S. Obul Reddy, C.J.
1. An interesting question of law arises in this reference :
'Whether, on the facts and in the circumstances of the case, the order of penalty dated December 16, 1969, passed by the Inspecting Assistant Commissioner under Section 271(1)(c) of the Income-tax Act, 1961, is barred by limitation as provided under Section 275 of the said Act '
2. The facts giving rise to the reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the revenue are these : The assessee originally for the relevant assessment year 1955-56 was a HUF. The assessment on a total income of Rs. 27,901 of the HUF was completed on January 31, 1956. In the course of the appeal before the Income-tax Appellate Tribunal for the assessment year 1956-57, it was admitted that a sum of Rs. 16,500 had escaped assessment in the assessment year 1955-56. The Tribunal, therefore, in its order dated April 11, 1963, in I.T.A. No. 5800 of 1962-63 directed the ITO to take necessary action for assessing the escaped income. Proceedings were initiated in accordance with the direction by the ITO under Section 147(a) of the Act, and in response to the notice served on the assessee under Section 148, the assessee filed a return on September 24, 1963, admitting a sum of Rs. 44,401 arrived at by adding a further sum of Rs. 16,500 to the income of Rs. 27,901 originally assessed, in accordance with the order of the Appellate Tribunal. The ITO in his assessment order dated January 27, 1965, computed the income of the assessee at Rs. 1,46,701 which included a sum of Rs. 16,500, the income which escaped assessment. On appeal against that assessment order, the AAC upheld the inclusion of Rs. 16,500. The ITO then initialed penalty proceedings and the IAC levied a penalty of Rs. 6,960 under Section 271(1)(c) of the Act by his order dated December 16, 1969. That led to the assessee preferring a further appeal to the Appellate Tribunal. The assessee objected to the levy of penalty before the Appellate Tribunal. Among the grounds raised before the Tribunal was the one relating to the period of limitation. According to the assessee, the levy of penalty was barred by limitation under Section 275 of the Act. The Tribunal, following the decision of the Assam and Nagaland High Court in Commissioner of Income-tax v. Sabitri Devi Agarwalla held that the order of penalty was beyond the period of limitation prescribed by Section 275.
3. Mr. Rama Rao, the learned counsel appearing for the revenue, relying upon the decision of the Supreme Court in Director of Inspection of Income-tax (Investigation) v. Pooran Mall & Sons : 96ITR390(SC) , strenuously contended that the Tribunal was in error in holding that even where a matter is remanded to the original authority, the period of limitation prescribed in Section 275 is attracted. Mr. Swamy, the learned counsel appearing for the assessee, contended on the other hand that the decision of the Supreme Court is distinguishable, and it is not a case rendered on the question of limitation provided in Section 275.
4. The short and interesting question that arises, therefore, is whether the period of two years prescribed in Section 275 applies to all stages of proceedings or is only confined or limited to the initial proceedings initiated and completed by the ITO. This question may be considered in the background of the corresponding provisions in the 1922 Act. Section 28 of the Indian Income-tax Act, 1922, provided for imposition of penalty for concealment of income or improper distribution of profits. The ITO, the AAC or the Appellate Tribunal, as the case may be, was empowered to initiate any proceedings and also penalty proceedings in cases where, among other things, the assessee without reasonable cause had failed to furnish the return of his total income which he was required to furnish, or where he had concealed the particulars of his income or deliberately furnished inaccurate particulars of such income. No period of limitation was prescribed for completion of the penalty proceedings by the original authority. Section 271(1)(c) of the present Act similarly empowers the ITO or the AAC to initiate penalty proceedings where there is failure to furnish returns, comply with notices or concealment of income, etc. The present case is one coming under Section 271(1)(c) which provides for penalty for concealment of the particulars of income or furnishing inaccurate particulars of income. The provisions of the 1961 Act are made applicable for the assessment year 1955-56 for the reason that assessment was completed on January 27, 1965, after this Act came into force. Section 275 prescribes the period of limitation for imposing penalties and this section, to the extent relevant for discussion, reads :
'No order imposing a penalty under this Chapter shall be passed-
(a) in a case where the relevant assessment or other order is thesubject-matter of an appeal to the Appellate Assistant Commissioner under Section 246 or an appeal to the Appellate Tribunal under Sub-section (2)of Section 253, after the expiration of a period of- (i) two years from the end of the financial year in which the proceedings in the course of which action for imposition of penalty has been initiated, are completed....'
5. The procedure for initiating penalty proceedings is prescribed in Section 274. An enquiry is contemplated under this section. The fact that the ITO or the AAC issues a notice under Section 274 does not by itself render the assessee liable to the imposition of penalty. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Where there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute, penalty may not be levied. But, in this case, penalty was levied rejecting the explanation of the assessee. Though under the 1922 Act, no provision similar to Section 275 of the present Act existed or no period of limitation was prescribed, yet courts have held that penalty proceedings must be initiated and completed within reasonable time. The Allahabad High Court in ITO v. Bisheshwar Lal : 76ITR653(All) held that, where a notice for imposition of penalty was issued under Section 28 of the old Act after a lapse of nearly 12 years, it would amount to an abuse of power. In that view, it quashed the penalty proceedings, on an application made to that court under art. 226 Of the Constitution. It was, however, pointed out by the learned judges in that case that what is reasonable time will depend upon the peculiar facts and circumstances of each case : This court in K.P. Narayanappa Setty & Co. v. CIT : 100ITR17(AP) similarly held that 'though no period for levying the penalty has been fixed in the Indian Income-tax Act, 1922, it has been held by this court that there should not be any inordinate delay and it should be levied within a reasonable time'. The learned judges observed further that 'even under the new Act the period prescribed for levy of penalty is two years after the completion of the assessment'. As there was a delay of nine years in the levy of penalty on the assessee there, the learned judges answered the question referred in the negative and against the revenue.
6. We may also notice the provisions relating to assessment under the 1922 Act and the present Act (1961 Act). Section 34 of the 1922 Act dealt with income escaping assessment. Sub-section (3) of Section 34 prescribed a period of four years for assessment or reassessment other than assessments under Section 23. In the 1961 Act, Section 153(3) provides for exclusion, for the purpose of computing the period of limitation for assessment or reassessment, the time taken in reopening the whole or any part of the proceedings, or the period during which the assessment proceeding is stayed by an order or injunction of any court, or the period commencing from the date on which the ITO directs the assessee to get his accounts audited under Sub-section (2A) of Section 142 and ending with the date on which the assessee furnishes a report of such audit under that sub-section or the period (not exceeding one hundred and eighty days) commencing from the date on which the ITO forwards the draft order under Sub-section (1) of Section 144B to the assessee, etc. It may be seen that no such period as provided in Section 153(3) is provided in computing the period of limitation for the purpose of Section 275, that is to say, there is no Explanation as in Section 153(3) which provides for excluding certain periods for the purpose of computing the period of limitation. It is thus seen that the legislature did not provide any period of limitation for the imposition of penalty under Section 28 and, similarly, the legislature has not provided in Section 34 for excluding any period while computing the period of limitation in regard to cases where the income had escaped assessment. It may also be noticed that while no period of limitation was prescribed under Section 28 of the 1922 Act, a period of limitation of two years is prescribed under the present Act. Now, the question is what could be the legislative intent in fixing the period of limitation under Section 275 and not fixing any period of limitation under Section 28 of the old Act, and, similarly, excluding certain periods for the purpose of computing the period of limitation in Section 153 and not making any provision for excluding certain periods for the purpose of computing limitation in Section 275. To us, it seems plain that it was the intention of the legislature that penalty proceedings which are essentially in the nature of quasi-criminal proceedings should be completed with the least possible delay. The object in enacting Section 271(1)(c) is to provide a deterrent against recurrence of default on the part of the assessee. The section is penal in the sense that its consequences are intended to be an effective deterrent which will put a stop to practices which the legislature considers to be against the public interest. It is now well-settled law that an order imposing penalty is the result of quasi-criminal proceedings. The intention of the legislature is, therefore, obvious and plain in fixing a period of two years in Section 275 for the imposition of penalty. What Mr. Rama Rao contends is that that period of two years applies only to the first authority, viz., the ITO, and it is not applicable to a case where the appellate authority sets aside or quashes the penal proceedings and remits the matter for disposal afresh according to law. In support of his contention, he has relied upon CIT v. Kishoresinh Kalyansinh Solanki : 39ITR522(Bom) . In that case, the learned judges of the Bombay High Court were concerned with the order of the CIT made in revision under Section 33B of the old Act (1922 Act) cancelling the order of registration of the firm and the order of assessment on the ground that there were grave doubts about the genuineness of the firm. On appeal, the Appellate Tribunal set aside the order of the Commissioner on the ground that the assessee had not been given sufficient opportunity of being heard and directed the Commissioner to pass fresh orders after giving the assessee sufficient opportunity of being heard and to find as a fact whether there was or was not a genuine firm in existence. After examining the account books and the statements of the alleged partners and other material, the Commissioner passed an order on 4th July, 1957, holding that no genuine firm had come into existence and by that order he cancelled both the assessment order and the order of registration. The assessee contended that the second order passed by the Commissioner was ineffective as it was made beyond the period of two years from the date of the orders sought to be revised as provided in Section 33B(2)(b). The learned judges held that the words of Section 33B(2)(b), though wide in the abstract, must be read as used with reference to an order made by the Commissioner in revision suo motu, and the period of limitation prescribed by the provision did not apply to an order passed by the Commissioner in pursuance of an order or direction of any higher authority and that the rule of limitation prescribed by Section 33B(2)(b) did not reach the second order passed by the Commissioner in the case. In reaching that conclusion, the learned judges were of the view that the rule of literal construction and linguistic clearness must not be pushed so far as to result in irrational or absurd conclusions.
7. It should be remembered that, while interpreting the provisions of a taxing statute, nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. One has to look merely at what is clearly said. The language of Section 275 is clear and explicit. It is mandatory. Therefore, the question of pushing the language so as to result in irrational conclusions does not arise in this case. If we are to go by what the Bombay High Court had said, it will result in this : The period of limitation, as contended by the learned counsel for the revenue, will apply not only to the first order of the first authority but also to the second order of the first authority after remand. We are, therefore, unable to agree with the learned judges of the Bombay High Court that the bar of limitation under Section 33B(2)(b) applies only to the orders passed by the Commissioner in revision suo motu and not to the orders which he may be required to pass in pursuance of the orders of any higher authority.
8. The Assam High Court in CIT v. Sabitri Devi Agarwalla dissented from the view expressed by the Bombay High Court. The Assam High Court was also dealing with the proceedings initiated under s. 33B of the old Act. On a construction of the language of Section 33B, the learned judges opined that the Appellate Tribunal would be justified in not remanding a case to the Commissioner if two years had expired from the date of the order sought to be revised.
9. The view expressed by us is also in consonance with the view expressed by the Kerala High Court in Addl. CIT v. K.S.G. Panicker : 97ITR525(Ker) . In that case, the learned judges considered the scope of Section 275 and observed that Section 275 speaks in imperative terms and the language used in the section permits no relaxation of the rigidity of the rule of limitation embodied in it.
10. The learned counsel for the revenue, however, invited our attention to a judgment of the Calcutta High Court in Bhagirathi Devi Jalan v. CIT : 112ITR534(Cal) , which purports to follow the decision of the Supreme Court in Director of Inspection of 'Income-tax (Investigation) v. Pooran Mall & Sons : 96ITR390(SC) . In that case, the learned judges did not follow an earlier decision of that court in I.T. Ref. No. 117 of 1967 (National Taj Traders v. CIT) in the view that the decision of the Supreme Court in Pooran Mall & Sons' case : 96ITR390(SC) impliedly overruled I.T. Ref. No. 117 of 1967 (National Taj Traders v. CIT). The learned judges wereof the view that the period of limitation prescribed in Section 33B(2) does not apply to a subsequent order of the Commissioner made after remand. The Supreme Court, in our opinion, has not laid down any such proposition. The learned judges have clearly stated that they were not deciding the question of taxing a person after the period prescribed therefor was over. After referring to the decisions cited before them, they said (page 397):
'Reference was made to various decisions of the various courts which have held that the particular period of limitation under consideration by the court should be strictly construed. There is no doubt that there is no equity about limitation. Most of the decisions relied on relate to provisions which laid down a period of limitation for taking one kind of action or other in order to assess to tax the person concerned. Naturally, after the period of limitation has expired, no proceedings can be taken to assess nor could any period of limitation laid down by the Act be extended merely by a superior tribunal directing an inferior tribunal to make an assessment or to take proceedings which result in assessment after the period of limitation is over. They are not in pari materia with the present proceedings. In deciding to whom any property seized under Section 132(1) belongs, the Income-tax Officer cannot be said to be exercising any powers of taxation. He is not deciding the question of taxing a person after the period prescribed therefor is over. He is really deciding to whom the property seized belongs and to such a case the provisions of ordinary law which deals with tribunals and courts which decide the questions of title to properties should be deemed to apply. This is not a case where equity is relied upon to tax a person who is not otherwise liable to be taxed. It is a general principle applicable to all judicial proceedings.' The learned judges have thus made it clear that, while construing the scope of Section 132(1), they are not guided by rules of construction regarding limitation where an ITO exercises his powers of taxation. The case on hand is one where an ITO had exercised his powers under the statute by levying penalty. The fact that that order was set aside ultimately by an appellate authority and the matter remitted to him for disposal afresh does not clothe him with powers to extend the period of limitation. Whether the proceedings relate to assessment or penalty, the period of limitation prescribed cannot be exceeded or extended. As pointed out by the Supreme Court, after the period of limitation has expired, no proceedings can be taken to assess nor can that period of limitation laid down by the statute be extended by a superior tribunal to make a fresh assessment. As we understand, the decision of the Supreme Court, far from rendering any assistance to the case of the revenue, goes against the stand taken by it. The Calcutta High Court had followed the view expressed by the Supreme Court in regard to the powers conferred upon the income-tax authorities to search and seize money, books of account, documents, jewellery, etc., which had not been disclosed for the purpose of the Act. In Pooran Mall & Sons' case : 96ITR390(SC) , the ITO passed a summary order under Section 132(5) on the basis that all the assets seized and 114 silver bars belonged to Pooran Mall. Thereupon, Pooran Mall & Sons, one of the firms in which Pooran Mall was a partner, and Pooran Mall filed a writ petition in the High Court challenging the order made on the basis of the consent of the parties. The High Court quashed the order and permitted the department to make a fresh enquiry after giving an opportunity to the petitioner and pass a fresh order within two months. After a fresh enquiry the Income-'tax Officer passed an order holding that the silver bars belonged to Pooran Mall, the individual, and not to the firm, Pooran Mall & Sons. Thereupon, the firm and Pooran Mall again filed a writ petition challenging the second order and the High Court held that the ITO had no jurisdiction to pass that order beyond the period prescribed in Section 132(5) and set aside the order and directed return of the 114 silver bars. The Supreme Court, on appeal, held that the period of limitation prescribed by Section 132(5) was intended for the benefit of aggrieved persons like the respondents and, therefore, it was competent for them to agree to a fresh disposal of the case by the ITO and thereby waive the period of limitation, The learned judges, therefore, held that an order made in pursuance of a direction given under Section 132(5),_or by a court in writ proceedings was not subject to the limitation prescribed under Section 132(5) and that Rule 112A of the Income-tax Rules, 1962, was not mandatory. It is thus seen that the ratio of that decision is not applicable to cases where the provisions are mandatory and a definite time limit is fixed for completion of the penalty proceedings. It is not enough if the first order passed by the first authority is in time. Even the order to be passed on remand by a superior authority must also be within the time prescribed by Section 275. As clearly stated by the learned judges of the Supreme Court, the period of limitation laid down by the Act cannot be extended merely for the reason that a superior tribunal had set aside the first order made by the ITO and directed him to make an order afresh.
11. In CIT v. Ram Baran Ram Nath : 104ITR691(All) the Allahabad High Court, construing the scope of Section 275, has also held that the IAC was debarred by the time-limit provided under Section 275 from passing the order of penalty.
12. For the reasons recorded, we agree with the view expressed by the Tribunal and answer the question in the affirmative and against the revenue with costs. Advocate's fee 250.