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Addl. Commissioner of Income-tax Vs. Dr. Khaja Khutabuddinkhan - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCase Referred No. 26 of 1975
Judge
Reported in[1978]114ITR905(AP)
ActsIncome Tax Act, 1961 - Sections 256, 256(2), 271(1), 274(2) and 275; General Clauses Act, 1897 - Sections 6
AppellantAddl. Commissioner of Income-tax
RespondentDr. Khaja Khutabuddinkhan
Appellant AdvocateP. Rama Rao, Adv.
Respondent AdvocateC.P. Sarathi and ;K.L. Rathi, Advs.
Excerpt:
.....away by way of amendment. - - 1,000. while the proceedings were pending before the inspecting assistant commissioner, section 274(2) as well as section 275 were amended by act 42 of 1970, which came into effect from april 1, 1971. by virtue of the amendment of section 274(2), the minimum penalty for purposes of making a reference to the inspecting assistant commissionerwas raised to rs. , limitation as well as jurisdiction. it is well-settled law that if in an application for reference of a case to the high court a particular question has not been stated, even the high court itself in exercise of its powers under section 256(2) cannot call for a reference on such a question. section 6(d) of the general clauses act, 1897, would, apply in cases like the present one and the..........by the tribunal :'whether, on the facts and in the circumstances of the case, the inspecting assistant commissioner has jurisdiction to impose penalty?'3. we are now concerned with the assessment year 1967-68, the relevant year of account being the financial year ending on march 31, 1967. the assessee is a doctor in government service and at the relevant time he was civil assistant surgeon at the osmania general hospital, hyderabad. it appears that, apart from the government service he was permitted private practice and, thus, besides his salary income, he also derived income from private practice. on november 28, 1968, he filed a return of income disclosing rs. 7,200 as income from private practice and rs. 7,456 as income from governmental service. the assessee did not maintain.....
Judgment:

B. J. Divan, C.J.

1. In this reference at the instance of the revenue, the following question has been referred to us for our opinion:

'Whether, on the facts and in the circumstances of the case, the quantum of penalty to be levied should be as per the amended provisions of Section 271(1)(iii) brought into effect from April 1, 1968?'

2. In this very case, at the instance of the assessee, the following question has been referred for our opinion by the Tribunal :

'Whether, on the facts and in the circumstances of the case, the Inspecting Assistant Commissioner has jurisdiction to impose penalty?'

3. We are now concerned with the assessment year 1967-68, the relevant year of account being the financial year ending on March 31, 1967. The assessee is a doctor in Government service and at the relevant time he was civil assistant surgeon at the Osmania General Hospital, Hyderabad. It appears that, apart from the Government service he was permitted private practice and, thus, besides his salary income, he also derived income from private practice. On November 28, 1968, he filed a return of income disclosing Rs. 7,200 as income from private practice and Rs. 7,456 as income from Governmental service. The assessee did not maintain books of account nor was he maintaining any diary in respect of income from private practice. The amount of Rs. 7,200 was returned on an ad hoc estimate made by the assessee himself. The Income-tax Officer received information that the assessee earned at least Rs. 16,450 from private practice in the relevant year of account. The assessee was examined on oath by the Income-tax Officer on September 19, 1970. In the course of such examination several details were elicited by the Income-tax Officer and the assessee having learnt that the Income-tax Officer got information regarding his professional receipts on the basis of details furnished by various employees of Central Government departments, filed a revised return on November 2, 1970, declaring a sum of Rs. 15,200 as income from private practice. The assessee is also a registered doctor for treating Central Government employees. On the certificates issued by the assessee, the employees got reimbursement from the Central Government. The Income-tax Officer obtained information from the office of the Postmaster-General, Andhra Circle, Hyderabad, which revealed that the amounts received by the assessee from the employees of that office alone amounted to Rs. 16,450. On the basis of the revised return, the Income-tax Officer passed an assessment order for the assessment year 1967-68 on December 21; 1970. Simultaneously, he initiated proceedings for levying penalty under Section 271(1)(c) for concealment of income. Under the provisions of Section 274(2) of the Income-tax Act, 1961, as existing prior to the amendment by Act 42 of 1970 which came into effect on April 1, 1971, the matter was referred to the Inspecting Assistant Commissioner, as the minimum penalty imposable exceeded Rs. 1,000. While the proceedings were pending before the Inspecting Assistant Commissioner, Section 274(2) as well as Section 275 were amended by Act 42 of 1970, which came into effect from April 1, 1971. By virtue of the amendment of Section 274(2), the minimum penalty for purposes of making a reference to the Inspecting Assistant Commissionerwas raised to Rs. 25,000. Section 275 which deals with the period of time before which penalty could be levied has also been amended to the effect that the order of penalty can be passed within two years after the end of the financial year in which the assessment has been made, while according to unamended provision the period of two years for passing an order of penalty was to be reckoned from the date of the assessment order.

4. After the matter was referred to the Inspecting Assistant Commissioner, a notice was issued to the assessee on March 7, 1973, for showing cause against levy of penalty under Section 271(1)(c). In reply to the show-cause notice, the assessee besides urging that on the facts of the case no penalty should be levied urged two contentions, viz., that the order of penalty could not be passed after the expiry of two years from the date of the assessment order, i.e., after December 21, 1972, since the assessment order was passed on December 21, 1970. The second contention on the technical point was that the Inspecting Assistant Commissioner had no jurisdiction to deal with the penalty matter if the amendment as per Act 42 of 1970 was to be applied since the minimum penalty imposable was less than Rs. 25,000, and the Income-tax Officer alone was competent to deal with the matter. Both these contentions urged on behalf of the assessee was rejected by the Inspecting Assistant Commissioner and he imposed a penalty of Rs. 12,000 by his order dated March 20, 1973. The Inspecting Assistant Commissioner invoked the provisions of the Explanation to Section 271(1)(c).

5. Against the order of the Inspecting Assistant Commissioner, the assessee took the matter in appeal before the Tribunal and the same two contentions which were urged before the Inspecting Assistant Commissioner were again urged before the Tribunal. The Tribunal also rejected the two contentions and held that the order of penalty was not barred by limitation nor could it be said that the Inspecting Assistant Commissioner had no jurisdiction to impose the penalty. The Tribunal, however, accepted the contention urged on behalf of the assessee with regard to the quantum of penalty. The Tribunal concluded that the quantum of penalty should be in accordance with the provisions as they existed prior to the amendment which came into force on April 1, 1968. Apparently, the Tribunal held that the minimum penalty should be imposed, worked out on the basis of 20 per cent, of the tax sought to be avoided.

6. Thereafter, at the instance of the revenue, question No. 1, which hasbeen set out hereinabove has been referred by the Tribunal. The secondquestion which we have set out above has been referred at the instance ofthe assessee.

7. As regards question No. 1, which has been referred to us at the instance of the revenue, the question is now covered by two decisions. The first ofthese two decisions is the decision of a Division Bench of this court consisting of Sambasiva Rao, Actg. C.J. and Muktadar J. in Addl. Commissioner of Income-tax v. Medisetty Ramarao : [1977]108ITR318(AP) . In that case, the Division Bench held that for purposes of Section 271(1)(c)(iii), the date of filing of the returns in which concealment of income has taken place would be the relevant date to be taken into account for the purpose of levying the quantum of penalty as it stood in the Act on that date, and not the date of completion of assessment, and the satisfaction of the Income-tax Officer or the Appellate Assistant Commissioner. This decision in Medisetty Ramarao's case : [1977]108ITR318(AP) was followed by a Division Bench of this court in R.C. No. 51 of 1974 and R.C. No. 14 of 1975, both decided by common judgment delivered on July 30, 1976--Commissioner of Wealth-tax v. R. D. Chand : [1977]108ITR787(AP) . I was party to that judgment delivered in R.C. No. 51 of 1974 and R.C. No. 14 of 1975, and there also we have held that penalty has to be levied in the light of the law that existed at the time when the offence for which penalty is levied, came to be committed. In the instant case, the return was filed on 28th November, 1968, showing much lesser income from private practice than what was actually the fact, viz., Rs. 7,200, was disclosed in the return filed on November 28, 1968, instead of a sum of Rs. 16,450 which was actually found to be the income from private practice and instead of Rs. 15,200 which was disclosed by the assessee himself in the revised return filed by him on November 2, 1970. Under these circumstances, the Tribunal was in error in calculating the amount of penalty in the light of the provisions as they existed prior to the amendment which came into force with effect from April 1, 1968. Since the offence for which the penalty is imposable under Section 271(1)(c) occurred on November 28, 1968, when the assessee filed the return showing much lesser income from private practice, the law which was in force on November 28, 1968, would govern the question of imposition of penalty in the light of these Division Bench judgments of our High Court. Under these circumstances, question No. 1 which has been referred to us at the instance of the revenue must be answered as follows :

8. The quantum of penalty to be levied should be as per the amended provisions of Section 271(1)(c) which came into effect on April I, 1968. Question No. 1 is, therefore, answered in the affirmative, i.e., in favour of the revenue and against the assessee.

9. As regards question No. 2 which has been referred to us at the instance of the assessee, it must be pointed out that the only point which Mr. Rathi, appearing for the assessee, urged before us is that the order of the Inspecting Assistant Commissioner passed on March 20, 1973, was barred by limitation. He contended that under the law as it prevailed prior to the amendment which came into force on April 1, 1971, the period of limitationwas two years from the date of the assessment order and since the assessment order was passed on December 21, 1970, the order of the Inspecting Assistant Commissioner levying the penalty, being the order dated March 20, 1973, was barred by limitation. The question which has been referred to us is only on the issue of jurisdiction of the Inspecting Assistant Commissioner to impose penalty and not on the question of limitation regarding the order of penalty. Mr. Rathi has addressed arguments at length before us contending that the question of limitation is also one of the aspects of the question of jurisdiction. Mr. Rathi is right that if a particular question of law has been referred for the opinion of the High Court by the Tribunal under the provisions of Section 256 of the Income-tax Act, it is open to the High Court to consider another aspect of the same question of law and the High Court can either reframe the question in order to bring out the real controversy between the parties or consider another aspect of the same question of law and decide the same. But it is difficult to accept the contention of Mr. Rathi that the limitation is just another aspect of jurisdiction. It is true that at one time a view was taken that when a court decided on a question of limitation it was either conferring jurisdiction upon itself or depriving itself of jurisdiction to try the matter. If any authority is needed for that statement of law one can find it in Mahindra Land and Building Corporation Ltd. v. Bhutnath Banerjee, : [1964]3SCR495 in that decision, the Supreme Court observed as follows (page 1337):

'The proposition that an erroneous decision on a question of limitation involves the question of jurisdiction applies to cases in which the law definitely ousts the jurisdiction of the court to try a certain dispute between the parties and not to cases in which there is no such ouster of jurisdiction under the provisions of any law, but where it is left to the court itself to determine certain matters as a result of which determination the court has to pass a certain order and may, if necessary, proceed to decide the dispute between the parties. The distinction between the two classes of cases is that in one, the court decides a question of law pertaining to jurisdiction. In the other, it decides a question within its jurisdiction.'

10. In arriving at this conclusion the Supreme Court relied on certainobservations of Sir John Beaumont delivering the opinion of the PrivyCouncil in Joy Chand Lal Baku v. Kamalaksha Chaudhury, .However, in a recent decision in M.L. Sethi v. R. P. Kapur, : [1973]1SCR697 , Mathew J., speaking for the Supreme Court, has dissented from thisview. After citing passages from the decision of the House of Lords inAnisminic Ltd., In re [1969] 2 AC 147 Mathew J. observed in paragraph 11of the judgment at page 2385 as follows :

'The dicta of the majority of the House of Lords, in the above case, would show the extent to which ' lack ' and ' excess ' of jurisdiction have been assimilated or, in other words, the extent to which we have moved away from the traditional concept of 'jurisdiction'. The effect of the dicta in that case is to reduce the difference between jurisdictional error and error of law within jurisdiction almost to vanishing point. The practical effect of the decision is that any error of law can be reckoned as jurisdictional. This comes perilously close to saying that there is jurisdiction if the decision is right in law but none if it is wrong. Almost any misconstruction of a statute can be represented as ' basing their decision on a matter with which they have no right to deal', 'imposing an unwarranted condition' or 'addressing themselves to a wrong question'. The majority opinion in the case leaves a court or Tribunal with virtually no margin of legal error. Whether there is excess of jurisdiction or merely error within jurisdiction can be determined only by construing the empowering statute, which will give little guidance. It is really a question of how much latitude the court is prepared to allow. In the end it can only be a value judgment............... Why is it that a wrong decision on a question of limitation or res judicata was treated as a jurisdictional error and liable to be interfered with in revision It is a bit difficult to understand how an erroneous decision on a question of limitation or res judicata would oust the jurisdiction of the court in the primitive sense of the term and render the decision or a decree embodying the decision a nullity liable to collateral attack. The reason can only be that the error of law was considered as vital by the court. And there is no yardstick to determine the magnitude of the error other than the opinion of the court.'

11. In view of these observations of the Supreme Court, it is obvious that today the view of the Supreme Court is that so far as the error on the ground of limitation is concerned it is but one of the aspects of error in exercise of jurisdiction and it cannot be said that only an error on the ground of limitation or res judicata amounts to jurisdictional error within the meaning of Section 115 of the Civil Procedure Code. This discussion in M. L. Sethi's case, : [1973]1SCR697 , thus brings out that so far as the word 'jurisdiction' is concerned, it does not avail except in a very narrow sense on the aspect of limitation. Again, the entire line of decisions on which Mr. Rathi relies were rendered in connection with Section 115 of the Civil Procedure Code and not on the broader aspect of income-tax law or general jurisprudence.

12. In the instant case, on behalf of the assessee, both before the Inspecting Assistant Commissioner and before the Income-tax Appellate Tribunal, two Contentions were urged (i) that the Inspecting Assistant Commissioner had no jurisdiction to impose the penalty; and (ii) that the passing of anorder of penalty was barred by limitation after December 21, 1972, i.e., after the expiry of two years from the date on which the order of assessment was passed. Both the Inspecting Assistant Commissioner and the Tribunal rejected these two contentions. The order of the Tribunal deals at length with both the contentions, viz., limitation as well as jurisdiction. However, when the question came to be referred to this court for the opinion of the court under Section 256(1), at the instance of the assessee, it is only the question regarding jurisdiction of the Inspecting Assistant Commissioner that is referred to us. No application has been made by the assessee saying that the question which was referred did not correctly express the contention which he wanted to urge for the opinion of the High Court. Under these circumstances, we have not accepted Mr. Rathi's contention that the issue of limitation is referred to this court by the use of the word 'jurisdiction' occurring in question No. 2 which has been referred to us at the instance of the assessee. We can only deal with the question which is actually referred to us and we cannot canvass questions of law in general. It is well-settled law that if in an application for reference of a case to the High Court a particular question has not been stated, even the High Court itself in exercise of its powers under Section 256(2) cannot call for a reference on such a question. Under these circumstances, it is not open for the assessee to contend that the order of penalty passed by the Inspecting Assistant Commissioner on March 20, 1973, was barred by limitation since the old law of limitation would continue to apply. It is true as Mr. Rathi, for the assessee, wanted to urge before us that in R. C. No. 36 of 1974 decided by a Division Bench of this court on December 26, 1975 [Addl. Commissioner of Income-tax v. Raj-kamal Hotel and Bar : [1977]107ITR737(AP) ] a view was taken that the law of penalty should be the law as it was in force at the time of commencement of the assessment year with reference to which the officer concerned was taking action. In view of the fact that we are not concerned with the aspect of limitation in the instant case, it is not necessary for us to consider the view taken by the Division Bench in R.C. No. 36 of 1974 [Addl. Commissioner of Income-tax v. Rajkamal Hotel and Bar : [1977]107ITR737(AP) ].

13. It is clear so far as the question of the Inspecting Assistant Commissioner's, jurisdiction' is concerned, that at the time when the matter came to be referred to him by the Income-tax Officer and the law as it stood on the date of that reference, he was the only officer who could have heard the matter because the minimum penalty imposable was more than Rs. 1,000. If during the time, when the matter was pending before the Inspecting Assistant Commissioner the law was changed by Act 42 of 1970 with effect from April 1, 1971, and the minimum penalty for purpose of making a reference to the Inspecting Assistant Commissioner came to beraised to Rs. 25,000, it does not mean that the jurisdiction of the Inspecting Assistant Commissioner was taken away. Section 6(d) of the General Clauses Act, 1897, would, apply in cases like the present one and the proceedings, in spite of repeal of the relevant part of the old Section 275(1) would continue. Under these circumstances, question No. 2 which is actually referred to us at the instance of the assessee must be replied in the affirmative, i.e., in favour of the revenue and against the assessee.

14. Question No. 1 referred to us at the instance of the revenue is answered, as stated above, in the affirmative, i.e.; in favour of the revenue and against the assessee. Question No. 2 referred to us at the instance of the assessee is answered in the affirmative, i.e., against the assessee and in favour of the revenue. The assessee will pay costs of this reference to the Commissioner. Advocate's fee Rs: 250.


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