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Bhoomareddy Brothers Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKarnataka High Court
Decided On
Case NumberI.T.R.C. Nos. 1 to 5 of 1977
Judge
Reported in[1987]163ITR854(KAR); [1987]163ITR854(Karn)
ActsIncome Tax Act, 1961 - Sections 251(1), 271(1) and 273
AppellantBhoomareddy Brothers
RespondentCommissioner of Income-tax
Appellant AdvocateB.V. Katageri, Adv.
Respondent AdvocateK. Srinivasan and ;H. Raghavendra Rao, Advs.
Excerpt:
.....the court has to consider the application filed by the petitioner under section 10 of the religious endowments act, 1863 (act xx of 18863). - for the assessment years 1959-60, 1960-61 and 1961-62, the income-tax officer levied penalty under sections 271(1)(a) and 273(b) of the income-tax act, 1961. in appeals against that order of the income-tax officer to the appellate assistant commissioner as well as the tribunal, it was held that the provisions of the income-tax act, 1961, were not applicable to the assessment years in question and the penalty levied was unauthorised. the tribunal found that the income-tax officer failed to work out the correct quantum of minimum penalty as prescribed under sections 271(1)(a) and 273(b) of the income-tax act, 1961, and the decision of this..........the following question of law : 'whether, on the facts and in the circumstances of the case, the appellate assistant commissioner had the power to enhance the penalty levied by the income-tax officer under sections 271(1)(a) and 273(b) for the assessment years 1959-60 to 1961-62 ?' 2. the assessee was an association of persons. for the assessment years 1959-60, 1960-61 and 1961-62, the income-tax officer levied penalty under sections 271(1)(a) and 273(b) of the income-tax act, 1961. in appeals against that order of the income-tax officer to the appellate assistant commissioner as well as the tribunal, it was held that the provisions of the income-tax act, 1961, were not applicable to the assessment years in question and the penalty levied was unauthorised. it was accordingly set aside......
Judgment:

Jagannatha Shetty, J.

1. These are references under section 256(1) of the Income-tax Act on the following question of law :

'Whether, on the facts and in the circumstances of the case, the Appellate Assistant Commissioner had the power to enhance the penalty levied by the Income-tax Officer under sections 271(1)(a) and 273(b) for the assessment years 1959-60 to 1961-62 ?'

2. The assessee was an association of persons. For the assessment years 1959-60, 1960-61 and 1961-62, the Income-tax Officer levied penalty under sections 271(1)(a) and 273(b) of the Income-tax Act, 1961. In appeals against that order of the Income-tax Officer to the Appellate Assistant Commissioner as well as the Tribunal, it was held that the provisions of the Income-tax Act, 1961, were not applicable to the assessment years in question and the penalty levied was unauthorised. It was accordingly set aside. On a reference to this court in I.T.R.C. Nos. 32 to 37 of 1968, the High Court held that penalty could be validly levied for the assessment years in question under section 271(1)(a) and under section 273(b) of the Income-tax Act, 1961.

3. Thereupon, the Tribunal took up the matter for final disposal. The assessee's representative then pointed out that the Appellate Assistant Commissioner did not examine the merits of the matter before him, and, therefore, the matter may be remitted to him to decide the case on merits. That request was opposed by the departmental representative. The Tribunal, however, remitted the matter to the Appellate Assistant Commissioner observing thus :

'It appears to us that the Appellate Assistant Commissioner took up this legal issue on his own, as he had every right to do, and decided the matter in favour of the assessee. But, now that issue has been decided against the assessee, it will result in injustice, if the merits of the assessee's claim are not considered at all. We accordingly set aside the order of the Appellate Assistant Commissioner in all these six appeals and direct that the Appellate Assistant Commissioner should decide the appeals afresh according to law, after giving the assessee and the Income-tax Officer an opportunity of being heard'.

4. Pursuant to the order of the Tribunal, the Appellate Assistant Commissioner took up the appeals for disposal. In the course of the proceedings, he found on verification that the quantum of penalty imposed under section 271(1)(a) was less than the minimum prescribed under the Income-tax Act, 1961. He, thereupon, issued a notice to the assessee to show cause why that penalty should not be enhanced up to the prescribed limit. The assessee raised several contentions in resisting the proposed action. The Appellate Assistant Commissioner, after considering the objections upheld the levy of penalty but enhanced it to the statutory minimum.

5. Against the said order of the Appellate Assistant Commissioner, the assessee preferred appeals to the Appellate Tribunal. Before the Tribunal, it was urged that the Appellate Assistant Commissioner has no jurisdiction to enhance the penalty after the decision of this court in I.T.R.C. Nos. 32 to 37 of 1968. It was also urged that on the merits of the matter, the Income-tax Officer ought not to have levied the penalty since the assessee had not disregarded the obligations under law. On both the contentions, the Tribunal found no substance. The Tribunal found that the Income-tax Officer failed to work out the correct quantum of minimum penalty as prescribed under sections 271(1)(a) and 273(b) of the Income-tax Act, 1961, and the decision of this court in the earlier I.T.R.C. Nos. 32 to 37 of 1968 was no bar for the Appellate Assistant Commissioner to enhance the penalty to bring it in conformity with the statutory provisions. On the merits of the matter, the Tribunal held that the assessee had consciously disregarded its obligations under the law and, therefore, penalty levied was justified.

6. The question referred to this court relates to the power of the Appellate Assistant Commissioner to enhance the penalty levied by the Income-tax Officer under sections 271(1)(a) and 273(b). There cannot be any dispute as to that power of the Appellate Assistant Commissioner to enhance the penalty levied. That power has been conferred on him under section 251(1)(b). All that is required to be followed is that the Appellate Assistant Commissioner shall afford a reasonable opportunity to show cause against such enhancement. In the instant case, it is not in dispute that such an opportunity has been afforded to the assessee.

7. Mr. Katageri, however, urged that the question is comprehensive enough for this court to go into the justification for the Appellate Assistant Commissioner to enhance the penalty in view of the earlier decision of this court in I.T.R.C. Nos. 32 to 37 of 1968. Even if we agree with this submission, we do not think that we could help the assessee. The power to enhance the penalty conferred on the Appellate Assistant Commissioner under section 251(1)(b) has nothing to do with the view taken by this court in ITRC Nos. 32 to 37 of 1968. The decision of this court was only to the effect that the Income-tax Officer has power under the provisions of the Income-tax Act, 1961, to levy penalty for the years in question. This court did not go into the question as to the quantum of penalty leviable. This court never observed that the quantum levied by the Income-tax Officer was correct.

8. When the matter went back to the Appellate Assistant Commissioner, the validity of the penalty leviable under sections 271(1)(a) and 273(b) was left open. It is not in dispute and indeed cannot be disputed that the Income-tax Officer himself has no power to levy penalty less than the minimum prescribed under the aforesaid sections. It is, therefore, not correct to contend that the Appellate Assistant Commissioner, in view of the decision of this court in. I.T.R.C. Nos. 32 to 37 of 1968, has no jurisdiction to enhance the penalty to the minimum prescribed.

9. On the other contentions relating to the cause shown by the assessee, the Tribunal has observed that there was no reasonable cause shown by the assessee for not furnishing the required returns and for non-payment of advance tax within the prescribed time. The Tribunal after considering the material on record has recorded a finding that the assessee consciously disregarded its obligations under the Income-tax Act. On the facts and circumstances of the case, we see no reason to disagree with that finding.

10. In the result, the question is answered in the affirmative and against the assessee. In the circumstances of the case, we make no order as to costs.


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