R.B. Lal, J.
1. The following question has been referred by the Income-tax Appellate Tribunal, Allahabad, under Section 256(1) of the I.T. Act, 1961 (briefly 'the Act'), for the opinion of this court.
'Whether, on the facts and in the circumstances, of the case, the Tribunal was correct in cancelling the penalty order instead of setting it aside for a fresh hearing and disposal by the Inspecting Assistant Commissioner of Income-tax ?'.
2. The material facts lie in a brief compass. The 1AC imposed a penalty of Rs. 37,412 on the assessee for the assessment year 1967-68; under the provisions of Section 271(1)(c) of the Act. The assessee appealed to the Income-tax Appellate Tribunal. In the appeal, the imposition of penalty was challenged on merits and also on the ground that no opportunity of being heard was allowed to the assessee. The Tribunal found as a fact that no opportunity of being heard was afforded to the assessee before the imposition, of the penalty and it went to the root of the matter and the penalty order could not be sustained. On the question, whether after setting aside the order of penalty, the case should be sent back to the 1AC for a fresh hearing and disposal, the Tribunal took the view that the period of limitation prescribed for passing the penalty order had already expired and the IAC was debarred from passing a fresh order ofpenalty. For this the Tribunal placed reliance on the decision of this court in the case of CIT v. Ram Baran Ram Nath : 104ITR691(All) . The Supreme Court's decision in Director of Inspection of Income-tax v. Pooran Mall & Sons : 96ITR390(SC) , was found distinguishable by the Tribunal. At the request of the Commissioner of Income-tax, Lucknow, the Tribunal has referred the aforesaid question.
3. Shri M. Katju, learned counsel for the Revenue, has urged that the principle laid down by the Supreme Court in the case, Pooran Mall & Sons, was applicable to the facts of the instant case and the case should have been sent back to the IAC for fresh hearing and disposal. In view of this Supreme Court decision, the decision of this court in the case of Ram Baran Ram Nath could not be held applicable to the facts of the present case. The Tribunal was in error in distinguishing the aforesaid Supreme Court decision and in placing reliance on the decision of this court.
4. We have carefully gone through the aforesaid decisions. In the Supreme Court case, the order under Section 132(5) of the Act passed by the ITO was set aside by the Delhi High Court with the consent of the parties and the ITO was directed to decide the matter afresh within two months after giving an opportunity to the petitioner to place his case before him. The order passed by the ITO in compliance with this direction was challenged as invalid on the ground that it was passed beyond the period mentioned in Section 132(5). The Supreme Court repelled this contention and observed that in deciding the question as to whom, any property seized under Section 132(1), belonged, the ITO could not be said to be exercising any powers of taxation. The ITO was really deciding as to whom the property seized belonged and to such a case the provisions of the ordinary law which deal with the Tribunals and courts which decide the questions of title to properties should be deemed to apply. This was not a case where equity was relied upon to tax a person who is not otherwise liable to be taxed. The Supreme Court also observed that the period of limitation prescribed in Section 132(5) was intended for the benefit of the assessee and it was, therefore, competent for him to waive it. The facts in the instant case are different. Hence this decision of the Supreme Court is clearly distinguishable and the principles laid down in it can have no application to the instant case.
5. In the case of Ram Barm Ram Nath : 104ITR691(All) , the order of penalty passed by the IAC was set aside by the Tribunal and the IAC was directed to pass a fresh order 'as he thought expedient in accordance with law'. The IAC re-heard the matter and imposed a penalty. The assessee appealed to the Tribunal and urged that the order passed by the IAC was barred by the limitation of two years provided in Section 275of the Act. The Tribunal upheld this submission. At the instance of the Commissioner, a reference under Section 256(1) of the Act was made to this court. This court held that the IAC was debarred by the time-limit provided under Section 275 of the Act from passing a fresh order of penalty and the Tribunal had rightly set aside that order. The principle laid down in the decision applies on all fours to the instant case. Since the period of limitation of two years prescribed in Section 275 of the Act had expired in the instant case, the Tribunal was right in cancelling the penalty order and in declining to send the case back to the IAC for disposal afresh.
6. In view of the above, the question is answered in the affirmative, in favour of the assessee and against the Revenue. The assessee shall get costs of these proceedings which are assessed at Rs. 250.