Skip to content


income-tax Officer Vs. Sri Venkataramana Metal - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Hyderabad
Decided On
Judge
Reported in(1982)1ITD728(Hyd.)
Appellantincome-tax Officer
RespondentSri Venkataramana Metal
Excerpt:
.....that arise for decision in this appeal is whether the aac was correct in law in taking up the appeal filed by the assessee before him against the order of the ito passed under section 271(1)(c) and disposing it of. to appreciate the above contention we have to refer to the provisions of section 246. section 246 was amended by the finance (no. 2) act, 1977, with effect from 10-7-1978. in the instant case the penalty order was passed by the ito on 23-3-1979. therefore, the amended provisions of section 246 alone would be applicable to this case. sub-section (2) of section 246 was introduced by the above finance act with effect from 10-7-1978. the same, so far as it is relevant for the purpose of this appeal, reads as follows : (2) notwithstanding anything contained in sub-section (1),.....
Judgment:
1. This appeal is filed by the revenue against the order of the A AC, dated 2-7-1980, by which he cancelled the penalty of Rs. 40,260 imposed by the ITO under Section 271(1)(c) of the Income-tax Act, 1961 ("the Act") for the assessment year 1975-76 by his order dated 23-3-1979.

2. The first contention of the revenue before us is that in view of the provisions of Section 246(2)(g) of the Act, the AAC ought not to have disposed of this appeal as the jurisdiction over the order of the ITO dated 23-3-1979 which is appealed against, vested with the Commissioner (Appeals). The learned departmental representative contended that the AAC erred in cancelling the penalty. He pointed out that the suppression of purchases was detected by the sales tax department on 27-11-1975, long before the completion of the original income-tax assessment, and that, therefore, the AAC has erred in observing that the assessee was not aware of the difference in stock particulars before the assessment was finalised by the sales tax department. On behalf of the assessee, the learned counsel Shri Anjaneyulu submitted than an assessee has the option to file appeals either before the AAC under Section 246(1) or before the Commissioner (Appeals) under Section 246(2). In this connection he referred to the expression "may" appearing in both the above sub-sections which according to him clearly indicated that the Legislature has given the option to the assessee to either appeal to the AAC or to the Commissioner (Appeals). He, therefore, urged that the order of the AAC was not bad in law. He relied heavily on the order of the AAC on the merits of the case. He pointed out that the assessee was not guilty of suppression of stocks or sales, that the sales tax authorities found out a difference in the weight of the goods as per the bill and as per the lorry receipts, that the above difference occurred due to inclusion of weight of packing material in the lorry receipts whereas in the vouchers the net weight was only taken, that the addition made by the sales tax authorities was set aside by the Appellate Tribunal, that in the subsequent assessment, the assessee had accepted the discrepancy in the turnover determined by the sales tax authorities to have quick relief, that as a matter of fact the assessee became aware of the discrepancies only when the sales tax assessment was completed on 20-12-1976, that immediately thereafter the assessee had filed a revised return on 8-2-1977 disclosing the income from the turnover alleged to be suppressed by the sales tax department, that the assessee had filed a revised return voluntarily admitting additional income which was also accepted by the revenue, and that in these circumstances there was no question of concealment of any income on the part of the assessee. He, therefore, strongly urged that the order of the AAC should be confirmed. He also relied upon the ruling of the Andhra Pradesh High Court in the case of Addl. CIT v.Bhrugupalli China Krishnamurthy (Decd.) [1980] 121 ITR 326. In reply the learned departmental representative submitted that the word "may" occurring in Section 246(1) and (2) cannot be interpreted in the manner suggested by the learned counsel of the assessee. In this connection he drew our attention to Section 247 in which the Legislature has provided for filing of appeals by partners of a firm who are individually assessable on their shares in the total income of the firm to the AAC.3. We have considered the rival submissions. The first and fundamental point that arise for decision in this appeal is whether the AAC was correct in law in taking up the appeal filed by the assessee before him against the order of the ITO passed under Section 271(1)(c) and disposing it of. To appreciate the above contention we have to refer to the provisions of Section 246. Section 246 was amended by the Finance (No. 2) Act, 1977, with effect from 10-7-1978. In the instant case the penalty order was passed by the ITO on 23-3-1979. Therefore, the amended provisions of Section 246 alone would be applicable to this case. Sub-section (2) of Section 246 was introduced by the above Finance Act with effect from 10-7-1978. The same, so far as it is relevant for the purpose of this appeal, reads as follows : (2) Notwithstanding anything contained in Sub-section (1), any assessee aggrieved by any of the following orders (whether made before or after the appointed day may appeal to the Commissioner (Appeals) against such order- (g) an order imposing a penalty under Clause (c) of Sub-section (1) of Section 271 where such penalty has been imposed with the previous approval of the Inspecting Assistant Commissioner under the proviso to Clause (iii) of Sub-section (1) of that section ;.

Sub-section (1), Clause (c) and Sub-clause (iii) of Section 246 reads as follows : (1) Subject to the provisions of Sub-section (2), any assessee aggrieved by any of the following orders of an Income-tax Officer may appeal to the Appellate Assistant Commissioner against such order- A plain reading of the above provisions clearly shows that after the introduction of Sub-section (2), an appeal against an order of penalty which was imposed with the previous approval of the IAC under the proviso to Clause (Hi) of Section 271(1), would lie only to the Commissioner (Appeals). We are unable to agree with the submission of the learned counsel for the assessee that the assessee is given an option to choose either the AAC or the Commissioner (Appeals) for preferring appeals against the order under Section 271. The word "may" occurring in Section 246(1) and (2), in our opinion, does not support the assessee's stand that the assessee is free to choose the appellate forum. The word "may" is used in the above provisions to enable the assessee to file an appeal before the appropriate appellate authority if he chooses to file an appeal. Wherever the statute has provided for filing of appeals by the aggrieved parties the word "may" has been used invariably by the Legislature. We are of the opinion that the word "may" is used just to enable an assessee if he chooses to file an appeal before an appropriate authority subject to the provisions contained in that section. Now in the present case it is common ground that the penalty order passed by the ITO falls under Clause (g) of Section 246(2). Section 246(1)(o)(iii) refers to an order imposing penalty under Section 271 without qualifying it in the manner provided in Section 246(2)(g). Further it is significant to note that the following provision in the same Section 246, viz., Section 246(3), reads as follows : (3) Every appeal against an order specified in Sub-section (2) which is pending immediately before the appointed day before an Appellate Assistant Commissioner or a Commissioner and any matter arising out of or connected with such appeal and which is so pending shall stand transferred on that day to the Commissioner (Appeals) and the Commissioner (Appeals) may proceed with such appeal or matter from the stage at which it was on that day : Provided that the appellant may demand that before proceeding further with the appeal or matter, the previous proceeding or any part thereof be reopened or that he be reheard.

This sub-section shows that even if an appeal was filed and the same was pending before that date before the AAC under Section 246, as it stood prior to the coming into force of the above amendment with effect from 10-7-1978, that appeal would stand transferred on that appointed day to the Commissioner (Appeals) and thereafter the Commissioner (Appeals) only has jurisdiction to decide that appeal. If the argument of the learned counsel for the assessee to the effect that the AAC and the Commissioner (Appeals) have concurrent jurisdiction and that, therefore, it is open to the assessee to choose either the AAC or the Commissioner (Appeals) as appellate forum, then there is no need for the above Sub-section (3). We are, therefore, of the considered opinion that the appeals against the orders specified in Sub-section (2) of Section 246 ought to be proceeded with and disposed of only by the Commissioner (Appeals) and not by the AAC. We, therefore, accept the contention of the revenue and hold that the AAC has no jurisdiction to proceed with the appeal filed before him by the assessee against the order of the ITO passed under Section 271(1)(c) and consequently the order passed by the AAC which is in appeal before us is void in law. In view of this finding of ours, it is neither proper nor necessary for us to go into the merits of the case which were extensively argued before us by the parties.

4. Now the point that arises is what direction should be issued for a proper disposal of the matter. The learned departmental representative has referred us to the ruling of the Supreme Court in the case of CIT v. Bhikaji Dadabhai & Co. [1961] 42 ITR 123 and at page 126 their Lordships of the Supreme Court observed that even if the ITO committed an error in passing the order imposing the penalty because the conditions necessary for invoking that jurisdiction were absent, an appeal against his order on the ground that he was not competent to pass the order did lie to the AAC and that the AAC under the Act constituted an appellate authority against certain orders of the ITO and exercise of that jurisdiction was not made conditional upon the competence of the ITO to pass orders made appealable. The Supreme Court further observed that the AAC had as a court of appeal jurisdiction to determine the soundness of the conclusions of the ITO both on questions of fact and law and even as to his jurisdiction to pass the order appealed from.

In the instant case, we have already held that the AAC has no jurisdiction to pass the order appealed in this case. The learned counsel for the assessee has drawn our attention to the latest judgment of the Hon'ble Supreme Court in Kapurchand Shrimal v. CIT [1981] 131 ITR 451. The Hon'ble Supreme Court in the course of the above judgment referred to the duty of the Tribunal in cases where it finds that the orders passed by the lower authorities were void and without jurisdiction. The Supreme Court observed that the duty of the Tribunal did not end with making a declaration that the orders were illegal but it has a duty to issue further direction. It was pointed out that the appellate authority has jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh unless forbidden from doing so by the statute. In the end the Supreme Court held that the orders of assessments which were without jurisdiction in that case were liable to be set aside but the Tribunal should direct the ITO to make fresh assessments in accordance with law.

Shri Anjaneyulu argued on the basis of similar direction for proper disposal of the appeal. He then referred us to the ruling of the Calcutta High Court in the case of Bhartia Steel & Engineering Co. (P.) Ltd. v. ITO [1974] 97 ITR 154 and submitted that if the order of the AAC in this appeal were to be held as void then the appeal must be deemed to be still pending before him and that, therefore, the Tribunal should issue a direction to the AAC to forward the appeal to the concerned Commissioner (Appeals) for disposal in accordance with Jaw.

The learned departmental representative, however, argued that the above decision of the Calcutta High Court would not apply to the facts of this case. He submitted that in that case the order passed by the Tribunal was held to be void but the Tribunal had jurisdiction to entertain the appeal and, therefore, the said decision would not apply to this case.

5. After perusing the recent judgment of the Supreme Court referred to above and cited on behalf of the assessee and after considering the rival submissions with reference to the direction to be given in this case, we find that the dictum laid down by the Supreme Court in the latest judgment referred to above has to be followed. As pointed out above the Supreme Court has laid down the dictum that "an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh unless forbidden from doing so by the statute". In the instant case, as held by us above, the AAC has no jurisdiction to dispose of the appeal filed by the assessee before him. The learned counsel for the assessee submitted that the assessee had filed the appeal before the AAC as advised by the ITO in the demand notice issued by him. The learned departmental representative has not controverted this position by referring to the copy of the demand notice which must be available with the revenue. We have, therefore, to proceed on the assumption that the ITO has advised the assessee to prefer an appeal against the penalty order under appeal to the AAC. It is common ground that before the AAC, the ITO neither appeared nor submitted any objections to the jurisdiction of the AAC to dispose of the appeal even though due notice was given to him. The result was that the AAC had proceeded to dispose of the appeal after hearing the assessee's arguments. The revenue is now challenging before us the competence of the AAC to dispose of the appeal. From the above, it is evident that he was misled by the ITO to file the appeal before the AAC. The AAC has also erroneously disposed of the appeal and the ITO who should have raised the objection to the jurisdiction of the AAC before the AAC failed to do so.

6. For the foregoing reasons we hold that the order of the AAC, which is in appeal before us, is void and without jurisdiction. Since the appeal filed by the assessee before the AAC on the advice of the revenue should not have been disposed of by him, we vacate the order passed by him on the appeal filed by the assessee. In the interest of justice we direct the AAC to forward the appeal filed by the assessee before him to the concerned Commissioner (Appeals) for disposal in accordance with law.

7. In the result, the appeal is treated as allowed in part for statistical purposes.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //