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Sri Jayalakshmi Cloth Stores Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCase referred No. 49 of 1979
Judge
Reported in[1985]155ITR425(AP)
ActsIncome Tax Act, 1961 - Sections 271(1), 274 and 274(2)
AppellantSri Jayalakshmi Cloth Stores
RespondentCommissioner of Income-tax
Appellant AdvocateV.K. Annapurna, Adv.
Respondent AdvocateM. Suryanarayana Murthy, Adv.
Excerpt:
direct taxation - penalty - sections 271 (1), 274 and 274 (2) of income tax act, 1961 - income-tax officer (ito) imposed penalties on assessee for concealment of income - contention that after amendment of 1961 act iac and not ito competent to impose penalty - no power conferred on iac to levy penalty after 1961 act was amended - no reference to iac under section 274 required - held, pursuant to amendment ito competent to levy penalty. - - the aac as well as the income-tax appellate tribunal rejected the assessee's contention that no income was concealed. this principle is clearly established by the decision of the supreme court in brij mohan's case [1979]120itr1(sc) .identical contention was urged in the above case before the supreme court, which was rejected......1970. according to the amendment that came into force, power is conferred on the ito himself to levy penalty where the income concealed does not exceed rs. 25,000. as in the present case, the income concealed did not exceed rs. 25,000 for either of the assessment years, the tribunal held that the proper authority to levy the penalty was the ito by virtue of the amendment that came into force on april 1, 1971. the tribunal also found that the ito did not make any reference to the iac in the matter of levying the penalty acting under s. 274(2) of the i.t. act as was in force prior to 1971 and, therefore, the iac had no jurisdiction at the relevant time. relying on the decision of this court in addl. cit v. dr. khaja khutabuddinkhan : [1978]114itr905(ap) the tribunal held that the.....
Judgment:

Anjaneyulu, J.

1. The Income-tax Appellate Tribunal referred the following question of law for consideration of this court under s. 256(1) of the I.T. Act :

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the Income-tax Officer had jurisdiction to levy the penalties for the assessment years 1969-70 and 1970-71, in view of the amendment to section 274(2) of the Income-tax Act, 1961 ?'

2. For the income-tax assessment years 1969-70 and 1970-71, the ITO made certain enquiries and came to the conclusion that the assessee had concealed its income in the returns filed. Assessments for these two years were completed on March 18, 1972. On the same date, the ITO issued notices for both the assessment years requiring the assessee to show cause why penalty should not be levied for concealment of income. The assessee submitted an explanation asserting that no income was concealed. The explanation was rejected. The ITO determined the income concealed for the assessment year 1969-70 at Rs. 25,000 and at Rs. 20,000 for the assessment year 1970-71. He levied penalty equal to the amount of income concealed for both the assessment years. The assessee appealed against the orders levying penalty. The AAC as well as the Income-tax Appellate Tribunal rejected the assessee's contention that no income was concealed. The ITO's finding that penalty is leviable was affirmed by the appellate authorities. Before the Tribunal, the assessee had taken a contention that the ITO had no jurisdiction to pass the orders of penalty for the assessment years 1969-70 and 1970-71. It is claimed that in accordance with the law relating to the income-tax assessment years 1969-70 and 1970-71, the proper authority to levy the penalty is the IAC where the minimum penalty leviable is more than Rs. 1,000. As in the present case, the minimum penalty is more than Rs. 1,000, the assessee claimed that the jurisdiction to levy the penalty vested not with the ITO, but with the IAC under s. 274(2) of the I.T. Act. The Tribunal rejected the contention of the assessee. The Tribunal held that the present case is covered by the amendment which came into force on April 1, 1971, by the Taxation Laws (Amendment) Act, 1970. According to the amendment that came into force, power is conferred on the ITO himself to levy penalty where the income concealed does not exceed Rs. 25,000. As in the present case, the income concealed did not exceed Rs. 25,000 for either of the assessment years, the Tribunal held that the proper authority to levy the penalty was the ITO by virtue of the amendment that came into force on April 1, 1971. The Tribunal also found that the ITO did not make any reference to the IAC in the matter of levying the penalty acting under s. 274(2) of the I.T. Act as was in force prior to 1971 and, therefore, the IAC had no jurisdiction at the relevant time. Relying on the decision of this court in Addl. CIT v. Dr. Khaja Khutabuddinkhan : [1978]114ITR905(AP) the Tribunal held that the jurisdiction is not vested in the IAC to levy the penalty. In that view, the assessee's contention regarding lack of jurisdiction on the part of the ITO to pass the orders of penalty was rejected. The assessee applied for and obtained the present reference against the above finding.

3. The learned counsel for the assessee contended that the assessment years involved were 1969-70 and 1970-71 and the penalty is leviable in this case in accordance with the law governing the above-mentioned two assessment years. Alternatively, it is contended that penalty is leviable in accordance with the law in existence at the time when the offence of concealment was allegedly committed by the assessee. It is pointed out that the returns were filed long prior to April 1, 1971, when the amendment came into force and, consequently, the law that governs the levy of penalty is the law in existence at the time of filing the returns wherein the offence of concealment was allegedly committed. Reliance is placed on the decision of the Supreme Court in Brij Mohan v. CIT : [1979]120ITR1(SC) . In that view of the matter, the learned counsel for the assessee urged that the ITO had no power to levy the penalties for the two assessment years on March 21, 1974, by applying the amendment that came into force on April 1, 1971.

4. The learned standing counsel for the Revenue, Sri M.S.N. Murthy, submits that the levy of penalties with reference to the amendment that came into force on April 1, 1971, is in order. According to him, the assessee has no vested right to have the penalties levied by any particular authority. The matter, contends the learned counsel, is one of procedure and at the time when the penalty proceedings were initiated, the authority having power to levy the penalty is the ITO and, consequently, the ITO was competent to pass the impugned orders. It is also represented that there was no reference to the IAC of Income-tax under s. 274(2) of the I.T. Act prior to April 1, 1971, when the amendment came into force with the result that the IAC was not seized of the matter in the present case in connection with the levy of the penalty. The learned counsel submits that the decision of the Supreme Court in Brij Mohan's case : [1979]120ITR1(SC) has no application, except in the matter of quantification of penalty. According to the learned counsel, the question regarding the authority who should levy the penalty has to be determined with reference to the law prevailing at the time when the jurisdiction to levy penalty is assumed, i.e., on the date when the penalty proceedings were initiated. It is pointed out that in the present case, notices under s. 274 were issued on March 18, 1972, when the assessments were completed and, consequently, the proceedings for levy of penalty were initiated subsequent to April 1, 1971, when the amendment came into force. In that view of the matter, the learned standing counsel for the Revenue, supports the orders passed by the ITO levying the penalty.

5. The assessee's contention that penalty is leviable with reference to the law governing each assessment year does not bear scrutiny. The principle that the law as in force on the first day of April of each assessment year governs that assessment for that year is applicable to assessment alone and not to the levy of penalties. This principle is clearly established by the decision of the Supreme Court in Brij Mohan's case : [1979]120ITR1(SC) . Identical contention was urged in the above case before the Supreme Court, which was rejected. It may, at this stage, be mentioned that the question of levying penalty with reference to the law prevailing on the date when the order is passed is also ruled out. The date on which the ITO passed an order of penalty has no relevance to determine the law that is applicable in the matter of levying the penalties. That leaves only two crucial dates for consideration, i.e., whether the law that has to be applied is the law prevailing at the time when the offence of concealment was committed when the returns were filed or the law that is prevailing on the date when the jurisdiction was assumed to levy the penalty by initiating penalty proceedings. The decision of the Supreme Court in Brij Mohan's case : [1979]120ITR1(SC) that the crucial date for the purpose of application of law in matters of levy of penalty for concealment is the date when the offence is committed, is applicable in the matter of computation of penalties. The question before the Supreme Court arose in the context whether the penalty could be computed with reference to the law in existence at the time when the offence is committed and it is that principle that was accepted by the Supreme Court in Brij Mohan's case : [1979]120ITR1(SC) . The question for consideration in this case is not whether the penalty should be computed in accordance with the law as amended. The question is who is the authority empowered to levy the penalty pursuant to the jurisdiction assumed by the ITO on March 18, 1972, to levy penalties. It cannot be denied that on March 18, 1972, when the jurisdiction was assumed and proceedings for levy of penalty were initiated by the ITO, the amendment by the Taxation Laws (Amendment) Act, 1970, has already come into force and the ITO is the proper authority to levy the penalty in all cases where the income concealed did not exceed Rs. 25,000. In the present case, for both the assessment years under consideration, the concealed income did not exceed Rs. 25,000. Consequently, pursuant to the jurisdiction assumed by the ITO to levy penalty on March 18, 1972, the power is conferred on the ITO alone to levy the penalty. The question of making any reference to the IAC under s. 274, according to the law in force prior to April 1, 1971, did not arise for the simple reason that no jurisdiction was at all assumed prior to April 1, 1971, to levy penalty. If jurisdiction was not assumed, the question of reference to the IAC does not arise. If at the time when the jurisdiction was assumed, the competent authority to levy penalty is the ITO, then the amended provisions come into operation and wherever the income concealed did not exceed Rs. 25,000, the ITO himself is empowered to levy the penalty. We are of the opinion that the penalty proceedings having been initiated on March 18, 1972, the authority to levy the penalty is the ITO pursuant to the amendment, which came into force on April 1, 1971.

6. A similar view has been taken by the Kerala High Court in CIT v. Varkey Chacko : [1982]136ITR733(Ker) by the Gujarat High Court in CIT v. Balabhai & Co. : [1980]122ITR301(Guj) and by the Punjab and Haryana High Court in CIT v. Raman Industries .

7. For the aforesaid reasons, we answer the question referred in the affirmative, i.e., in favour of the Revenue and against the assessee. Advocate's fee Rs. 500.


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