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Commissioner of Income-tax Vs. Ram Murti - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 127 of 1967
Judge
Reported in[1973]87ITR577(All)
ActsIncome Tax Act, 1961 - Sections 254 and 271(1)
AppellantCommissioner of Income-tax
RespondentRam Murti
Appellant AdvocateB.L. Gupta and ;R.R. Misra, Advs.
Respondent AdvocateJ.C. Bhardwaj, Adv.
Excerpt:
.....271. failure to furnish returns, comply with notices, concealment ofincome, etc. --(1) if the income-tax officer or the appellate assistantcommissioner in the course of any proceedings under this act, is satisfiedthat any person- (a) has without reasonable cause failed to furnish the return of his total income which he was required to furnish under sub-section (1) of section 139 or by notice given under sub-section (2) of section 139 or section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner requited by sub-section (1) of section 139 or by such notice, as the case may be, or. the rate at which the penalty must be computed is clearly laid down. if parliament had at all intended to vest a power in the tribunal to reduce or waive the..........reduced the penalty to rs. 1,800. the assessee proceeded in further appeal to the income-tax appellate tribunal. the appellate tribunal also held that the assessee had committed a default under section 271(1)(a) and that a penalty should be imposed under that provision. however, it reduced the penalty further to a nominal sum of rs. 200 only. it was urged on behalf of the revenue before the tribunal that the rate of 2% for every month of default mentioned in section 271(1)(i) of the act of 1961 as the rate for imposing a penalty in respect of a default under section 271(1)(a) could not be varied and the tribunal was bound to apply that rate and it could not reduce the penalty to a figure below that computed on the basis of that rate. the contention was rejected by the appellate.....
Judgment:

Pathak, J.

1. The assessee, Ram Murti, voluntarily submitted his returns for the assessment years 1957-58 to 1962-63, all on the same date March 23, 1962. The Income-tax Officer took proceedings for imposing a penalty for default of the notice under Section 22(1) of the Indian Income-tax Act, 1922, in respect of the different assessment years. On August 31, 1963, he made an order under Section 271(1)(a) of the Income-tax Act, 1961, imposing a penalty of Rs. 2,209 on the ground that the assessee had not filed the returns of income in time. On appeal for the assessment year 1960-61, the Appellate Assistant Commissioner of Income-tax, although finding that the assessee was guilty of default in complying with the notice under Section 22(1) of the Act of 1922, and that, therefore, Section 271(1)(a) of the Act of 196'1 was attracted, reduced the penalty to Rs. 1,800. The assessee proceeded in further appeal to the Income-tax Appellate Tribunal. The Appellate Tribunal also held that the assessee had committed a default under Section 271(1)(a) and that a penalty should be imposed under that provision. However, it reduced the penalty further to a nominal sum of Rs. 200 only. It was urged on behalf of the revenue before the Tribunal that the rate of 2% for every month of default mentioned in Section 271(1)(i) of the Act of 1961 as the rate for imposing a penalty in respect of a default under Section 271(1)(a) could not be varied and the Tribunal was bound to apply that rate and it could not reduce the penalty to a figure below that computed on the basis of that rate. The contention was rejected by the Appellate Tribunal. At the instance of the Commissioner of Income-tax, the Tribunal has referred the following question for the opinion of this court:

'Whether, on the facts and in the circumstances of the case, the Tribunal erred in reducing the penalty from Rs. 1,800 to Rs. 200? '

2. The contention on behalf of the revenue is that the Tribunal, once it found that the case attracted the penalty contemplated by Section 271(1)(i), was bound to impose a penalty at the rate of 2%. It had no jurisdiction to impose a penalty which fell below the amount computed on the basis of that rate. On the other hand, it is urged for the assessee that the provision fixing the rate in Section 271(1)(i) is binding upon the Income-tax Officer only and does not bind the Income-tax Appellate Tribunal which has power under Section 254(1) of the Act of 1961 to pass such order as it thinks fit. It is also urged, in the alternative, that there is a discretion in the Income-tax Officer when he exercises the power under Section 274(1)(i) to impose or not to impose a penalty for default in filing the return within time, and if that discretion is available to him it cannot be said that he cannot reduce the amount of penalty below the level mentioned in Section 271(1)(i). In our opinion, neither of the contentions urged on behalf of the assessee is well-founded. It seems to us that the Tribunal, while disposing of an appeal in a case arising out of a penalty proceeding under Section 271(1) has the same limits set to its jurisdiction as govern the jurisdiction of the Income-tax Officer. There can be no dispute that the jurisdiction exercised by the Tribunal is an appellate jurisdiction. The general principle is that an appellate court or Tribunal has only that jurisdiction which was possessed by the court or Tribunal from whose order the appeal has arisen. No doubt, this general principle is subject to legislative provision which may modify it. But, in the absence of such legislative provision, the appellate authority can do only that which the original authority could do. We think the proposition is well-settled and that it is not necessary to cite any authority in support of it. In the light of that general principle, therefore, it becomes necessary to ascertain the jurisdiction of the Tribunal, The powers of the Tribunal are set out in Section 254(1), which provides :

'The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.'

3. Great emphasis has been laid on behalf of the assessee on the expression 'as it thinks fit'. It is said that it suggests the wide amplitude of power vested in the Tribunal by the statute in respect of an appeal preferred before it. But, we think, when words of such wide amplitude are used by the statute there is need to determine the general limits within which the jurisdiction conferred thereby can be exercised. It must not be forgotten that the Tribunal is a judicial body exercising judicial powers under the statute. It is not empowered to employ its jurisdiction, arbitrarily. Whatever it does must be done in consonance with sound judicial principle and in accordance with well-accepted doctrines applicable to judicial bodies. One of those principles is the general principle to which we have already alluded. Therefore, in our opinion, the jurisdiction of the Tribunal 'to pass such orders thereon as it thinks fit' in respect of an appeal before it must be orders within limits which we can discover by reference to the jurisdiction of the authority whose order has given rise to the appeal. Ordinarily that would be the Appellate Assistant Commissioner of Income-tax, but it is not disputed that for the purposes of the present case, if this general principle applies, we must go down to the order of the Income-tax Officer. The power to impose a penalty for failing to furnish a return of income within the statutory period is set out in Section 271. The section provides:

'271. Failure to furnish returns, comply with notices, concealment ofincome, etc.--(1) If the Income-tax Officer or the Appellate AssistantCommissioner in the course of any proceedings under this Act, is satisfiedthat any person-

(a) has without reasonable cause failed to furnish the return of his total income which he was required to furnish under Sub-section (1) of Section 139 or by notice given under Sub-section (2) of Section 139 or Section 148 or has without reasonable cause failed to furnish it within the time allowed and in the manner requited by Sub-section (1) of Section 139 or by such notice, as the case may be, or......

he may direct that such person shall pay by way of penalty,--

in the cases referred to in Clause (a), in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent. of the tax for every month during which the default continued, but not exceeding in the aggregate fifty per cent. of the tax:......'

4. Where the Income-tax Officer considers it to be a case attracting penalty, he must follow the terms of that provision as to the quantum of the penalty. The provision requires that the quantum should be 2% of the tax for every month during which the default continued but not exceeding in the aggregate 50% of the tax. The rate at which the penalty must be computed is clearly laid down. To our mind, it is not variable. If that is so for the Income-tax Officer, then equally it is so for the Tribunal. If Parliament had at all intended to vest a power in the Tribunal to reduce or waive the penalty it would have clearly and expressly done so. It has done so in the case of the Commissioner of Income-tax by enacting Section 271(4A).

5. We may with advantage refer to the observations of the Calcutta High Court in Commissioner of Income-tax v. A.K. Das, [1970] 77 I.T.R. 31, 59 (Cal ), in a case of penalty under Section 271(1)(iii) of the Act. The learned judges observed :

'The expression 'such orders as it thinks fit' (under Section 251) cannot mean an order against the statutory mandate imposing limits of penalty under Section 271(1)(iii) of the Act of 1961. The words as it thinks fit' in Section 254(1) of the Income-tax Act, 1961 even then will have to observe the prohibitions of the Income-tax Act, and do not mean that the Tribunal can think 'fit' to disregard the clear mandates of the statute. The Tribunal as much as any other authority has to carry out the dictates of the statute. If the statute says, and as we interpret that it does so, that the limitation is on the penalty and not on the officer or the institution, then whoever administers the penalty, whether it is the Inspecting Assistant Commissioner or the Tribunal, must have to observe the maximum and minimum limits of penalty imposed under Clause (iii) of Section 271(1) of the Income-tax Act, 1961.'

6. Then we are referred to the distinction drawn by the Tribunal between the language contained in Sub-clause (i) and Sub-clauses (ii) and (iii) of Sub-section (1) of Section 271. The Tribunal has said that if it was the intention of Parliament to impose a minimum limit of 2% by Sub- Clause (i), it would have used the language 'it shall not be less than' employed in Sub-clauses (ii) and (iii). From this the Tribunal deduces that the rate of 2% mentioned in Sub-clause (i) can be reduced. We think that the Tribunal has failed to correctly appreciate the provisions contained in the three sub-clauses. By Sub-clause (i) a uniform rate of 2% has been specified in determining the quantum of penalty. There is no minimum rate nor maximum rate mentioned by that provision. The only limit is that the total quantum of penalty computed at the rate of 2% must not exceed in the aggregate 50% of the tax. On the contrary, in Sub-clauses (ii) and (iii) the statute has specified a minimum limit and a maximum limit. Consequently, it refers to 'a sum which shall not be less than .... but which shall not exceed . . . .' as the basis for determining the quantum of penalty. The Tribunal has observed that the rate of 2% mentioned in Sub-clause (i) is not a uniform rate but is the maximum rate up to which the Income-tax Officer can impose a penalty in a case falling under Section. 271(1)(a) Upon the considerations which have found favour with us this conclusion cannot be accepted at all. It might have been possible to agree with the Tribunal if Sub-clause (i) had read 'in the cases referred to in Clause (a), in addition to the amount of tax, if any, payable by him, a sum upto 2% of the tax for every month .. . .' Clause (i) instead speaks of 'a sum equal to two per cent.' The language is clear and admits of no doubt.

7. We are of opinion that when disposing of an appeal against a penalty order made under Section 271(1)(i) the Tribunal must, while determining the quantum of penalty, apply the rate of 2%, so, however, that the quantum does not exceed 50% of the tax.

8. The second contention on behalf of the assessee is that inasmuch as Section 271(1) provides that 'Income-tax Officer .... may direct that such person shall pay by way of penalty (i) .... a sum equal to 2% of the tax . ...' a discretion had been conferred on the Income-tax Officer to impose or not to impose a penalty. If it is discretionary in the case of the Income-tax Officer, it is equally so, it is said, in the case of the Tribunal. It is not necessary, we think, to enter into that question. In the present case, the Tribunal has expressly given a finding that the assessee committed a default under Section 271(1)(a) and that a penalty should be imposed. Upon that finding, the only question which remains is whether the penalty was to be imposed at the rate of 2% in accordance with the terms of Sub-clause (i). As we have already pointed out, the Tribunal was bound, as much as the Income-tax Officer was, to impose a penalty at the rate of 2% specified by that sub-clause.

9. Upon the aforesaid considerations, we are of opinion that the Tribunal erred in reducing the penalty to Rs. 200.

10. The question referred is answered in the affirmative. The Commissioner of Income-tax is entitled to his costs; which we assess at Rs. 200.

11. Counsel's fee is assessed in the same figure.


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