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Joseph John Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Cochin
Decided On
Judge
Reported in(1983)3ITD571(Coch.)
AppellantJoseph John
Respondentincome-tax Officer
Excerpt:
1. these appeals are against the order of the iac, ernakulam range, dated 21-3-1977 by which he levied penalty of rs. 72,000, rs. 1,13,000 and rs. 94,000 on the assessee under section 271(1)(c) of the income-tax act, 1961 ('the act'), for alleged concealment of income for the assessment years 1972-73, 1973-74 and 1974-75, respectively, for which the previous years ended 31-12-1971, 31 -12-1972 and 31 -12-73, respectively.2. the assessee was carrying on the business of money-lending, having commenced it in 1970. returns of income were filed by the assessee on 12-9-1974 disclosing income of rs. 6,233 for the assessment year 1972-73, rs. 2,427 for the assessment year 1973-74 and rs. 19,175 for the assessment year 1974-75. while the return for the last-mentioned assessment year was made in.....
Judgment:
1. These appeals are against the order of the IAC, Ernakulam Range, dated 21-3-1977 by which he levied penalty of Rs. 72,000, Rs. 1,13,000 and Rs. 94,000 on the assessee under Section 271(1)(c) of the Income-tax Act, 1961 ('the Act'), for alleged concealment of income for the assessment years 1972-73, 1973-74 and 1974-75, respectively, for which the previous years ended 31-12-1971, 31 -12-1972 and 31 -12-73, respectively.

2. The assessee was carrying on the business of money-lending, having commenced it in 1970. Returns of income were filed by the assessee on 12-9-1974 disclosing income of Rs. 6,233 for the assessment year 1972-73, Rs. 2,427 for the assessment year 1973-74 and Rs. 19,175 for the assessment year 1974-75. While the return for the last-mentioned assessment year was made in the form as amended by the Income-tax (Second Amendment) Rules, 1974 (which had effect from 1-6-1974), those for the assessment years 1972-73 and 1973-74 were filed in the forms which were in vogue prior to such amendment.

3. On 5-10-1974, the officers of the income-tax department raided the business premises of the assessee and found that the assessee had maintained two sets of account, one of which alone represented the true state of affairs. A statement of the assessee was recorded and he admitted the same. It was also admitted that the returns filed on 12-9-1974 had been based not oh the accounts reflecting the true state of affairs, but on the other set of accounts. Subsequently, the assessee filed revised returns for the abovementioned assessment years, which were received in the office of the ITO on 21-12-1974 accompanied by a covering letter dated 20-12-1974. The income returned was Rs. 65,027 for the assessment year 1972-73, Rs. 78,113 for the assessment year 1973-74 and Rs. 92,413 for the assessment year 1974-75.

Assessments were completed on 31-3-1975, after initiating proceedings for imposition of penalty for concealment, determining the income at Rs. 78,070 for the assessment year 1972-73, Rs. 1,16,121 for the assessment year 1973-74 and Rs. 1,13,870 for the assessment year 1974-75. The ITO referred the case to the IAC in accordance with the requirements of Section 274(2) of the Act, as it existed then.

4. Aggrieved by such assessments, the assessee preferred appeals to the AAC and further appeals to the Tribunal. As a result of the order passed by the Tribunal on 27-7-1977 in IT Appeal Nos. 130, 131 and 132 (Coch.) of 1976-77, the income as finally determined came to Rs. 73,074 for the assessment year 1972-73, Rs. 98,209 for the assessment year 1973-74 and Rs. 1,03,795 (excluding agricultural income) for the assessment year 1974-75.

5. The IAC required the assessee to show cause against the levy of penalty. The assessee, by his letter dated 17-4-1975, contended, that he was guided throughout by his accountant, that his accountant informed him that for the purpose of income-tax two sets of account had to be maintained, that there was no deliberate concealment of income by him in the returns originally filed and that in fact, he had simply affixed his signature in blank return forms and did not know what was filled up later. It was also urged that since the returns for the assessment years 1972-73 and 1973-74 filed on 12-9-1974 had been filed in the forms which had become obsolete, such returns could not be considered as valid returns and subsequently only the returns filed on 21-12-1974 could be considered as returns validly filed and since there was no concealment in those returns, there was no question of levy of penalty. The IAC did not accept the contentions. He held that the undisputed facts clearly indicated that the assessee had concealed income in the original returns filed by him on 12-9-1974. He, accordingly, by his order dated 21-3-1977 levied penalty of Rs. 72,000 for the assessment year 1972-73, Rs. 1,13,000 for the assessment year 1973-74 and Rs. 94,000 for the assessment year 1974-75.

6. Aggrieved by such levy of penalty, the assessee has preferred these appeals, contending (1) that the IAC had no jurisdiction to levy penalty, (2) that the assessee had not concealed any income and (3) that, in any case, the returns filed on 12-9-1974 for the assessment years 1972-73 and 1973-74 were noltest and could not form basis for levy of penalty.

7. These appeals were heard along with IT Appeal No. 675 (Coch.) of 1977-78, IT Appeal Nos. 132 and 133 (Coch.) of 1978-79, where also the contention that the IAC had no jurisdiction to levy penalties was taken. Arguments were addressed by Shri K.S. Paripoornan, counsel for the appellant herein and also by Shri P.K. Radhakrishna Menon, counsel for the appellant in IT Appeal Nos. 132 and 133 (Coch.) of 1978-79 and Shri P.S. Menon, Chartered Accountant, the authorised representative for the appellant in IT Appeal No. 675 (Coch.) of 1977-78. The learned standing counsel for the Commissioner, Shri P.K. Ravindranatha Menon, addressed arguments on behalf of the department.

8. The main contention taken by the assessee in these appeals is that the IAC had no jurisdiction to levy penalty on the date he passed the Impugned orders on account of the fact that Section 274(2) was deleted with effect from 1-4-1976 by Section 65 of the Taxation Laws (Amendment) Act, 1975. The assessee's learned counsel contended that the provision of Section 274(2) was procedural law and since the same was deleted such deletion would have retrospective effect and consequently references made to the IAC by the ITO became abated. In other words, he urged that by reason of the deletion of Section 274(2), the jurisdiction that had become vested in the IAC by reference of cases validly made to him by the ITO prior to such deletion stand terminated and consequently the IAC could not have levied penalty after 1-4-1976 and that only the ITO could have levied the same. He emphasised the fact that the Taxation Laws (Amendment) Act, 1975, which deleted Section 274(2) did not provide for any saving clause and consequently the reference made to the IAC by the ITO earlier became abated. He further urged that since Section 274(2) has been 'omitted', there was no scope for the application of the provisions of Section 6 of the General Clauses Act which would be attracted only in the event of repeals. He urged that the law as on the date of the filing of the returns would be applicable only for the purpose of finding out whether any offence by way of concealment has been committed and if so, the quantum of punishment to be inflicted, therefor. In support of the above contentions, he has relied upon the decisions of the Supreme Court in Rayala Corporation (P.) Ltd. v. Director of Enforcement AIR 1970 SC 494 and of the Madras High Court in V.C.K. Bus Service (P.) Ltd. v. H.B. Sethna AIR 1965 Mad. 149. He also referred to the passages occurring at page 461 of Salmond's Jurisprudence, 12th Edition at page 485, Legislation and Interpretation of Statutes by Jagdish Swarup and at page 222 in Maxwell on the Interpretation of Statutes, 12th Edition.

9. While adopting the arguments of Shri K.S. Paripoornan, Shri K.P.Radhakrishna Menon contended that the IAC being a qreature of the statute was only an administrative Tribunal, whose powers were circumscribed by the relevant statute under which he functions and when Section 274(2) was omitted with effect from 1-4-1976 he was deprived of all the powers which had been conferred on him thereunder with effect from that date and hence the orders passed by him in the instant case on 21-3-1977 levying penalty were without jurisdiction.

10. The learned standing counsel appearing for the department, on the other hand, strenuously contended that the deletion of Section 274(2) with effect from 1-4-1976 would not affect the jurisdiction which had become vested in the IAC in respect of cases referred to him prior to that date by the ITO under that provision. He urged that in such cases, the assessee would have acquired a vested right to get an adjudication on the question as to whether or not he was liable to be penalised for concealment of income by the IAC, an officer of larger experience than the ITO and the deletion of Section 274(2) in such circumstances would not affect such jurisdiction. He urged that the principle laid down by the Privy Council in Colonial Sugar Refining Co. Ltd v. Irving [1905] AC 369 would be attracted. He emphasised that since the cases in question had been validly referred to the IAC by the ITO under the provisions of Section 274(2) and since there is no provision made either in the Income-tax Act, 1961 or in the Taxation Laws (Amendment) Act, 1975, taking away the jurisdiction of the IAC in respect of such cases, the IAC had the power to levy penalty.

11. The question as to whether by reason of the amendments made to Section 274(2) by the Taxation Laws (Amendment) Act, 1970, with effect from t-4-1971 and again by the Taxation Laws (Amendment) Act, 1975, with effect from 1-4-1976, the jurisdiction, which had already become vested in the IAC by reason of certain cases having been validly referred to him by the ITO prior to such amendment was affected or not, has been considered by the Orissa, Allahabad, Gujarat, Andhra Pradesh, Madras and Punjab and Haryana High Courts. The Orissa and the Allahabad High Courts have taken the view that such amendments would affect the pending cases also and after such amendments the IAC would have no jurisdiction to levy penalty even in respect of cases which might have been validly re ferred to him by the ITO prior thereto. The decisions of the Orissa High Court are those reported in CIT v. Dhadi Sahu [1976] 105 ITR 56, Bhikari Charan Panda v. IAC [1978] 112 ITR 526 and Radheshyam Agarwalla v. CIT [1977] 113 ITR 196. The decisions of the Allahabad High Court taking a similar view are those reported in CIT v.Om Sons [1979] 116 ITR 215, CIT v. Smt. Raj Rani Devi [1979] 116 ITR 358 and CIT v. Pearey Lal Radhey Raman [1979] 117 ITR 319. A contrary view has been taken by the Madras High Court in Continental Commercial Corporation v. ITO [1975] 100 ITR 170 where it was held that the relevant provision related to jurisdiction and hence could not be considered as procedural law but was substantivei law' and hence the amendment made to Section 274(2) with effect from 1-4-1971 could not have retrospective effect. Similar view has been taken by the Gujarat High Court in CIT v. Royal Motor Car Co, [1977] 107 ITR 753 and by the Andhra Pradesh High Court in Addl. CIT v. Dr. Khaja Khutabuddinkhan [1978] 114 ITR 905 and by the Punjab and Haryana High Court in CIT v.Raman Industries [1980] 121 ITR 405. It is to be stated that the Gujarat, Andhra Pradesh and Punjab and Haryana High Courts have proceeded on the basis that the principle laid down by the Privy Council in Colonial Sugar Refining (supra) was applicable.

12. Before considering the contentions, the history of the amendments made to the provisions of Section 274(2) can be traced. Originally, Sub-section (2) of Section 274 of the Act was as follows : (2) Notwithstanding anything contained in Clause (iii) of Sub-section (I) of Section 271, if in* the case falling under caluse (c) of that sub-section, the minimum penalty imposable exceeds a sum of rupees one thousand, the Income-tax Officer shall refer the case to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty.

The above section was amended by the Taxation Laws (Amendment) Act, 1970, with effect from 1-4-1971. After such amendment, the above section stood as follows : (2) Notwithstanding anything contained in Clause (iii) of Sub-section (1) of Section 271, if in a case falling under Clause (c) of that sub-section, the amount of income (as determined by the Income-tax Officer on assessment) in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of rupees twenty-five thousand the Income-tax Officer shall refer the case to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty.

The above provision was deleted by Section 65 of the Taxation Laws (Amendment) Act, 1975, with effect from 1-4-1976. But a provision was incorporated in Clause (iii) of Section 271(1) requiring the ITO to obtain sanction of the IAC in case where concealment exceeded Rs. 25,000. It will be seen from the above that originally the ITO had been empowered to levy penalty when the minimum did not exceed Rs. 1,000 only. Later when the quantum of penalty became income (sic) based by the reason of amendment made to Section 271(1)(iii) with effect from 1-4-1968, the ITO was empowered to levy penalty where the minimum amount did not exceed Rs. 25,000. Now there is no restriction at all as regards the amount of penalty that can be levied by the ITO except the requirement of prior sanction of the IAC.13. The first question to be considered is whether the above provision is a piece of substantive law or procedural law. If it is the former, it cannot have retrospective effect and in such event, in the instant cases, penalty could have been levied only by the IAC. If, on the other hand, it was to be held that the provisions of Section 274(2) were only procedural law, then the deletion thereof would have retrospective effect and in such event the ITO alone could levy the penalty.

14. In Saltnond's Jurisprudence, 12th Edition, the learned author has stated at pages 461 and 462 as follows : What, then is the true nature of the distinction The law of procedure may be defined as that branch of the law which governs the process of litigation. It is the law of actions-jus quod ad actiones pertinet-using the term action in a wide sense to include all legal proceedings, civil or criminal. All the residue is substantive law and relates, not to the process of litigation but, to its purposes and subject-matter. Substantive law is concerned with the ends which the administration of justice seeks ; procedural law deals with the means and instruments by which those ends are to be attained. The latter regulates the conduct and relations of courts and litigants in respect of the litigation itself ; the former determines their conduct and relations in respect of the matters litigated.

A glance at the actual contents of the law of procedure will enable us to judge the accuracy of this explanation. Whether I have a right to recover certain property is a question of substantive law, for the determination and the protection of such rights are among the ends of the administration of justice ; but in what courts and within what time I must institute proceedings are questions of procedural law, for they relate merely to the modes in which the courts fulfil their functions....

At page 485 of Legislation and Interpretation of Statutes by Jagadish Swarup, the learned author has stated as follows : The procedure for enforcing a right is not portion of the right ; there is no vested right in having a case tried by a Tribunal which has been deprived of jurisdiction by a subsequent enactment, such a right pertains to the province of procedural law and the provisions of an amending Act relating only to a change of form are, therefore, simply matters of procedure.

At page 222 of the Maxwell On The Interpretation of Statutes, 12th Edition, the following passage occurs: ...No person has a vested right in any course of procedure, but only the right of prosecution or defence in the manner prescribed for the time being, by or for the court in which he sues and if an Act of Parliament alters that mode of procedure, he can only proceed according to the altered mode....

15. In the case of V.C.K. Bus Service (supra) the question arose in the context of a claim for damages as a result of a motor accident. The motor accident occurred on 6-1-1961 in which the bus belonging to the first petitioner and the motor car belonging to the first respondent were involved. The accident resulted in personal injuries to the claimants. Section 110(1) of the Motor Vehicles Act, 1939, provided for constitution by the Government of Motor Accidents Claims Tribunals, for specified areas, for adjudicating upon claims for compensation, in respect of accidents involving death or bodily injury to persons, arising out of the use of motor vehicles. By a notification dated 1-7-1961, issued by the Government of Madras, the District and Sessions Judge, Coimbatore, was constituted the Tribunal for such a purpose.

Before such constitution of the Tribunal such claims were adjudicated on suits in civil courts. The procedure to be followed by the applicants before the Tribunal was also prescribed by Section 110A of the Motor Vehicles Act, which included a provision as to limitation, such period of limitation being only 60 days, as against a longer period prescribed in the Limitation Act. The petitioners contended by way of writ petitions before the High Court that since the accident took place prior to the constitution of the Tribunal, claims for damages could be agitated only by instituting suits therefor in the ordinary civil court and resort to the Tribunal was not competent, that contention was negatived. The Court observed : No litigant has or can have vested right in a particular forum; he cannot say as a matter of right that his suit or application should be tried by this or that forum which existed on the date his cause of action arose ; forum belongs to the realm of procedure and does not constitute substantive right of a party or a litigant. It should also be borne in mind that cause of action is not to be confused with the forum and a cause of action whatever vested rights, it may carry with it, does not include a right to insist upon a particular Court or Tribunal or Judge or any other. It follows, therefore, that any statutory law which changes a forum may not raise a question of retrospective operation, unless, of course, in exceptional cases it is invariably intertwined with vested rights.

16. In Sukumar Pyne's case (supra) action was taken against the respondent for an alleged violation of the provisions of the Foreign Exchange Regulation Act, 1947. At the time of the alleged violation, the said Act had provided for a prosecution therefor, in a criminal court. Later the provisions of the said Act were amended by which it was provided that action could be taken for any violation of the provisions therefor by the Director of Enforcement. It was further provided that if the Director of Enforcement was of the view that adequate punishment could not be meted out by him, he could launch prosecution in a court of law. The respondent contended that since the Act as it stood at the time of the alleged commission of the offence provided only for prosecution in a criminal court, action taken by the Director of Enforcement was without jurisdiction. That contention was rejected and the Supreme Court held that- ...a person accused of the commission of an offence has no vested right to be tried by a particular court or particular procedure except insofar as there is any constitutional objection by way of discrimination or the violation of any other fundamental right is involved.

The passage from Maxwell On The Interpretation of Statutes quoted above was also approved by the Supreme Court.

17. It will be seen from the above that while such provisions of an enactment constituting the ingredients of an offence and prescribing the quantum of punishment for the commission thereof are substantive law, the provisions relating to the procedure to be adopted for the trial therefor or prescribing the authority who has to conduct the trial are procedural law. Consequently, the law as it stood on the date of filing of the returns of income would be applicable only to find out whether the assessee has concealed income and if so to determine the quantum of penalty to be levied therefor but not in other respects.

There is nothing contrary to the above in the decision of the Supreme Court in Brij Mohan v. CIT [1979] 120 ITR 1.

18. The decisions relied upon by the learned standing counsel in support of his contention are all distinguishable In Mohd.'Idris v. Sat Narain AIR 1966 SC 1499, the respondent (successor in interest of the mortgages of the land) had filed an application on 27-5-1952 under Section 12 of the UP Agriculturists Relief Act in the court of the Munsif (East), Allahabad, alleging that the mortgage had been paid off from the usufruct of the land and he was entitled to redeem it. The District Munsif passed the decree in favour of the plaintiff on 24-11-1953. The defendant preferred an appeal to the District Court which was dismissed on 17-4-1957. The main contention urged before the appellate court was that since the UP Agriculturists Relief Act was repealed by an Act passed in 1953, which amended the UP Zamindari Abolition and Land Reforms Act, 1950, the proceedings instituted under Section 12 of the former Act were rendered incompetent. That contention was rejected by the appellate court and on further appeal by the High Court. The same point was urged before the Supreme Court again. The Supreme Court also rejected the contention and held that the amendment of the earlier Act had no retrospective effect. But it is to be noticed that the Supreme Court came to the above conclusion on the ground that Section 23 of the Amending Act contained the saving provision and -that disclosed an intention of the concerned Legislature that Section 6 of the General Clauses Act would be applicable. The Supreme Court pointed out that the UP Agriculturists Relief Act had been repealed retrospectively from 1-7-1952 only and, therefore, it was not possible to give the repeal further retrospectivity, so as to affect a pending suit from before that date. It was also pointed out by the Supreme Court that the jurisdiction of the Assistant Collector was itself created from 1-7-1952 and there was no provision in the Abolition Act for transferring pending cases to such Assistant Collector. Then the Court observed that from the above two circumstances it was to be inferred, if there was at all any expression of intention, that it was to keep Section 6 of the General Clauses Act applicable to pending litigation.In Manujendra Dutt v. Purnedu Prasad Roy Chowdhury AIR 1967 SC 1419 the landlord had filed a suit in the Court of Subordinate Judge of Alipore for ejectment and mesne profits against the tenant alleging that the tenancy had come to an end. During the pendency of the suit, the Calcutta Thika Tenancy Act, 1949 was enacted. On both parties agreeing that the defendant was a Thika tenant as defined by the said Act and that, therefore, the suit would be governed by that Act, the Court of Subordinate Judge transferred the suit to the Thika Controller under Section 29 of the said Act. During the pendency of that proceeding before the Thika Controller, the West Bengal Legislature passed the Amendment Act, 1953, which came into force on 21-4-1953, which by Section 8 deleted Sections 28 and 29 of the Calcutta Thika Tenancy Act. The question for consideration was whether by reason of deletion of Section 29, the Controller had lost jurisdiction over the proceedings which had been transferred to him earlier by the civil court. That question was answered in the negative on the ground that though the Amendment Act did not contain any saving clause, Section 8 of the Bengal General Clauses Act, 1899, applied and the transfer of the suit having been lawfully made to the Thika Controller under the Calcutta Thika Tenancy Act, the deletion of that section did not have the effect of altering the law applicable to the claim in the litigation.In Dewaji v. Ganpatlal AIR 1969 SC 560 a suit had been already filed by the owner of the land for recovery of possession and mesne profit against a tenant and decreed in accordance with the law prevalent at that time. That was a valid and correct decree as per law, Pending decision of the appeal against that decree the concerned Legislature enacted the Berar Regulation of Agricultural Leases Act, 1951. Section 16 thereof ousted in respect of which revenue officer had been clothed with jurisdiction. But that Act itself contained the saving provision. It was because of the saving provision the court held that the subsequent enactment did not affect the prior proceedings culminating in the decree.

21. It has to be stated that the decisions of the Madras High Court in Continental Commercial Corpn. (supra), the Gujarat High Court in Royal Motor Co, (supra), the Andhra Pradesh High Court in Dr. Khaja Khutabud-dinkhan (supra) and the Punjab and Haryana High Court in Raman Industries (supra) have not taken note of the decision of the Supreme Court in Sukumar Pyne's case (supra). They have all been rendered on the basis that the provision relating to the forum was substantive law, which is contrary to the abovementioned decision of the Supreme Court.

22. As already stated, the learned standing counsel contended that in view of the principles laid down by the Privy Council in Colonial Sugar Refining (supra), it could not be said that the effect of deletion of Section 274(2) was to terminate the jurisdiction which had become vested in the IAC in respect of cases which had been referred to him by the ITO validly prior to such deletion.The dictum laid down by the Privy Council in the above-mentioned case is to the following effect : To deprive a suitor in a pending action of an appeal to a superior Tribunal which belonged to him as of right is a very different thing from regulating procedure. In principle, their. Lordships see no difference between abolishing an appeal altogether and transferring the appeal to a new Tribunal. In either case there is an interference with existing rights contrary to the well-known general principle that statutes are not to be held to act retrospectively unless a clear intention to that effect is manifested.

It is to be noticed that in that case the Judiciary Act was passed during the pendency of an action in the court of first instance transferring the forum ,of appeal to an authority different from the one which had been authorised to hear appeals earlier. Their Lordships' decision recognised that, from the date of institution of the action, the suitor had a right to appeal to a superior Tribunal according to the state of the law as it stood at the time of commencement of the proceeding. This principle was held applicable even in the case of a pending suit instituted in a civil court of competent jurisdiction by the Federal Court in Venugopala v. Krishnaswamy AIR 1943 FC 24.

23(a). Except to the extent aforesaid, there can be no question of any vested right of the assessee being prejudicially or adversely affected by reason of the deletion of Section 274(2). The principle in Colonial Sugar Refining (supra) as well as Venugopala (supra) proceeds on the basis of a Tribunal or court being called upon to adjudicate on a Us between parties. As far as the appellate jurisdiction is concerned in penalty proceedings, it can be said that there is an adjudication of a lis between parties. The final appellate body before the omission of Section 274(2) as well as thereafter is the Appellate Tribunal. The final appellate forum thus remains unchanged. After the deletion of Section 274(2), all that has happened is one further intermediary appellate forum, i.e., the AAC or the Commissioner (Appeals) has been provided. The provision of one additional intermediate forum as long as the final forum remains unchanged does not affect any vested right of an assessee, if anything, it is to the benefit of the assessee.

23(b). As far as the imposition of penalty in the first instance is concerned, however, the position is different. The department has a right, if concealment is established, to levy a penalty. Where an authority levies penalty, he does not adjudicate on a lis between parties and there is, therefore, no vested right acquired by an assessee at this stage. Thus, where the Legislature decides that the forum or the authority to impose penalty should be different, no vested right of an assessee is affected and neither the principle in Colonial Sugar Refining Co. (supra) nor the principle in Venugopala''s case (supra) can be invoked to continue to vest jurisdiction in the authority, who prior to the amendment was competent to impose penalty.

Such authority to impose penalty would be only the authority in which such powers are vested by the amendment, i.e., the ITO.24. Another argument taken by the learned standing counsel was that in view of period of limitation prescribed for levy of penalty in Section 275 of the Act, the deletion of Section 274(2) could not be construed as taking away the jurisdiction of the IAC to pass orders levying penalty even in respect of cases referred to him earlier to such deletion. In this connection he pointed out that there is no provision made for. excluding the period during which the proceedings might have been pending before the IAC up to the time when Section 274(2) was deleted. The argument was that in many cases it may so happen that very little time would be left for the ITO to complete the proceedings levying penalty within the prescribed period, that it could not have been the intention of Parliament that in such cases the assessee who had concealed income should go unpunished and, therefore, the deletion of Section 274(2) could not be so construed as taking away the jurisdiction of the IAC even in respect of cases already referred to him. We are unable to accept the above contention. A specific provision is made in the Explanation to Section 275 for excluding the period taken for giving an opportunity to the assessee to be reheard under the proviso to Section 129. It is almost certain that in all the cases, the assessee would require a fresh opportunity of being heard when the ITO takes up the question of levy of penalty in cases where reference had been earlier made to the IAC. Such being the position the period required for a proper rehearing by the ITO would fall to be excluded in computing the period of limitation before the expiry of which the penalty has to be levied. Where an assessee does not want to be reheard, the extended time limit would not be available. But then there would also be no difficulty for the ITO to pass his order expeditiously on the material already on record. We are also unable to agree with the learned standing counsel that the provisions of Section 129 of the Act apply only where an income-tax authority is succeeded by another income-tax authority of equal status. The various income-tax authorities are specified in Section 116 of the Act. Section 129 of the Act speaks of one income-tax authority ceasing to exercise jurisdiction and another being vested with the same. It is not possible to read into the provisions that the predecessor and successor authority should be of the same status. There is no real hardship which results and we are unable to accept the contention of the learned standing counsel.

25. From the above discussion, it is clear that the provision in Section 274(2), which prescribed the authority to levy penalty in certain cases, was only a piece of procedural law. Consequently, the deletion thereof would put an end to the jurisdiction of the IAC even in respect of cases which might have been referred to him validly by the ITO, in accordance with the provisions of Section 274(2) prevalent at the time of making such references. The jurisdiction which had become vested in the IAC became terminated on the deletion of Section 274(2) and consequently the IAC had no jurisdiction to levy penalty in the instant case.

26. The next question to be considered is whether Section 6 of the General Clauses Act could be invoked to presume the jurisdiction of the IAC in the cases already referred to him by the ITO. The Supreme Court has held in Rayala Corporation (supra) that Section 6 of the General Clauses Act would apply only to repeals and not to omissions. In the instant case Section 274(2) was omitted. Where an Act is repealed the effect is as if it had never existed in the statute book. Therefore, in order to provide for the continuation of such action as might have been taken under the repealed enactment, or for completion of the investigations that might have been commenced thereunder, the provisions of Section 6 of the General Clauses Act are made applicable.

In the instant case, the Parliament, notwithstanding the above decision of the Supreme Court in the case of Rayala Corporation (supra), expressly only'omitted' Section 274(2) by enacting Section 65 of the Taxation Laws (Amendment) Act, 1975. It is thus clear that it did not intend that the provisions of Section 6 of the General Clauses Act should be made applicable. Therefore, we hold that there is no scope for the application of Section 6 of the General Clauses Act in the instant cases. We have noticed that in the case of Dr. Khaja Khutabuddinkhan (supra), the Andhra Pradesh High Court held that Section 6(d) of the General Clauses Act applied. But, in view of the abovementioned decision of the Supreme Court, we have come to the above view.

27. It was next contended by the assessee's authorised representative, Shri L. Rangamani, Chartered Accountant, that the assessee could not be considered to have concealed any income in the return filed by him on 12-9-1974. It was contended that the assessee was really a victim in that two sets of books of account were maintained at the instance of the accountant who had been employed by the assessee. It was also stated that the assessee had simply signed the blank return forms which were later filled up by the accountant. We are totally unable to accept the above contention. It is not disputed, on the other hand it is admitted, that two sets of books of account had been maintained-one reflecting the true state of affairs, the other being faked up accounts. It is not as if the assessee was not aware of such maintenance of two sets of account. On the other hand, it was admitted by the assessee, when he was examined at the time of search, that two sets of account books had been maintained and that one of them alone reflected the true state of affairs. It is also significant that soon after the search, the assessee filed returns on 21-12-1974 based on the books of account which reflected the true state of affairs. Under these circumstances, we think it is idle for the assessee to contend that he was a victim of circumstances and, therefore, no contumacious conduct could be imputed to him. On the other hand, the facts and circumstances clearly indicate that the assessee had deliberately filed the returns on 12-9-1974 based on the faked set of accounts. We are, therefore, of the opinion that penalty is exigible.

28. The assessee's authorised representative, however, contended that so far as the assessment years 1972-73 and 1973-74 were concerned, the returns filed on 12-9-1974 should be ignored and could not be considered as valid returns since they had been filed not in the prescribed form but in forms which had become obsolete. He, therefore, urged that only the returns filed on 21-12-1974 could be considered as valid returns filed by the assessee for those assessment years and since there was no concealment in such returns the question of levy of penalty would not arise at all. In support of his contention, he has relied upon the decision of the Allahabad High Court in the case of CIT v. M.K. Gupta [1978] 113 ITR 473 and the Calcutta High Court in the case of Maya Debt Bansal v. CIT [1979] 117 ITR 125. He also drew our attention to the fact that the forms prescribed were amended by the Income-tax (Second Amendment) Rules framed in 1974 [set out in 94 ITR (St.) 77]. He further drew our attention to the press note issued by the Government of India dated 7-6-1974 which stated that' "all those assessees who filed the retufns on or after 1st June, 1974 for the assessment year 1974-75 or earlier assessment years should file the same in the new forms". He emphasised that.he had set out this plea even in the letter dated 20-12-1974 along with which the subesquent returns on 21-12-1974 were forwarded to the ITO.29. The departmental representative, on the other hand, contended that even though the returns for the assessment years 1972-73 and 1973-74 which had been filed on 12-9-1974 were not in the prescribed form as amended by the Income-tax (Second Amendment) Rules, 1974, but were in the forms which were prevalent before such amendment, they could not be ignored as non set. He further stated that such forms could not be considered as invalid. In support of this contention, he placed reliance on the decision of the Madras High Court in the case of CIT v.Royal Textiles [1979] 120 ITR 506.

30. It is by no means clear whether by reason of the amendments made to the form of return, it is obligatory for the assessee to have filed the returns for the assessment years 1972-73 and 1973-74 in the amended form, since Rule 12 of the Income-tax Rules, 1962, is not explicit on the point. We will, however, proceed on the assumption that the returns of income even for the earlier assessment years should have been filed only in the amended form. But even then the question remains whether the returns filed in the forms which were prevalent prior to the amendment could be considered as illegal and, therefore, as non est.

The decision of the Madras High Court on this point is clear. In that case the assessee-firm filed its returns of income in Form No. 3 on 10-3-1968 disclosing income of Rs. 1,90,000. The ITO made a provisional assessment under Section 141 of the Act on 20-5-1968 and the lax demanded was paid. On 20-8-1968 the ITO required the assessee to file a return in the correct Form No. 2 and also forwarded that form and the assessee filed the return in the said form on 15-10-1970. The assessment was completed on 28-12-1970. The ITO charged interest under Section 139(1) of the Act for the period 1-1-1968 to 10-3-1968. The revenue audit raised an objection that since the return filed on 10-3-1968 in Form No. 3 was not in the proper form and since the return in the prescribed form was filed only on 15-10-1970, interest should have been charged up to that date. The Commissioner initiated proceedings under Section 263 and directed the ITO to levy interest up to 15-10-1970. The Tribunal, however, held that it was not open to the department to contend that the earlier return was invalid. On a reference made, the Madras High Court held that though the assessee had used a wrong form, it did not mean that the return was non est so that the return filed later in the correct form could be treated as the only return filed by the assessee. The Court further observed that an innocuous mistake on the part of the assessee in choosing a wrong form could not be treaded as so serious as to result in the return being treated as a mere scrap of paper.

31. It is true that the Allahabad High Court and the Calcutta High Court had taken a contrary view in their decisions mentioned above. It may also be noticed that the Madras High Court has referred to the- decision of the Calcutta High Court also in its judgment and understood the Calcutta High Court as having laid down that even an 'invalid' return or a return in a wrong form was proper return. We prefer to follow the view taken by the Madras High Court. We, accordingly, do not accept the assessee's contention that the returns filed on 12-9-1974 for the assessment years 1972-73 and 1973-74 were invalid returns and hence the fact that the income was concealed therein could be considered as warranting the levy of penalty.

32. Shri Rangamani next urged that the amounts of penalty levied have not been correctly quantified. He contended that only the difference between the amounts disclosed in the original returns could be considered as concealed income and penalties are to be levied with reference thereto. It is seen from the orders of assessment that certain disallowances had been made which according to Section 271(1)(iii) could not be considered as concealed income. In the event of our holding that the IAC had jurisdiction to levy penalty, we would have directed imposition of minimum penalty computed according to the provisions of Section 271(1)(c) at the relevant time.

33. Though we have held that the assessee had concealed income for all the assessment years in the returns filed by him on 12-9-1974 and penalty was exigible, therefor, in view of our finding that the IAC had no jurisdiction to levy penalty by reason of the omission of Section 274(2) with effect from 1-4-1976 we cancel (he penalties imposed in these cases.


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