Satish Chandra, J.
1. During the course of the assessment proceedings for the year 1952-53, as well as for the year 1953-54, the Income-tax Officer found certain entries in the cash book which disclosed purchases of crystal sugar from L. H. Sugar factory in the accounts of the assessee's munims and which were not included in the return. He included such items as income of the assessee from undisclosed source. The assessment order for the year 1952-53 was passed on 30th November, 1954, while the assessment order for the year 1953-54 was passed on 23rd March, 1955. Aggrieved, the assessee went up in appeal. Meanwhile, the Income-tax Officer drew up penalty proceedings under Section 28(1)(c) of the Indian Income-tax Act, 1922. The case appears to have been fixed for 9th February, 1956, on which date the assessee addressed a letter to the Income-tax Officer requesting postponement of the hearing till the disposal of the appeals pending before the Appellate Assistant Commissioner, The Appellate Assistant Commissioner decided the appeal relating to the assessment year 1952-53, on 4th September, 1956, and the appeal in respect of the assessment year 1953-54, on 2nd September, 1957. In the appeals the amounts of tax were partly reduced.
2. After the lapse of over a decade the Income-tax Officer fixed a date for hearing of penalty proceedings somewhere in 1968. After hearing the assessee he passed an order imposing a penalty of Rs. 10,000 on 10th May, 1968. For the assessment year 1953-54 a penalty of Rs. 40,000 was levied by an order dated 26th March, 1968. Aggrieved, the assessee went up in appeal. The Appellate Assistant Commissioner reduced the penalty to Rs. 3,500 and Rs. 16,000, respectively, for the two assessment years.
3. The assessee took the matter to the Tribunal. The Tribunal after giving the facts and after considering the decision of this court in Mohd. Atiq v. Income-tax Officer : 46ITR452(All) and another decision in Ram Kishan Baldeo Prasad v. Commissioner of Income-tax : 65ITR491(All) quoted the following passage from the later decision:
'When there is no prescribed period of limitation, as already observed, delay can only be a factor, albeit a very relevant factor, to be taken into consideration in determining the propriety of the order.'
4. The Tribunal then held :
'In view of the principle laid down by the Allahabad High Court which we are bound to follow, we cannot sustain the levy of penalty in both the years under appeal as a result of which the assessee's appeals succeed and appeals of the revenue fail.'
5. At the instance of the Commissioner of Income-tax, the Tribunal has referred the following question of law for the opinion of this court :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in cancelling the levy of penalty under the provisions of Section 28(1)(c) of the Indian Income-tax Act, 1922, relating to assessment years 1952-53 and 1953-54, respectively ?'
6. We may here notice that the Income-tax Officer in his order imposing penalty had explained the delay. In one order he has said that the file was under transfer from one Income-tax Officer to the other and the pendency of penalty proceedings casually escaped notice. The assessee contributed to the delay by the non-submission of the reply to the two opportunities given to him. In the other order dated 26th March, 1968, passed for the assessment year 1953-54, he was a little more elaborate. He observed :
'It is necessary to mention here that because of change of jurisdiction of Pilibhit district from Income-tax Officer, Shahjahanpur, to the Income-tax Officer, Bareilly, the records were transferred to the Income-tax Officer, Bareilly. Subsequently, the case was transferred to the Income-tax Officer, Special Investigation Circle, Meerut, by the Income-tax Officer, C-Ward, Bareilly, on July 30, 1960. By a clerical error in the completion of the transfer memo, the pendency of the penalty proceedings for the year 1953-54 was not reported to the Income-tax Officer, Central Circle. After having stayed with the Income-tax Officer, Central Circle, the assessment records were returned to this office under the transfer memo from the Income-tax Officer, Central Circle, Meerut, on November 27, 1967. Unfortunately, this transfer memo also failed to indicate the pendency. While going through the assessment records received, it was discovered that the penalty proceedings for concealment were initiated for the assessment year 1953-54, and the assessee was given two opportunities which the assessee did not avail of. He did not file any written reply. As a last opportunity to the assessee another reminder was served upon him on March 8, 1968, in response to which the assessee attended on March 19, 1968. The assessee wanted some more time for the preparation of his reply as the matter was very old. At the assessee's instance, the time was extended to March 25, 1968.'
7. In appeal these findings were more or less confirmed. The Commissioner held that the records clearly showed that on various dates due to reasons beyond the control of the Income-tax Officer, the delay happened and also due to the appellant's non-submission of the replies to the Income-tax Officer's notices. It was further seen from the record that the appellant was indulging in dilatory tactics with a view to delay the functioning of the recovery proceedings in the due course of law. The Income-tax Officer appears to have had no option but to complete the penalty proceedings and in his opinion there was no unreasonable delay on the part of the department in taking the penalty action and passing the penalty order.
8. In view of these factual findings we would have expected the Tribunal to apply its mind and to record a finding as to who was responsible for the delay. The Tribunal, however, overlooked this factual aspect completely. It has not recorded any finding on this aspect. In the case of Ram Kishan Baldeo Prasad v. Commissioner of Income-tax : 65ITR491(All) a Division Bench of this court held :
'Therefore, though as a matter of strict law, when there is no period of limitation prescribed, it may not be possible to say that the order passed was one which was invalid ; nevertheless, the question of inordinate delay is certainly one which does affect the propriety of the penalty order and it is for the final court of fact to determine, in the circumstances of each case, what effect the inordinate delay will have upon the order passed by theIncome-tax Officer. This aspect, the Tribunal, with all respect, appears tohave completely lost sight of.'
9. With respect we are constrained to remark that even though the Tribunalconsidered this decision, yet it lost sight of the position emphasised by theDivision Bench. The Bench further observed (at page 495):
'Therefore, where the assessee is not to blame for the inordinate delayin completing penalty proceedings and the sword of Damocles has been kepthanging over his head for many a year without any rhyme or reason, itwill certainly be a factor, amongst others, for the Tribunal to considerwhether the order passed by the Income-tax Officer was a proper one.'
10. The question referred to the High Court in that case, namely, 'whetherfor the assessment year 1945-46, the assessment of which was made inMarch, 1950, could a penalty be imposed in August, 1957' was answeredby the Division Bench by saying that a penalty in respect of the assessmentyear 1945-46 as a matter of strict law could have been imposed inAugust, 1957, even though the assessment was completed in March, 1950,but the propriety required the changed circumstances to be taken into consideration and the responsibility for the inordinate delay to be fastenedbefore levying the penalty and upholding it. In the present case, theTribunal which was the final court of fact did not apply its mind to therival contentions of the parties and did not fix the responsibility for thedelay. There is no finding as to whether the delay was innocuous or itaffects the levy of penalty because of any changed circumstances. Inthis view of the matter we would answer the question referred to us bysaying that the Appellate Tribunal was not justified in cancelling the levyof penalty without recording relevant findings and fixing responsibility for the delay and finding its effect upon the penalty order. In the circumstances, the parties will bear their own costs.