B. J. Divan, C.J. - This writ petition has been filed by the Income tax Officer, b. Ward, Masulipatnam, against the order of the Income-tax Appellate Tribunal passed on June 30, 1975. The writ petition arises under the following circumstances :
2. The first respondent in these proceedings is the assessee on the file of the Income-tax Officer, B.Ward, Masulipatnam. For the assessment year 1965-66, the assessee should have filed the return of income on or before June 30, 1965. However, he filed the retrun Income on July 20, 1966. The Income-tax Officer issued a show cause notice proposing to levy penalty under S. 271(1)(a) of the Income-tax Act, 1961, for late filing of the return. The assessees explanation was that the delay in filing the return was because of the dissensions among the partners. This explanation of the assessee was not accepted by the Income-tax Officer who levied the penalty of Rs. 6,417/- under S. 271(1)(a) of the Act. On appeal, the Appellate Assistant Commissioner confirmed the levy of penalty. On further appeal, at the instance of the assessee, the Income-tax Appellate Tribunal, on October 19,1971, cancelled the order of penalty holding that the levy of penalty was not sustainable as the return was filed under S. 139(4) of the Act before the finalisation of the assessment and in view of the decision of the Supreme Court C.I.T. vs. Kulu Valley Transport Co. The Tribunal held that the return having been filed before the order of assessment was passed there was no delay. The Tribunal did not consider other contentions raised on behalf of the assessee and did not go into the merits regarding reasonable cause for the delay. In connection with this order dated October 19, 1971, the Appellate Tribunal was moved by Additional Commissioner of Income-tax by way of an application under S. 356(1) of the Act, to refer the following question of law viz.,
'Whether, in the facts and in the circumstances of the case, penalty under S. 271(1)(a) of the Act can be levied when the return was filed within the time allowed under S. 139(4) though it was beyond the time limit allowed under S. 139(1) ?'
3. By its order dated February, 18, 1972 the Appellate Tribunal rejected the reference application on the ground that the Additional Commissioner of Income-tax was not competent to file the reference application. Thereupon, Writ Petition 5229 of 1972 was filed in this Court for the issue of a writ of Certiorari quashing the said order of the Tribunal. By its order dated August 18, 1973 this Court allowed the writ petition and set aside the order of the Tribunal dated February 18, 1972. In doing so, this court followed its earlier decision in writ petition 735 of 1972, decided on August 29, 1972 reported in Additional commissioner I.T. vs. I.T. Tribunal.
4. After the order of the High Court according to the petitioner in this writ petition, the Appellate Tribunal should have disposed of the reference application as filed by the department. However, it is the contention of the petitioner in this writ petition that the Appellate Tribunal without passing order on the reference application suo motu passed the order dated April 19, 1975 in the original appeal designating it is a continuation of the order passed in the appeal on October 19, 1971. The reference application was fixed for hearing on August 23, 1974 and on that day the Tribunal observed that they like to depose of the appeal on merits regarding reasonable cause, and the case was adjourned. The Tribunal fixed the case on April 4, 1975 for hearing on merits but no arguments were advanced by the assessee as the Tribunal observed that the arguments originally advanced at the time of the appeal have been recorded by the Bench. The Departmental representative raised an objection that the Tribunal was incompetent to go into this question and this objection was overruled. The Tribunal did not hear on merits either side as Tribunal observed that they had already heard the arguments on merits at the time of original hearing of the appeal. Thereafter, the Tribunal rejected the reference on June 30, 1975 stating that the question of law sought to be referred is academic in view of the order dated April 19, 1975 disposing of the appeal on merits. Thereafter, this writ petition has been filed for the issue of a writ of Certiorari or any other appropriate writ or order or direction, calling for the records of the Income-tax Officer on the file of the Income-tax Appellate Tribunal, Bench A, and quashing the order dated April 19, 1975 in I.T.A. 365 of 1968-69 passed by the Tribunal.
5. It is clear from the order dated April 19, 1975 that in the view they had taken regarding the effect of the decision in Kalu Vally Transport Companys case, the Tribunal was of the view that the penalty should be cancelled. At the time of passing that order of April, 19, 1975, the Tribunal observed :
'Applying the decision of the Supreme Court in the aforesaid case, we have held that the penalty levied in this case is not warranted. We make it clear that we have not gone into merits of the case, the ratio of the aforesaid Supreme Court. However, the order of the Tribunal makes it clear that the Tribunal had heard the department representative and representative of the assessee on merits. Paragraph 4 of the order of October 19, 1971 shows that it was contended by the learned by the learned representative of the assessee that the delay in filing the return was due to dissensions among the partners and, therefore, there was reasonable cause for not filing the return within the time prescribed, and the argument based on the decision of the Supreme Court on Kulu valley Transport companys, case was advanced in the alternative since that alternative argument appealed to the Tribunal, the merits of the case were not gone into at the time when the order dated October, 19, 1971 was passed. There after, it appears that when the matter was taken up after the order was passed by this Court in the earlier writ petition, the Tribunal tried to disposal of the appeal even on merits so that the entire appeal could be disposed of instead of the matter being decided solely on the strength of the decision of the Supreme Court in Kulu valley transport Companys, case. The Tribunal made in clear in the order dated April 19, 1975 that since the revenue was requiring it to draw up a statement of the case and prefer a question of law that is said to arise out of the earlier order, the Tribunal considered it necessary for the sake of completeness, to give a finding on the assessees contention on the merits also. At that stage, the departmental representative raised a preliminary objection that it was not competent to the Tribunal to go into the question of merits as it will amount to reviewing their order. The Tribunal by its order dated April 19, 1975 over-ruled that objection. There was their own earlier order, according to the Tribunal, but since the question as left open regarding the merits and the merits of the case had not been considered by the earlier order dated October 19, 1971, the Tribunal was now disposing of the appeal on merits also, and the question that has been urged before us is whether it was open to the Tribunal to go into this question.
6. It is true that before the passing of the order dated April 19, 1975, the Tribunal did not hear either the learned advocate for the assessee or the representative of the department. But, as the earlier order of October 19, 1971 made it clear the arguments on merits wear heard and that at the earlier stage only decision regarding the merits was not given by the order dated October 19, 1971. When they came to dispose it of on merits on April 19, 1975 the Tribunal came to the conclusion that there was sufficient cause in view of the disputes leading to the difficulty in filing the return in time. Thereafter, following the decision in Hindustan Steel Ltd. vs. State of Orissa the Tribunal held that the assessee was not guilty of conduct contumacious or dishonest when he was acting in deliberate disregard of the provisions of law and, therefore, the explanation offered by the assessee should be accepted, and even on merits there was sufficient cause for late filing of the return.
7. There is no question of violation of principles of natural justice in this case or of any procedure because both the sides had been heard on the merits of the case before the order of April 19, 1975 was passed. It would have been better when it passed the order of April 19, 1975, i.e., what is called the continuation of the earlier order that was passed on October 19, 1971. All that the Tribunal had done was to set up that reason in support of its order which it would have done even in the earlier order dated October 19, 1971, if it had proceeded on the merits of the case also.
8. Mr. Rama Rao, the learned Advocate for the petitioner in writ petition, has drawn our attention to S. 24 of the Income-tax Act. Under S. 254, save as provided under s. 256, an order passed by the Tribunal on appeal shall be final. But the question, in the instant case, is whether the order passed by the Tribunal on 19-10-1971 could be said to the final order passed by the Tribunal. So long as the Tribunal was not called upon to state a case, the Tribunal rested its decision purely on the alternative argument based on the Supreme Courts But when it came to consider the reference application filed under S. 256(1) the Tribunal proceeded to dispose of the appeal on merits also and as the Tribunal pointed out, since the parties were already heard on previous occasion there was no necessity to hear the parties once again on merits. The finality which is referred to under S. 254(4) could not cover a case like the present one when the Tribunal having heard the parties on both aspects viz. on the legal aspect based on the decision in Kulu valley Transport Co., case and on the merits of the case regarding reasonable cause for late filing the return, chose to base its decision of October 19, 1971, only on the decision of the Supreme Court in Kulu valley Transport Cos case. Therefore, there was nothing wrong in the Tribunal disposing of the merits of case, when it became clear that the department wanted that the matter to be referred to the High Court, the reference application under S. 256(1) of the Income-tax Act was pressed before it.
9. Under these circumstances so far as the writ petition is concerned, it is obvious that the Tribunal has not acted without jurisdiction or in violation of principles of natural justice when it passed the order on merits on April 19, 1975 in the I.T.A.
10. The writ petition, therefore, fails and is dismissed. No order as to costs. Advocates fee Rs. 150/-