was issued. There was no response to this. A further opportunity was afforded to the assessee to offer his explanation by 10th March, 1965, but even then the assessee did not offer any explanation. An appeal filed against the assessment also came to be dismissed. In these circumstances, the Income-tax Officer imposed a penalty of Rs. 750 by an order dated 31st March, 1965. This order was, however, served on the assessee on 7th June, 1966.
3. Thereupon the assessee preferred an appeal to the Appellate Assistant Commissioner of Income-tax and it was contended that the order imposing penalty was barred by limitation. The ground urged was that as the order had been served only on 7th June, 1966, it must be held that it was passed after the expiry of two years prescribed in section 275 and the order should have been served within two years of the completion of the assessment proceedings. The Appellate Assistant Commissioner did not accept the contention. He held that from the records it was seen that the penalty order was passed on 31st March, 1965, and observing that the Act does not require the penalty order should be served within two years, was of opinion that there was no merit in the contention. He also held that the imposition of penalty was justified on the facts and circumstances in the case and dismissed the appeal.
4. The assessee appealed against the order of the Appellate Assistant Commissioner to the Income-tax Tribunal. The only point urged before the Tribunal was that the order imposing penalty was barred by limitation. It was contended that the expression used in section 275 was 'passed' and there was a distinction between the expression 'making an order' and 'passing an order' and though the former may mean 'created' and not 'communicated' the latter meant 'issued'. The Tribunal however did not accept the contention. It referred to an earlier decision in I. T. As. Nos. 8898 to 8903 of 1968-69, where a similar contention had been considered and rejected and following the same held that the order imposing penalty had been passed within the two years prescribed under section 275. It held that there was nothing in the Act to show that the order should be communicated within the said two years and was of opinion that the order should be held to have been passed when the authority made it or signed.
5. It is urged by Shri. K. Srinivasan, the learned advocate for the assessee, that the expressions 'made' and 'passed' are used in various sections in the Act and they must be given different meanings. He pointed out that under section 153, it is provided that no order of assessment shall be made under section 143 or section 144 at any time after the expiry of the periods mentioned therein and similarly in section 263(2) it is provided that no order shall be made under sub-section (1) after the expiry of two years from the date of the order sought to be revised whereas under section 275 it is provided that no order imposing penalty under this Chapter (Chapter 21) shall be passed after the expiration of two years from the date of completion of the proceedings in the course of which proceedings for the imposition of penalty had been commenced. It is, therefore, contended that the expression 'passed' denotes something other than 'made' and must be construed as an order issued. He further contended that in order to be an order 'passed' it must be an effective order and unless it is communicated to the party affected thereby, there is no effective order. Reliance was placed in this behalf on the rulings in N. N. Majumdar v. N. M. Bardhan and Abdul Ali v. Mirja Khan and also Secretary of State for India in Council v. Gopisetti Narayanaswami Naidu, which have been referred to in N. N. Majumdar v. N. M. Bardhan.
6. For the department, it is urged that the expressions 'made' and 'passed' used in the various sections of the Act are synonymous and an order should be held to have been 'made' or 'passed' when it is made and signed by the authority concerned and when the provisions provides that an order shall be 'made' or 'passed' within a particular time it means that the order should be made or signed by the authority concerned within that time and the communication of the said order may be after the expiry of that time. It was argued that every liability imposed by an assessment or other order is enforced against the assessee by the issue of a notice of demand and hence so far as the assessee or person liable is concerned, the order will become effective when it is communicated to him and the Act also provides for remedy to the person affected for preferring an appeal or taking other proceedings within the time prescribed from the date of communication of the order. It is, therefore, urged that communication of the order is distinct from passing or making of the order and the communication of the order pre-supposes its earlier existence and when time limit is prescribed for 'making' or 'passing' an order it has reference only to the making and signing of the order by the authority within that time.
7. It is pointed out that under section 263(3) it is provided that notwithstanding anything contained in sub-section (2) an order in revision under that section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court. It is, therefore, argued that the expression 'passed' used him sub-section (3) and the expression 'made' used in sub-section (2) are synonymous. It is also pointed out that what has been provided in section 156 of the Act is that when any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under the Act, the Income-tax Officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable, and the use of the expression 'passed' in this section also points out that there is no distinction between making an order and passing an order. It is argued that the observations in N. N. Majumdar v. N. M. Bardhan and in the other cases referred to therein were in a different context and were not applicable in construing the provisions of the Income-tax Act. Reliance was placed in this behalf on the decision in Badri Prasad Bajoria v. Commissioner of Income-tax Esthuri Aswathiah v. Commissioner of Income-tax and Viswanathan Chettiar v. Commissioner of Income-tax
8. A proceeding for imposition of penalty or the making of an assessment is a quasi-judicial proceeding in nature, whereby liability is imposed on an assessee to pay a certain sum of money and thus affects his right in regard to his property. He should know how and to what extent his rights are affected or liability is created against him before it can become effective and enforced against him. Chandavarkar J., while construing the expression 'making an order' in section 77 of the Indian Registration Act (Act III of 1877), held in Abdul Ali v. Mirja Khan, that it meant not merely recording the order of refusal in writing, but communicating it to the party concerned so as to bind him by it. He further held that an order does not become an order unless and until steps are taken by the officer passing it to bring it to the consciousness and knowledge of the party against whom it is passed. If the party affected by the order acts in such a way as to prevent the officer from communicating it to him within a reasonable time after he has written it, it may be that the date of the order would be the date when it could have been brought to the knowledge of the party within a reasonable period. In that case it was not contended that there was any conduct of any kind on the part of the plaintiff, and it was found by both courts that though the order was recorded in writing on 21st December, 1901, it was communicated to the plaintiff on 22nd December, 1901, and section 77 of the Registration Act provided that the suit to set aside such an order must be brought within 30 days from the making of it. Therefore, it was held in that case that the words 'making of an order' meant not merely recording it in writing but communicating it to the party concerned so as to bind him by it. This decision and the decision in Secretary of State for India in Council v. Gopisetty Narayanaswami Naidu were referred in N. N. Majumdar v. N. M. Bardhan. In that case, Sinha J., inter alia, held :
'If an order is made which affects the rights of a person, then the order must be communicated to such person in order to be complete and effective. The date of the order is the date when it is made known to the affected penalty. To this, however, there are certain exceptions, which are as follows :
(i) Where the order is made in the presence of the party, whose right has been affected.
(ii) Where notice has been given to the party affected by the order to be present at the announcement but in spite of such notice, he fails to be present. Where the methods of giving notice is prescribed, e.g., by publication in the Gazette, compliance with the same will be deemed sufficient as also in a case where the law presumes knowledge.
(iii) Where owing to the obstruction of the party affected himself, the order cannot be communicated within a reasonable time.
(iv) Where the authority making the order in spite of reasonable efforts has been unable to serve the order within a reasonable time or at all.
In such a case, the date of making of the order is the date of the order.
Barring these exceptions, I think that the law is that an order which affects the interests of a person cannot be said to be effectively made until it has been brought to his notice.'
9. In Secretary of State for India v. Gopisetti Narayanaswami Naidu, it was observed that :
'A decision cannot properly be said to be passed until it is in some way pronounced or published under such circumstances that the parties affected by it have reasonable opportunity of knowing what it contains. Till then, thought it may be written out, signed and dated, it is nothing but the decision which the officer intends to pass. It is not passed so long as it is open to him to tear up what he has written and write something else.'
10. An order imposing a penalty does affect the rights of an assessee and in order to be complete and effective it must be communicated to the party. If an officer draws up an order imposing a penalty but wishes to change his mind or take a different view, he could do so until the said decision is made know to the party affected thereby. Merely because he signs an order, it cannot be said to have become final because there is no publication of it, and the process of publication would not commence until steps are taken to issue the order for communication to the party affected.
11. In the present case section 275 of the Income-tax Act prescribes the time limit within which an order imposing penalty has to be passed. It prescribes a period of two years from the date of completion of the proceeding in the course of which proceedings for the imposition of penalty have been commenced. Proceedings for the imposition of penalty have to be taken in the course of the assessment proceedings or in the course of an appeal by the Appellate Assistant Commissioner. Therefore, an action to impose penalty under section 271(1)(c) would have to be initiated by the Income-tax Officer before the assessment is completed. Therefore, the period of two years prescribed in section 275 has to be computed from the date of completion of the assessment. The period fixed being two years from the date of completion of the assessment, it is quite adequate to complete the penalty proceedings also within the time prescribed, i.e., communicating the order imposing the penalty within that period. As a matter of general principle, it seems to us that an order imposing penalty, as it affects the rights of a party, no violence would be done if the provision in section 275 is construed as directing the making of an effective order within the time prescribed, i.e., comprehending the communication of the order to the party affected.
12. But, in our opinion, the argument put forth on behalf of the assessee that there is distinction between the two expressions 'making an order' and 'passing an order' is not tenable. Though under section 153, the expression used is 'No order of assessment shall be made...', in section 154, provision is made for the Income-tax Officer amending 'any order of assessment or of refund or any other order passed by him', with a view to rectifying any mistake apparent from the record. Reading in juxtaposition with the provisions in section 153, it is apparent that the expressions 'made' and 'passed' are used as synonymous and interchangeable. Section 156 which refers to the service of notice of demand on an assessee refers to any tax, interest, penalty, fine or any other sum payable in consequence of any order passed under the Act. The tax payable is obviously in consequence of an assessment made. Even in that context the section uses the expression 'any order passed'. Similarly, though section 263(2) provides that 'No order shall be made under sub-section (1) after the expiry of two years from the date of the order sought to be revised', in sub-section (3) the expression used is 'an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court.' It is, therefore, seen that the expressions 'made' and 'passed' are used as being synonymous.
13. Section 274 provides :
'(1) No order imposing a penalty under this Chapter shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard.'
14. The expression used in this section is 'made'. It is in regard to such an order that is going to be 'made' that section 275 prescribes the time limit. It provides that no order imposing a penalty (under Chapter XXI) shall be passed after the expiration of two years. Therefore, the subject-matter under reference under both sections 274 and 275 is the same and the expression used in section 274 is 'made' and the expression used in section 275 is 'passed'. It is, therefore, obvious that no special significance need be attached to the use of the expression 'passed' and that it is synonymous with the expression 'made'. We, therefore, reject the contention urged for the assessee that the expression 'passed' should be construed differently from the expression 'made'.
15. It is seen that the expressions 'made' and 'passed' are used in various sections of the Act and, therefore, they should be construed similarly wherever they occur. In the case of Badri Prasad Bajoria v. Commissioner of Income-tax, interpretation of the provision in section 34(3) of the Indian Income-tax Act, 1922, was involved. The assessment for 1954-55 had been completed by the Income-tax Officer on 26th March, 1959. Notice of demand under section 29 was, however, served on the assessee on 1st April, 1959. It was contended for the assessee that since the order of assessment was not communicated to him before the expiry of four years from the end of the assessment year the same was time barred. The High Court did not accept the contention. Therein also argument was advanced that the order will not be complete until it was communicated and reliance was placed upon the decision in N. N. Majumdar v. N. M. Bardhan and the other cases. But their Lordships were of the opinion that the principle enunciated in Majumdar's case would not be applicable to the facts and circumstances in that case. Their Lordships observed :
'It cannot be denied that an order, before it is made effective, must be served on the person against whom the order is made. This from the point of view of the person who is affected by the order, the order is made when it is communicated to him. But this does not mean that until an order is communicated, the order is not made at all. Notice under section 29 of the Income-tax Act pre-supposes an order of assessment under section 23(1) or 23(3). Notice under section 29 can only be served after an order of assessment is made. Thus, the making or passing of an assessment order, the issue of notice under section 29, and service of notice or communication of the assessment order are different stages or steps before an assessee pays the assessed tax. In other words the date of making the order, the date of issue of notice and the date when the order is communicated need not necessarily be the same date. Admittedly, in the instant case, the order of assessment was made on 26th March, 1959, which is a date within four years after the end of the assessment year. It is true that the order of assessment has been communicated to the assessee on 1st April, 1959, which date falls four years after the end of the assessment year. But the date of communication of the order cannot be the date of making the order because communication pre-supposes the determination of the thing to be communicated. From the point of view to the taxability or liability to pay tax on the part of the assessee, the date of communication may be the most effective date. An order to be communicated presupposes the existence of an order and the existence of the order is only possible when the Income-tax office, he has discharged the statutory liability to assess if he makes an order of assessment within four years after the end of the assessment year. The statute does not say that the Income-tax Officer must communicate the order of assessment within four years after the end of the assessment year.'
16. Therefore, the contention for the assessee that the date of communication of the order of assessment was the date of making the order was rejected.
17. This court in Esthuri Aswathiah v. Commissioner of Income-tax considered a similar point. In that case, the assessment was completed under section 23(3) of the Indian Income-tax Act, 1992, on 29th February, 1960. The assessment order was sent by registered post to the assessee and it was received by him on 4th April, 1960. The assessment was for the year 1955-56, the relevant accounting year being one ended 31st March, 1955. In the appeal before Appellate Assistant Commissioner, against a reassessment it was contended that the assessment was barred by limitation as the order was not communicated to the assessee within four years from the end of assessment year and the order can be said to have been made only when the order was communicated to the assessee. That was not accepted. In the reference to the High Court, a similar argument was reiterated. This court rejected the contention referring to the ruling of the High Court of Madras in Viswanatha Chettiar v. Commissioner of Income-tax This court held that section 34(3) did not speak of any communication and what was of the essence was the making of the order and not its communicated and the assessment had been made within the time prescribed and the date of the communication could not be taken as the date or making of the order. It transpires that certain decisions in which it had been held that for purposes of filing the appeal or revision against the order made, the relevant date was the date of the knowledge of the order or the date on which it was communicated had been relied upon. But the learned judges held that those cases were not apposite for deciding the matter in issue. It is, therefore, seen that, so far as the Income-tax Act is concerned, the expression 'making of an order' has been construed as implying the signing of the order and not its communication and this view has been taken by this court as well as the High Courts of Madras and Calcutta. We have earlier held that no distinction is possible to be made between the use of the expression 'made' and 'passed'. Therefore, the principle that has been applied by more than one court in the matter of construction of such expression in the Income-tax Act should be upheld as the enactment has to be administered throughout the territory of India, though as the matter of general principle it seems to us that to be an effective order the order imposing liability on a party should communicated to him and there does not appear to be any difficulty in passing such an effective order within the time prescribed in section 275.
18. Having regard to the view taken in the three cases referred to above, we hold that passing of the order imposing penalty was on 31st March, 1965, within two years as prescribed in section 275 of the Act and the communication of the order subsequently did not affect the validity of the order imposing penalty. We, therefore, answer the question referred to us thus :
'The order imposing penalty under section 271(1)(c) should be passed within two years from the date of the completion of the proceedings in the course of which the proceedings for the imposition of penalty had been commenced and it is not necessary that the communication of the same to the assessee should also be within the said period of two years.'
19. The parties shall bear their own costs of this reference.