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Sait Bansilal and Rangisetti Veeranna Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCase Referred No. 26 of 1966
Judge
Reported in[1972]83ITR750(AP)
ActsIncome Tax Act, 1922 - Sections 28
AppellantSait Bansilal and Rangisetti Veeranna
RespondentCommissioner of Income-tax
Appellant AdvocateD.V. Sastry, Adv.
Respondent AdvocateT. Anantha Babu, Adv.
Excerpt:
.....power to impose penalty under section 28 of act when appeal against assessment was filed before appellate assistant commissioner - section 28 does not oust jurisdiction of income tax officer to impose penalty. - - 6. inviting our attention to the scheme of the act as envisaged by the various sections of the act relating to the assessment (section 23), penalties (sections 18(7), 18a, 9(a), and (b), section 25(2), section 44e, section 44f, section 46(1) and section 28), the powers of revision exercisable by the commissioner of income-tax (section 33b) and the appellate powers of the assistant commissioner and the tribunal (sections 31 and 33), the learned counsel, sri sastry, appearing for the assessee, contended that, under the scheme of the income-tax act, there are some offences..........to have the power to impose apenalty under that section, once an appeal has been filed before the appellate assistant commissioner, against the assessment which gave rise to the initiation of penalty proceedings '2. the material facts giving rise to this reference are:3. to the income disclosed by the assessee-firm for the assessment year 1954-55, the income-tax officer made an addition of rs. 4,25,800 as estimated income for low gross profits and for business income kept outside the account books. the assessment was completed on february 19, 1959. two days prior to the completion of the assessment, i.e., on february 17, 1959, the income-tax officer issued a notice under section 28 of the act, calling upon the assessee to show cause as to why penalty should not be imposed upon it, for.....
Judgment:

Sriramulu, J.

1. At the instance of the assessee, the Income-tax Appellate Tribunal has referred to this court under Section 66(1) of the Indian Income-tax Act, 1922 (hereinafter called 'the Act'), the following question of law for our opinion :

' Whether, on a proper construction of Section 28 of the Income-tax Act, 1922, the Income-tax Officer ceases to have the power to impose apenalty under that section, once an appeal has been filed before the Appellate Assistant Commissioner, against the assessment which gave rise to the initiation of penalty proceedings '

2. The material facts giving rise to this reference are:

3. To the income disclosed by the assessee-firm for the assessment year 1954-55, the Income-tax Officer made an addition of Rs. 4,25,800 as estimated income for low gross profits and for business income kept outside the account books. The assessment was completed on February 19, 1959. Two days prior to the completion of the assessment, i.e., on February 17, 1959, the Income-tax Officer issued a notice under Section 28 of the Act, calling upon the assessee to show cause as to why penalty should not be imposed upon it, for concealment of income and deliberate furnishing of inaccurate particulars of income. The assessee filed an appeal to the Appellate Assistant Commissioner against the assessment challenging the quantum of addition made by the Income-tax Officer. After due consideration of the appeal the Appellate Assistant Commissioner passed an order dated February 13, 1960, reducing the addition by rupees one lakh. On further appeal, by its order dated November 22, 1960, the Appellate Tribunal sustained an addition of rupees one lakh. On September 11, 1961, the Income-tax Officer pursued the penalty proceedings initiated by him on February 17, 1959, and levied a penalty of Rs. 25,000 on the assessee. On first appeal the Appellate Assistant Commissioner and, on second appeal, the Appellate Tribunal upheld the penalty.

4. In this reference, we are neither concerned with the question as to whether penalty is at all attracted in the circumstances of the case nor with the question whether the penalty imposed is reasonable or excessive.

5. Before the Appellate Tribunal, it was contended on behalf of the assessee that once an appeal was preferred from the assessment order, the Income-tax Officer was not, but only the Appellate Assistant Commissioner was, competent to levy a penalty. Similarly, once an appeal was filed before the Appellate Tribunal, it would be the Tribunal, and not the Appellate Assistant Commissioner that can levy a penalty. The Tribunal rejected the contention with the observation that a ' plain reading of the section did not support the assessee's contention and that no judicial authority was cited in support of the contention. ' Hence this reference to this court.

6. Inviting our attention to the scheme of the Act as envisaged by the various sections of the Act relating to the assessment (section 23), penalties (sections 18(7), 18A, 9(a), and (b), Section 25(2), Section 44E, Section 44F, Section 46(1) and Section 28), the powers of revision exercisable by the Commissioner of Income-tax (section 33B) and the appellate powers of the Assistant Commissioner and the Tribunal (Sections 31 and 33), the learned counsel, Sri Sastry, appearing for the assessee, contended that, under the scheme of the Income-tax Act, there are some offences for which penalty can only be levied by the Income-tax Officer and as well as by his superior and the appellate authorities, i.e., the Appellate Assistant Commissioner and the Appellate Tribunal, In regard to such offences, the penalties that are to be levied depend upon the quantum of total income finally determined and the tax computed thereon. It would, therefore, be more reasonable to construe Section 28 of the Act, as meaning that as soon as an appeal is filed against the assessment before the Appellate Assistant Commissioner, the Income-tax Officer ceases to have the jurisdiction to impose penalty on the assessee under the powers vested in him under Section 28. So also, as soon as an appeal is filed by the assessee or the Income-tax Officer against the order of the Appellate Assistant Commissioner before the Tribunal under Section 33, the Appellate Assistant Commissioner ceases to have jurisdiction to impose a penalty upon an assessee under the powers vested in him under Section 28 of the Act. The learned counsel, in favour of the above construction, contended that, under the scheme of the Act as shown above, there can be no room for doubt, that if Section 28 is so construed, the assessee would escape penalty, because the Income-tax Officer is also a party in the appeals before the Appellate Assistant Commissioner and the Tribunal and it is always open to him to bring to the notice of the appellate authorities in an appropriate case that there exist circumstances in the case which attract the penal provisions of the Act and that they should impose penalty upon the assessee before them. It was further submitted that when these authorities, one above the other in the heirarchy, are empowered to impose penalty upon the assessee for the same offence, nothing, in law, can prevent each one of those authorities from invoking its power and imposing a penalty upon an assessee for the same offence. In order to prevent such an anomalous situation, it would be reasonable to construe Section 28 of the Act in a manner which cannot possibly give rise to such an anomalous situation. That purpose could only be achieved if Section 28 of the Act is construed in the manner in which he did. It was further submitted that, as held in C. A. Abraham v. Income-tax Officer, : [1961]41ITR425(SC) and Commissioner of Income-tax v. Bhikaji Dadabhai & Co., : [1961]42ITR123(SC) penalty is only an additional tax and the computation of tax depends upon the total income of an assessee finally determined by the appellate authority. When an appeal is filed before an appellate authority, the whole assessment would be before it and its orders would finally determine the precise total income. To prove the above scheme envisaged under the Act, the learned counsel for the assessee cited various rulings which, in our opinion, need not be mentioned here.

7. As against the above arguments, the learned counsel, Sri Ananta Babu, submitted that ' assessment' and ' penalty' are two different concepts, although the word ' assessment ', under different circumstances, may mean more than one aspect. On a plain reading of its language, Section 28 does not admit of the construction sought to be placed on it by the learned counsel for the assessee. The law confers jurisdiction on the Income-tax Officer to impose penalty on an assessee for concealment or deliberate furnishing of inaccurate particulars of income, and ouster of his jurisdiction at a later stage must be by an express and unambiguous language of the section. Such ouster of jurisdiction cannot be inferred from the language which has not been expressly used in the section. It would be unreasonable to expect that each appellate authority who is empowered to impose a penalty upon an assessee would, in the exercise of their powers, impose penalty on an assessee in spite of the fact that the Income-tax Officer had already imposed a penalty upon the assessee. Circumstances which attract penalty may, for the first time, come to the notice of any of the appellate authorities and the law, therefore, wisely contemplates that such authorities should also have powers to impose penalty. In support of the above arguments, the learned counsel relied upon the decision in Haji Ghulam Hussain v. Commissioner of Income-tax, [1953] 23 I.T.R. 309 (All.).

8. Tax and penalty, like tax and penal interest, are distinct and different concepts under the Income-tax Act. Penalty is in addition to the tax determined as payable by the assessee. Penalty, in our opinion cannot be taken as additional tax for all purposes. No doubt in C. A. Abraham v. Income-tax Officer, : [1961]41ITR425(SC) and Commissioner of Income-tax v. Bhikaji Dadabhai & Co., : [1961]42ITR123(SC) the Supreme Court has held that under Section 28 of the Act liability to pay additional tax, which is designated penalty, is imposed in view of the dishonest and contumacious conduct of the assessee. The observations made by the Supreme Court in the above cases should be considered in the context in which they were made. In C. A. Abraham v. Income-tax Officer the Supreme Court was construing the expression 'assessment' occurring in Section 44 of the Act, in order to find out whether the word 'assessment' included procedure for the imposition of penalty on a dissolved firm. The context in which those observations were made by the Supreme Court is clear from the following passage occurring in that case:

' The expression ' assessment', used in the sections of Chapter IV of the Income-tax Act, is not used merely in the sense of computation of income and when Section 44 declares that the partners or members of a firm or association shall be jointly and severally liable to assessment, it refers to the liability to computation of income under Section 23 as well as the application of the procedure for declaration and imposition of tax liability and the machinery for the enforcement thereof. Nor has the expression 'all the provisions of Chapter IV shall, so far as may be, apply to such assessment' a restricted content; in terms, it says that all the provisions of Chapter IV apply, so far as may be, to assessment of firms, which have discontinued their business. By Section 28, the liability to pay additional tax, which is designated penalty, is imposed in view of the dishonest and contumacious conduct of the assessee. This liability arises only if the Income-tax Officer is satisfied about the existence of the conditions which give him jurisdiction and the quantum thereof depends upon the circumstances of the case. The penalty is not uniform and its imposition depends upon the exercise of discretion by the taxing authorities ; but it is imposed as a part of the machinery for assessment of tax liability.'

9. By those observations we understand that what their Lordships meant was that the word 'assessment' covered penalty proceedings, if it is used (as it is in some sections) to denote the whole procedure for imposing penalty on the taxpayer. We are, therefore, unable to agree with the learned counsel for the assessee that assessment proceedings and penalty proceedings are one and the same proceedings for all purposes. This view of ours gains support from the fact that the findings given in the assessment proceedings would only be relevant and admissible, but not final and conclusive in penalty proceedings. In penalty proceedings, further evidence can be led to rebut the findings given in the assessment proceedings. If both the assessment proceedings and the penalty proceedings are one and the same, we should ordinarily expect that the findings given in the assessment proceedings are final and conclusive and binding in penalty proceedings so as to preclude the assessee from leading evidence in penalty proceedings to rebut the findings given in the assessment proceedings. We are, therefore, convinced that assessment proceedings are ordinarily different from penalty proceedings.

10. The next argument advanced by the learned counsel for the assessee was that as the powers of the Appellate Assistant Commissioner are wide enough, that every aspect of the assessment can be gone into by the Appellate Assistant Commissioner, that the penalty depends upon the quantum of total income determined by the Assistant Commissioner in appeal, that an appeal filed by the assessee before the Appellate Assistant Commissioner cannot be withdrawn so as to prejudice the department's right of levying penalty in proper cases, it -would follow that the Appellate Assistant Commissioner would be in a better and more advantageous position to impose penalty upon an assessee for concealment ofincome. In support of the above argument the learned counsel relied upon the observations made by the Supreme Court in Commissioner of Income-tax v. Rai Bahadur Hardutroy Motilal Chamaria, : [1967]66ITR443(SC) which are as follows :

'It is impossible to talk of a court of appeal when only one party to the original decision is entitled to appeal and not the other party, and in view of this peculiar position the statute has conferred very wide powers upon the Appellate Assistant Commissioner once an appeal is preferred to him by the assessee. It is necessary also to emphasize that the statute provides that, once an assessment comes before the Appellate Assistant Commissioner, his competence is not restricted to examining those aspects of the assessment which are complained of by the assessee ; his competence ranges over the whole assessment and it is open to him to correct the Income-tax Officer, not only with regard to a matter raised by an assessee, but also with regard to a matter which has been considered by the Income-tax Officer and determined in the course of the assessment. It is also well established that an assessee having once filed an appeal cannot withdraw it. In other words, the assessee having filed an appeal and brought the machinery of the Act into working, cannot prevent the Appellate Assistant Commissioner from ascertaining and settling the real sum to be assessed, by intimation of his withdrawal of the appeal. Even if the assessee refuses to appear at the hearing, the Appellate Assistant Commissioner can proceed with the enquiry and, if he finds that there has been an under-assessment, he can enhance the assessment.'

11. There is no doubt that when an appeal is filed before the Appellate Assistant Commissioner, his powers are very wide enough and that he can consider all the matters which have been dealt with by the Income-tax Officer and can even enhance the total income determined by the Income-tax Officer. However, these powers of the Appellate Assistant Commissioner are not absolute. There are also limitations on his powers. The Appellate Assistant Commissioner can tax an income which the Income-tax Officer had expressly or by clear implication considered and allowed to be not taxable irrespective of the question whether the income falls under a head with regard to which an appeal has or has not been preferred, but the Appellate Assistant Commissioner cannot tax an item of income the taxability of which has not been considered at all by the Income-tax Officer. (See Prabhudas Ramji v. Commissioner of Income-tax, [1966] 62 I.T.R, 621 (Guj.)).

12. Under the Income-tax Act, 1922, the Appellate Tribunal has no power to enhance the total income at all. Thus if an assessee has concealed income, say from house property, which has not been considered or processed by the Income-tax Officer, neither the Appellate Assistant Commissioner nor the Tribunal can obviously impose penalty on the houseproperty income so concealed, although in the enquiry those officers, viz., Appellate Assistant Commissioner and the Tribunal, are satisfied that the assessee has concealed such income.

13. Even in matters which are processed by the Income-tax Officer, the assessee might not place all the materials before the Income-tax Officer, with the result he might not be able to detect or find out concealment of income. The Appellate Assistant Commissioner, during his enquiry, may come to know additional facts,' which are either not disclosed to the Income-tax Officer, or which escape the attention of the Income-tax Officer, and those facts might reasonably lead the Appellate Assistant Commissioner to a finding that the assessee had concealed income. In such a case, if the Appellate Assistant Commissioner has no powers to impose a penalty, the assessee would altogether escape penalty. Therefore, the law has wisely given powers to the Appellate Assistant Commissioner and also the Tribunal to impose penalty on the assessee. When the law empowers more than one authority to impose penalty, it would be unreasonable to expect that each one of them would, in his own turn, invoke and impose penalty. At any rate, the assessee can be punished only once in respect of concealment of income and not by all the three authorities simultaneously or one after the other and for the same offence. It would, therefore, be reasonable to think that when the Income-tax Officer, having original jurisdiction, and the appellate authorities, i.e., Appellate Assistant Commissioner and the Tribunal, are also invested with powers to impose penalties, it would be wise for the inferior officer to exercise that jurisdiction or power. If Section 28 is interpreted in a different manner it would be disadvantageous to the assessee. If the penalty is imposed by the Income-tax Officer, the assessee would have two opportunities to test the correctness of that penalty ordei by filing appeals to the Appellate Assistant Commissioner and if necessary to the Tribunal. If the power to impose penalty is exercised by the Appellate Assistant Commissioner, then the assessee would lose the benefit of one appeal because he could in that case file an appeal only to the Tribunal. If the power, to impose penalty is exercised by the Tribunal, then the assessee would altogether lose the right of filing an appeal against the penalty order. If Section 28 of the Act is at all to be construed, such construction should be placed on it which would be more advantageous to the assessee. We are, therefore, unable to agree with the submissions made by the learned counsel for the assessee.

14. Before we proceed further, it is necessary to read the relevant portion of Section 28 of the Act. It reads as follows :

Section 28:

'(1) If the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal, in the course of any proceedings under this Act, is satisfied that any person--. . ...

(c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income,

he or it may direct that such person shall pay by way of penalty, in the case referred to in Clause (a), in addition to the amount of income-tax and super-tax, if any, payable by him, a sum not exceeding 11/2 (one and a half) times that amount, and in the cases referred to in Clauses (b) and (c), in addition to any tax payable by him, a sum not exceeding 11/2 times the amount of income-tax and super-tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income ....

(2) If the Income-tax Officer, the Appellate Assistant Commissioner, or the Appellate Tribunal, in the course of any proceedings under this Act, is satisfied that the profits of a registered firm have been distributed otherwise than in accordance with the shares of the partners as shown in the instrument of partnership registered under this Act governing such distribution, and that any partner has thereby returned his income below its real amount, he or it may direct that such partner shall, in addition to the income-tax and super-tax, if any, payable by him, pay by way of penalty a sum not exceeding 11/2 times the amount of income-tax and super-tax which has been avoided, or would have been avoided if the income returned by such partner had been accepted as his correct income; and no refund or other adjustment shall be claimable by any other partner by reason of such direction ....

(5) An Appellate Assistant Commissioner or the Appellate Tribunal on making an order under Sub-section (1) or Sub-section (2), shall forthwith send a copy of the same to the Income-tax Officer . . . . '

15. On a plain reading of the above section, we find that the language used in Section 28 is clear and unambiguous. The section does not under any circumstances oust the jurisdiction of the Income-tax Officer to impose penalty. If the Appellate Assistant Commissioner or the Tribunal imposes penalty on an assessee under Section 28(1)(c), he or it is bound under Sub-section (5) of Section 28, to send a copy thereof to the Income-tax Officer so that he could not once again impose a penalty upon the assessee for the same concealment.

16. If the legislature had intended to oust the jurisdiction of the Income-tax Officer to impose a penalty on an assessee if an appeal was filed against the assessment before the Appellate Assistant Commissioner, nothing prevented the legislature from saying so in express language in Section 28. There is a general presumption in law against an intention to disturb or oust the jurisdiction or interfere with the jurisdiction, which is given to an officer. It is supposed that the legislature would not make any important change without any explicit expression of its intention. Unless the statutecontains words, whether expressly or by necessary implication, ousting the jurisdiction of the Income-tax Officer, which once vested in him, we cannot accept the contention of the assessee. Nothing, but express words in the section, can take away the jurisdiction of an officer. We are, therefore of the opinion that a presumption exists in law in favour of the continuance of jurisdiction or power, which is once vested in an officer, until it is ousted in express words.

17. No case has been cited by the assessee's counsel which has got a direct bearing on the point in issue. The cases cited by the assessee, which go to prove the scheme of the Act, are not helpful for this purpose. We entirely agree with the assessee's counsel that the scheme as submitted by him exists in the Income-tax Act. But the mere existence of the scheme does not give rise to an interpretation which the learned counsel wants us to put on Section 28 of the Act.

18. Sri Anantha Babu, the learned counsel appearing for the department, has relied upon the decision in Haji Ghulam Hussain v. Commissioner of Income-tax, [1953] 23 I.T.R. 309 (All). In that case the facts are as follows :

' In the course of the assessment an officer discovered certain deliberate omissions in the accounts and, therefore, after issuing a notice under Section 28(3), he imposed a penalty of Rs. 3.000 under Section 28(1)(c). The assessee appealed to the Appellate Assistant Commissioner against the order imposing penalty and contended before him that the penalty imposed was illegal as the return was not a return furnished in accordance with the provisions of the Act. The Appellate Assistant. Commissioner accepted that contention of the assessee, but issued a notice to him under Section 28(3) and by the same order by which he disposed of the appeal, he imposed a penalty of Rs. 3,000 under Section 28(1)(a), for failure to furnish return as required by notice under Section 22. On those facts, the Allahabad High Court held that the Appellate Assistant Commissioner was entitled while dealing with the appeal pending before him to pass an order under Section 28(1)(a) imposing a penalty. '

19. We are unable to understand how this case helps the department or throws any light on the point involved in this reference.

20. We are, therefore, of the opinion that the contention raised by the assessee before the Appellate Assistant Commissioner or the Tribunal was without force and untenable. We, therefore, answer the question referred to us, in the negative, i.e., the Income-tax Officer does not cease to have power to impose a penalty when an appeal against an assessment is filed before the Appellate Assistant Commissioner. The assessee shall pay the costs of this reference to the department. Counsel's fee is Rs. 250.


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