J.B. Mehta, J.
1. The Tribunal has posed the following question in this reference :
'Whether, on the facts and in the circumstances of the case and in view of the limitation period prescribed under section 275 of the Income-tax Act, the Tribunal was justified in law in remained the matter back to the Inspecting Assistant Commissioner for passing fresh orders under section 271(1)(c) of the Income-tax Act, 1961 ?'
2. The present question has arisen in aspect of the two assessment years 1958-59 and 1964-65. 11 years' proceedings in respect of this assessee had been pending before the various authorities. The proceedings for the fur years from 1957-58 to 1960-61 had been reopened under section 148 while the proceedings for assessment for the years 1961-62, had been pending before the Income-tax Officer and the year 1962-63, had been pending before the Appellate Assistant Commissioner. For the other five years, 1963-64 to 1967-68, proceedings for assessment were pending before the Income-tax Officer. In all these proceedings settlement had been reached, and in so far as the present two years were concerned in the assessment proceeding for 1958-59, Rs. 15,000 with Rs. 920 as interest has been added on account of the hundi loan in question, as per the order at annexure 'H', dated January 25, 1969; while in the proceeding for the assessment year 1964-65, the amount of Rs. 20,000 with interest of Rs. 5,875 and an additional amount of Rs. 10,000 by way of cash credit in the account of one Harshrai Thaker had been added a per the order at annexure 'F' dated March 10, 1969. Both the orders recited the fact that penalty proceedings had been initiated for concealment of income. On the basis of the aforesaid orders, the Inspecting Assistant Commissioner levied penalty of Rs. 1,582.02 and Rs. 3,445. The assessee having challenged this order in appeal before the Tribunal on the ground that no show-cause notice had been served on him as required by section 274 for giving due opportunity for hearing, the Tribunal upheld the contention. The Tribunal even perused the envelope in which the show-cause notice was alleged to have been sent. The remark on the envelope was 'party not traceable', which indicated the fact that the assessee had not been served with the notice. the Tribunal, therefore, held that, as the law required that no order imposing penalty under Chapter XXI may be passed unless the assessee had been heard or had been given a reasonable opportunity of being heard, mere dispatch of notice was not sufficient compliance with the mandatory provision of section 274. Then the Tribunal strangely observed that 'though in law it may constitute proper service', it was clear that the assessee has not been given an opportunity to put up his case. Therefore, the Tribunal set aside the order of penalty and sent back the matter to the Inspecting Assistant Commissioner for giving an opportunity to the assessee to show cause why penalty should not be imposed under section 271(1)(c), and then to pass a legal order. The Tribunal having disposed of these two appeals of the assessee by the aforesaid order, the assessee had come in the present reference.
3. There is no dispute that so far as these two assessment orders ar concerned, the relevant provisions for levying a penalty are as under. Under section 271(1)(c) for concealment of the particulars of the income in application, penalty proceedings had been initiated. The procedure for levy of this penalty is laid down in section 274(1) under which no order imposing a penalty under Chapter XXI shall be made, unless the assessee had been heard, or has been given a reasonable opportunity of being heard. The bar of limitation, which has been urged in this reference for imposition of as under :
'275. Bar of limitation for imposing penalty. - No order imposing a penalty under this Chapter shall be passed after the expiration of two years from the date of the completion of the proceeding in the course of which the proceedings for the imposition of penalty have been commenced.
Explanation. - In computing the period of limitation for the purpose of this section, the time taken in giving an opportunity to the assessee to be re-heard under the proviso to section 129 and any period during which a proceeding under this Chapter for the levy of penalty is stayed by an order or injunction of any court shall be excluded.'
4. Mr. Patel, therefore, vehemently argued that the penalty proceedings for both these year having been initiated on the date of completion of the reassessment proceeding in 1958-59, and the assessment proceeding in 1964-65, by the aforesaid order dated January 25, 1969, and March 10, 1969, the two years' limitation period had expired as the final order imposing the penalty should have been passed before January 25, 1971, and March 10, 1971, in these two cases. Therefore, the Tribunal had no jurisdiction to pass such a remand order proceeding on an assumption that the Inspecting Assistant Commissioner would have authority to impose this penalty in the face of this bar of limitation enacted in section 275. Mr. Patel invoked the terms of the Explanation where the legislature lifted the bar when the opportunity for re-hearing had to be given under the proviso to section 219, when the incumbent in office has been changed and the assessee demanded such fresh opportunity or when the proceeding for imposition of penalty under Chapter XXI had been stayed by some order or injunction of any court. He also relied even on the analogy of the other provisions in the sold section 34(3) corresponding to section 153(3) and in section 263(3), and even in the very Explanation I to section 153 and the Explanation to section 263, where the legislature had made such provision for lifting the bar of limitation, whenever it so intended. Therefore, the argument of Mr. Patel was that the legislature having laid down the final limit of the period during which the penalty proceeding should be completed by the original authority, the original authority could not be conferred jurisdiction by any such remand order so as to ignore that limitation period.
5. On a plain reading of this provision where the legislature had laid down a bar of limitation for imposition of penalty, it is obvious that the term 'no order imposition a penalty under Chapter XXI' would refer prima facie to the initial order or the first order, which would have to be passed by the competent authority. When the legislature has enacted the provisions providing for appeal or revision where the appellate or revisional authority could interfere with the original imposition of penalty, the very scheme enacted by the legislature for such appeal or revision would be frustrated, if the provision in section 275 is literally read so that all these appeals, revision an even reference proceedings to this court and even an appeal to the Supreme Court would be governed by this period of two years' limitation. Even Mr. Patel also rightly did not advance this extreme contention and he proceeded on the footing that the limitation period in section 275 is meant only for the original authority imposing a penalty and not for any other higher authority who can interfere with the penalty order, under the hierarchy set up under this Act or under the Constitution. He, therefore, confined his contention to only such orders of remand when the matter again came back to the original authority. When the original authority once completes this order at the initial stage by imposing a penalty, scope of section 275 is, however, completely exhausted because the initial order by the competent authority had been passed. Therefore, when the remand is by the higher authorities in appeal or revision or because of the answer given in the reference or because of the answer given in the reference or because of the constitutional provision, the original order having been interfered with, the section could not be literally read, as it would otherwise frustrate the whole intention of the legislature. The legislature could never have intended that these higher authorities which are set up to interfere with the penalty order in their entirety (sic) or should only set it aside, and should not pass such just remand orders, requiring the fresh order to be passed by the authority imposing the penalty. Even Mr. Patel had to concede on the basis which he had accepted that if the higher authority adopted a colourable device to call for merely a finding from the original authority retaining the original matter on its file, this bar of limitation would not apply. The legislature could never have intended that for doing justice and for exercising the jurisdiction created in these higher authorities, such a colourable device should be adopted. the plain effect of such a situation would be that the interpretation sought to be put by Mr. patel leads to such an absurd result that if two constructions are possible, that construction must be preferred which avoid this result. In such cases where the authority imposing penalty had not given due hearing as required by the mandatory provisions of section 274, and when under our Constitution none can be penalised without giving him proper opportunity of hearing, even in accordance with the principles of natural justice, it is obvious that if the higher authority was left in such a predicament either to confirm the order or set aside in its entirety, it would be to perpetuate injustice. Justice can only be done in such cases by again going into the merits and, therefore, the plain interpretation of section 275 to avoid in such a situation, would be that this bar only applies to the initial order of the authority imposing penalty and the bar would not apply to such fresh order after remand. If the legislature intended to cover situations arising after the higher authorities have remanded the matters for fresh orders, appropriate language to that effect would have been used by providing a time limit for passing final order, including all the other stags of appeal, revision, etc. The very length of two years' period itself indicated that the legislature never intended to set up such a limit for the final completion of all proceedings and that is why Mr. Patel even rightly makes that concession.
6. Mr. Patel could draw no inspiration from the words of the Explanation or from the analogy of other provisions which are clearly by way of abundant caution. If the just interpretation of the section as per the true intention of the legislature achieved the same result, it is obvious that such provisions would be clearly superfluous or by way of abundant caution. But that would not justify an argument to put any such absurd or unjust construction on that section.
7. Mr. Patel in this connection vehemently relied upon a decision of the Kerala High Court in Additional Commissioner of Income-tax v. K. S. G. Panicker : 97ITR525(Ker) . It is true that that decision was in the context of similar penalty order which has been passed by the original authority after the matter was remanded to him by the Tribunal because penalty at the initial stage was imposed without giving the assessee adequate opportunity to represent his case. At page 527, it was held that the presence of similar safeguard in sections 153(3) and 263(3) and the absence of any such safeguard in section 275 can give rise only to one conclusion that section 275 should be applied in its undiluted form disregarding the consequences. It was, therefore, held that the penalty order, after remand even after two years' period had expired form the date of the completion of the authority proceeding, was without jurisdiction and it was against the statutory provision in section 275. The Bombay view in Commissioner of Income-tax v. Kishoresinh Kalyansinh Solanki : 39ITR522(Bom) , which was a decision dated April 6, 1960, and it would be binding on this court, had not been accepted on the ground that, however desirable it would be to have a provision that the period of limitation would not apply when the authority was acting under the direction of the appellate authority, such a provision could not be introduced by the judicial decision. With great respect to the learned judges of the Kerala High Court, this view of the legal position is entirely erroneous and contrary to all settled principles of construction of statutes.
8. Even the limitative construction placed by us would carry out fully this salutary object of the legislature because the initial order would have to be passed by the original competent authority within two years' statutory time-limit and it is only in that limited class of cases where the penalty order would have to be interfered with by a remand by higher authorities in appeal or revision or under the constitutional provision that the bar would be lifted. Such limited construction would not only completely carry out the salutary object of the legislature behind this provision of setting down a time-limit for the original authority for passing the initial order of penalty under section 275, but would also give full effect to the reason or justice behind this provision, in view of the compelling context of the hierarchial scheme for correction of this penalty order when the higher authorities are given that jurisdiction under the Act or under the Constitution. When two constructions even in such a taxing statute and even in the context of levy of a penalty are permissible, it is only the limitative construction which would have to be adopted to a void the aforesaid absurd and unjust consequence. A construction which accords with reason and justice must be preferred to one which would completely defeat the intention of the legislature without advancing the salutary object of this provision.
9. The aforesaid decision in Kishoresinh Kalyansinh Solanki's case : 39ITR522(Bom) was in the context of section 33B(2)(b) of the Indian, Income-tax Act, 1922, which provided that no order shall be made under sub-section (1), after the expiry of two years from the date of the order sought to be revised. The limitative construction was adopted on this two years' limitation period by holding that it applied only to an order made suo motu by the original authority itself and not to an order or direction of any higher authority. Literal construction of the section would have led to manifest absurdity and so the limitative construction was preferred as the only correct conclusion. That is why it was in terms held that no light could be thrown on the question of correct interpretation of such a section by provisions like the proviso to section 34, where the legislature had lifted the bar by enacting such a proviso only ex abundanti cautela. That is why at page 532 in the aforesaid decision it was in terms held that the true meaning of any passage in a statue is that which best harmonises with the object and each passage of the statute and the court should ordinarily and as far as possible see that the interpretation it puts on a particular provision makes a consistent enactment of the whole statute. Where the main object and the intention is clear, it must not be reduced to the nullity by the draftsman's unskilfulness. The court will read not only the particular provision but also allied and cognate provisions as forming a connected scheme and not treat them as detached provisions. A casus omissus was not rightly inferred in such a case, when the true meaning could be given by preferring a limited construction in consonance with the particular subject-matter by avoiding the other wider meaning resulting in absurdity, repugnancy and inconsistency.
10. The same is the approach adopted by their Lordship in Director of Inspection of Income-tax (Investigation) v. Pooran Mall & Sons : 96ITR390(SC) , where an identical question had arisen because the order under section 132(5) of the Act had to be passed within 90 days of the seizure of the article in question. Under section 132(10) if a person legally entitled to the books of account nor other documents seized under sub-section (1) or sub-section (1A) objects for any reasons to the approval given by the Commissioner under sub-section (8), he may made an application to the Board stating therein the reasons for such objection and requesting for the return of the books of account or other documents. Under sub-section (12) on receipt of the application under sub-section (1) the Board, or on receipt of the application under sub-section (11) the notified authority may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit. In that case in a writ petition filed before the High Court by consent of the parties the High Court had quashed the original order of seizure and permitted the department to make a fresh enquiry after giving an opportunity of hearing to the petitioner and to pass a fresh pass a fresh order within two months. After fresh enquiry when the Income-tax Officer passed a fresh order, another petition was filed challenging the jurisdiction of the Income-tax Officer to pass this fresh order, beyond the period prescribed under section 132(5). This identical question had been examined by their Lordship at page 394. Their Lordship first proceeded on the assumption that the period of time of 90 days fixed under section 132(5) was mandatory and it was held that even if the period of time fixed under section 132(5) was held to be mandatory, that condition was satisfied when the first order was made. Thereafter if any other direction was under section 132(12) or by a court in writ proceedings, as in that case, such an order made in pursuance of such a direction would not be subject to the limitation prescribed under section 132(5). Once the order had been made within 90 days aggrieved person had a right to approach the notified authority under section 132(11) within thirty days and that authority could direct the Income-tax Officer to pass a fresh order. Their Lordship, therefore, refused to accept the contention that even such a fresh order should be passed within 90 days as contemplated by section 132(5) because that would make sub-section (11) and (12) of section 132 ridiculous and useless. Their Lordship then pointed out that what could be done by the notified authority could also be done as per the settle legal position by the court which exercised its power under article 226 of the Constitution because otherwise the powers of the court under article 226 would be wholly ineffective unless they could mould the remedy to suit the facts of a case. If in a particular case a court take the view that the Income-tax Officer while passing an order under section 132(5) did not give an adequate opportunity to the party concerned, it should not be left with the only option of quashing it and putting the party at an advantage even though it may be satisfied that on the materials before him the conclusion arrived at by the Income-tax Officer was correct or dismissing the edition because otherwise the party would get an unfair advantage. It was pointed out that the power to quash an order under article 226 can be exercised not merely when the order sought to be quashed was one without jurisdiction in which case there could be no room for the same authority to be directed to deal with it. But, in the circumstances of the case, the court might take the view that another authority had the jurisdiction to deal with the matter and may direct that authority to deal with it or where the order of the authority which had the jurisdiction was vitiated by the circumstances like failure to observe the principles of natural justice, the court might quash the order and direct the authority to dispose of the matter afresh after giving the aggrieved party reasonable opportunity of putting a forward its case. Their Lordships pointed out that otherwise, it would mean that where a court quashed an order because the principles of natural justice had not been complied with, it should not while passing that order permit the Tribunal or the authority to deal with it again irrespective of the merits of the case. At page 396, their Lordships referred to the argument based on the Explanation I to section 132 and similar provisions in certain other sections, which laid down that in computing the period of limitation any period during which any proceedings was stayed by an order or injunction of any court shall be excluded, as it was vehemently contended that where the legislature intended that the period of limitation prescribed by any of the provisions of the Income-tax Act should not be strictly enforced, the law itself made a specific provision. Their Lordship pointed out that it was a well-established principle of judicial procedure that where any proceedings were stayed by an order of a court or by an injunction issued by any court that period should be excluded in computing any period of limitation laid down by law. Especially after the Limitation Act, 1963, the provisions of which were now applicable to all proceedings, a provision like Explanation I to section 132 was superfluous and no argument could be based on it. Therefore, this decision completely settles the whole question of proper construction of the similar provisions creating a bar of limitation as in section 275 in the context of penalty proceedings, where also provisions like the Explanation and similar other provisions which provided for lifting of bar in certain cases, proceedings on certain well-settled principles of judicial procedure would have to be treated as superfluous or by way of abundant caution and not by way of throwing any light on the true construction or the interpretation of the provision.
11. Mr. Patel, however, vehemently relied on the passage at page 397, where their Lordships had pointed out the settled ratio that, naturally, after the period of limitation had expired, no proceedings could be taken to assess nor could any period of limitation laid down by the Act be extended merely by a superior tribunal directing an inferior tribunal to make an assessment or to take proceedings which result in assessment after the period of limitation was over. This ratio of some of the settled decision was distinguished by their Lordships because in deciding the question of title to the property seized under section 132(1), the Income-tax Officer was not exercising any powers of taxation but only the question as to the person to whom the property seized belonged an to such a case the provisions of ordinary law which deals with the tribunals and courts which decide the question of title to properties should be deemed to apply. These observations, however, have been made by their Lordships to repeal the contention that there can be no question of any equity about limitation and the provisions must be strictly construed. In that case, the person concerned having by consent obtained a remand order was held to be precluded from urging any such contention. The question is not of any equity in the present case but about the true construction of such limitation provision and the question is already answered by their Lordships that in order that such hierarchial shame under the Act or the Constitution, where the other higher authority or superior court could pass order of remand for passing a fresh order would not be rendered ridiculous and useless, such limitation must be spelt out looking to the reason and justice behind such provision. That order to which such limitation applies was only the first order or the initial order of the competent authority and not the order which would have to be passed in pursuance to the remand order of the higher authorities or the superior court and that in such a contexts no light could be thrown from the fact that proceeding on well-established principles of judicial procedure, other provisions of exclusion of limitation period are specifically made in the other cognate provision by way of abundant caution.
12. Mr. Patel could hardly draw any inspiration from the decision of the Allahabad High Court in Commissioner of Income-tax v. Ram Baran Ram Nath : 104ITR691(All) , where the original remand order of the Tribunal was of a limited nature as under (page 692) :
'We accordingly set aside the order of the Inspecting Assistant Commissioner, who shall, if need be, pass a fresh order as he thinks expedient in accordance with law.'
13. The learned judges had in terms observed at page 694 that the only liberty left to the Inspecting Assistant Commissioner was to make a fresh order which would be valid in law, and so it was unnecessary to express a concluded opinion on the other question whether the Inspecting Assistant Commissioner would have been bound to obey the direction of the Tribunal to pass a fresh order of penalty, irrespective of the fact that by lapse of time he lost jurisdiction to make such an order. That question in those circumstances was found to be of academic value and was not answered.
14. Finally, Mr. Patel tried to argue that such an order in flagrant violation of section 274 without giving any opportunity or hearing was an order without jurisdiction and, therefore, in such cases the bar laid down under section 275 must apply, even when the matter went back to the original authority. Mr. Patel ignores that both in the Bombay decision : 39ITR522(Bom) and in Puran Mal's case : 96ITR390(SC) , before their Lordships the cases were of very identical type where the remain had been necessary, because the original order had been passed without giving adequate opportunity of hearing and in such a contexts their Lordships have adopted this limited construction that this bar applies only to the initial order of the competent authority and not to the fresh order which would have to be passed in pursuance of the remain order of the higher authority. Therefore, Mr. Patel could not invoke in the present case the bar of limitation period prescribed under section 275 and on that ground urged that the Tribunal was not justified in law in remanding the matter back of the Inspecting Assistant Commissioner for passing a fresh rode under section 27(1)(c) of the Act.
15. Mr. Patel wanted to urge that the order of the competent authority was a mala fide order as at the very fag end, when the limitation period was about to expire, this order had been passed and the Tribunal without going into this material aspect had remanded the matter, which would enable the original authority to get out of the bar of limitation. Such a question should have been urged before the Tribunal and without proper material and findings of the Tribunal on this material question, it would not be open to such to go into this question and, therefor, we have not permitted Mr. Patel to raise any such contention.
16. In that of the matter this reference must be answered in the affirmative, that is to say, against the assessee and in favour of the revenue. Reference is accordingly disposed of and the assessee shall pay the costs of the Commissioner.
17. Mr. Patel asks for a certificate for appeal to the Supreme Court under section 261. In view of the conflict of decisions on this material question as aforesaid, we would issue a certificate under section 261 as the question of true interpretation of section 275 is a fit one for being certified for appeal to the Supreme Court. The certificate shall accordingly issue.