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Modern Wood Works Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 418 of 1968
Judge
Reported in[1974]93ITR164(All)
ActsIncome Tax Act, 1961 - Sections 271, 271(1) and 275
AppellantModern Wood Works
RespondentCommissioner of Income-tax
Appellant AdvocateP.N. Pachauri, Adv.
Respondent AdvocateR.R. Misra, Adv.
Excerpt:
- - if the income-tax officer or the appellate assistant commissioner in the course of any proceedings under the act is satisfied. it would thus appear that the conditions requisite for the application of section 271(1) of the income-tax act, 1961, were satisfied. the opening part of section 271(1) of the act corresponds to section 28(1) of the indian income-tax act, 1922. the relevant part of section 28(1) of the indian income-tax act, 1922, may be quoted :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. section 28 of the income-tax act, in terms, enables the appellate assistant commissioner to take action under that section if in the course of any proceedings under..........on the facts and in the circumstances of the case, the tribunal was justified in holding that the penalty proceedings by the appellate assistant commissioner were valid under the income-tax act, 1961?' 2. the dispute relates to the assessment year 1963-64. the assessee carries on retail timber business. the income-tax officer made an addition in the trading account to the tune of rs. 5,432, on the ground that there was no stock register and quantitative tallies and that the result shown by the assessee was lower as compared to the rates applied by the department in earlier years. the income-tax officer found a deposit of rs. 12,162, being a credit to the assessee's account. this amount was also added and the explanation given by the assessee that the same represented the moneys received.....
Judgment:

C.S.P. Singh, J.

1. The Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, has referred the following question for our opinion :

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the penalty proceedings by the Appellate Assistant Commissioner were valid under the Income-tax Act, 1961?'

2. The dispute relates to the assessment year 1963-64. The assessee carries on retail timber business. The Income-tax Officer made an addition in the trading account to the tune of Rs. 5,432, on the ground that there was no stock register and quantitative tallies and that the result shown by the assessee was lower as compared to the rates applied by the department in earlier years. The Income-tax Officer found a deposit of Rs. 12,162, being a credit to the assessee's account. This amount was also added and the explanation given by the assessee that the same represented the moneys received from the sale proceeds of ornaments was not accepted. The assessee, thereafter, filed an appeal before the Appellate Assistant Commissioner and he upheld both the additions. The Income-tax Officer although he had made additions to the returned income, did not initiate any penalty proceedings under Section 271(1)(c) of the Income-tax Act, 1961. The Appellate Assistant Commissioner, while disposing of, the quantum appeal, directed that notice should be issued to the assessee to show cause as to why penalty proceedings under Section 271(1)(c) of the Income-tax Act, 1961, should not be imposed. The Appellate AssistantCommissioner, after hearing the assessee under Section 274(2) of the Act, held that there was no doubt that the assessee had concealed the correct particulars of his income and, therefore, imposed a penalty of Rs. 4,500. The assessee appealed to the Tribunal and the Tribunal held that the explanation given by the assessee in respect of the Concealed income was false, but reduced the quantum from Rs. 4,500 to Rs, 2,000. After the appeal was disposed of, an application was filed for a rehearing of the case, and the Tribunal reopened the case.

3. It was contended that, in view of Section 275 of the Income-tax Act, 1961, it was necessary that a requisite notice under Section 271(1)(c) of the Act should either be issued or served on the assessee before the end of the proceedings and, consequently, the Appellate Assistant Commissioner could not himself impose any penalty on account of concealment not detected by him. The fact as to whether a notice had been issued under Section 271(1)(c) of the Income-tax Act before the completion of proceedings was not clear to the court and the Tribunal disposed of the contention raised by the assessee oil the basis that no such notice had been issued simultaneously with the passing of the above order or some time thereafter. In respect of the contention that the Appellate Assistant Commissioner had no jurisdiction to impose a penalty in respect of concealment detected by the Income-tax Officer, the Tribunal held that the Appellate Assistant Commissioner was fully competent to initiate the penalty proceedings and in support of this contention, reliance has been placed upon a decision of the Supreme Court in Kamlapat Motilal v.Commissioner of Income-tax, [1962] 45 I.T.R. 266 (S.C.).

4. In respect of the second contention, it took the view that Section 271(1)(c) of the Act did not require that the show cause notice should be issued or served before the end of the proceedings in case penalty proceedings were initiated. It did not accept the argument raised on behalf of the assessee that Section 275 of the Act makes it incumbent upon the authority initiating the penalty proceedings to do so before the close of the proceedings.

5. The question as framed requires an investigation of two questions. The first is as to whether the Appellate Assistant Commissioner had any jurisdiction at all under Section 271(1) of the Income-tax Act, 1961, to start penalty proceedings; and, secondly, whether the penalty proceedings could be initiated by sending a notice after the completion of the proceedings. We shall begin by consideration of the first question.

6. Section 271(1) of the Act empowers either the Income-tax Officer or the Appellate Assistant Commissioner to impose penalty in a case where a person has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income. The words of Section 271(1) of the Act are:

'If the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under the Act is satisfied.....'

7. Thus, all that Section 271(1) of the Income-tax Act, 1961, requires is that there must be some proceeding under the Act in the course of which either the Income-tax Officer or the Appellate Assistant Commissioner of Income-tax reaches the satisfaction about concealment of particulars of income. In the present case, the appellate proceedings were undoubtedly the proceedings under the Act and the Appellate Assistant Commissioner reached the necessary satisfaction in the course of those proceedings. It would thus appear that the conditions requisite for the application of Section 271(1) of the Income-tax Act, 1961, were satisfied. The opening part of Section 271(1) of the Act corresponds to Section 28(1) of the Indian Income-tax Act, 1922. The relevant part of Section 28(1) of the Indian Income-tax Act, 1922, may be quoted :

'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.....'

8. These two sections are in pari materia. In Kamlapat Motilal v. Commissioner of Income-tax, [1962] 45 I.T.R. 266, 269 (S.C.).the facts were similar. The Income-tax Officer had made certain additions while making the assessment. The assessee filed an appeal. The Appellate Assistant Commissioner did not accept the contention of the assessee in the quantum appeal and rejected the appeal. He, thereafter, issued a notice under Section 28(3) of the Indian Income-tax Act, 1922, asking it to show cause why penalty proceedings under Section 28(1)(c) of the aforesaid Act should not be imposed. Considering the question as to whether the Appellate Assistant Commissioner could impose a penalty in a case where the Income-tax Officer had not taken action, their Lordships of the Supreme Court, at page 269, observed as under:

'Section 28 of the Income-tax Act, in terms, enables the Appellate Assistant Commissioner to take action under that section if in the course of any proceedings under the Act he is satisfied that any person has, inter alia, concealed the particulars of his income or deliberately furnished inaccurate particulars of such income. The High Court rightly pointed out that tlu Appellate Assistant Commissioner was within his right in taking action under Section 28 of the Income-tax Act against the assessee when in the course of the appeal proceedings before him he was satisfied that the assessee had deliberately furnished inaccurate particulars of its income in the sense that it debited a sum of Rs. 76,836 on account of excise duty, an expenditure which related to another year and could not be debited against the profits of the year under consideration. We are satisfied that the Appellate Assistant Commissioner was legally justified inissuing a notice under Section 28 of the Income-tax Act against the assessee.'

9. The principle of this decision covers this aspect of the controversy.

10. So far as the first question is concerned, the answer follows from our decision in Commissioner of Income-tax v. Bankey Lal Hira Lal (I. T. R. No. 592 of 1968, decided on December 23, 1971), wherein we have taken the view that it is not necessary that a notice under Section 271 should be issued in the course of the assessment proceedings and that Section 275 of the Act is a section which is concerned only with prescribing the period of limitation for imposing a penalty.

11. We are of the view that the decision of the Tribunal is correct. Our answer to the question referred is that the Tribunal was justified in holding that the penalty proceedings by the Appellate Assistant Commissioner were valid under the Income-tax Act, 1961. The Commissioner is entitled to his costs, which we assess at Rs. 200. Counsel's fee is assessed at the same figure.


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