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Sundardas Thackersay and Bros Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 351 of 1979
Judge
Reported in[1984]147ITR524(Cal)
ActsIncome Tax Act, 1961 - Sections 154, 154(3), 271(1) and 271(2)
AppellantSundardas Thackersay and Bros
RespondentCommissioner of Income-tax
Appellant AdvocateS. Bhattacharjee, Adv.
Respondent AdvocateA.C. Maitra and ;A.N. Bhattacharjee, Advs.
Excerpt:
- .....271(1)(a) of the act, vide his orders both dated 16th november, 1967. the ito worked out the quantum of penalty on the basis of the assessed tax payable by the assessee as a registered firm. against the said orders of the ito, the assessee preferred appeals before the aac. pending the said appeals, the ito noticed that the quantum of penalty worked out by him was not in accordance with the provisions of section 271(2) of the act, inasmuch as he had worked out the quantum of penalty on the basis ofthe assessed tax payable by the assessee as a registered firm instead of treating it as an unregistered firm for this limited purpose, he, therefore, enquired of the assessee whether it had any objection to the rectification of the obvious mistake in the calculation of the quantum of.....
Judgment:

Sabyasachi Mukharjee, J.

1. The Tribunal has referred to us the following question :

' Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the orders dated 15th February, 1968, passed by the Income-tax Officer under Section 154 of the I.T. Act, 1961 '

2. The assessee is a firm registered under the Act. The assessment years are 1963-64 and 1964-65.

3. As there was delay of two months in filing the returns of income for each of the years under reference, the ITO imposed penalty under Section 271(1)(a) of the Act, vide his orders both dated 16th November, 1967. The ITO worked out the quantum of penalty on the basis of the assessed tax payable by the assessee as a registered firm. Against the said orders of the ITO, the assessee preferred appeals before the AAC. Pending the said appeals, the ITO noticed that the quantum of penalty worked out by him was not in accordance with the provisions of Section 271(2) of the Act, Inasmuch as he had worked out the quantum of penalty on the basis ofthe assessed tax payable by the assessee as a registered firm instead of treating it as an unregistered firm for this limited purpose, he, therefore, enquired of the assessee whether it had any objection to the rectification of the obvious mistake in the calculation of the quantum of penalty imposable under Section 271(1)(a) read with Section 271(2) of the Act. On 23rd January, 1968, the ITO made the following noting in the order sheet :

' Sri Jirji Thakersay appears to say that the assessee has no objection to rectification in the matter of calculation of penalty Under Section 271(1)(a) which is apparent from record '.

4. Therefore, on 13th March, 1968, the ITO passed orders under Section 154 of the Act, whereby he worked out the correct quantum of penalty as contemplated under Section 271(1)(a) read with Section 271(2) of the Act and issued demand notices and challans accordingly.

5. On 7th March, 1968, the AAC passed a consolidated order in respect of the appeals preferred by the assessee against the orders of the ITO dated 16th November, 1967, made under Section 271(1)(a) of the Act, wherein the AAC held that ' the quantum of penalty ' imposed is as per the provisions of the Act and, therefore, cannot be considered as excessive.

6. In appeals before the AAC against the orders of the ITO passed under Section 154 of the Act, it was contended on behalf of the assessee that, (i) since there was no mistake apparent on record, the ITO was not justified in passing orders under Section 154 of the Act, whereby he enhanced the quantum of penalty, (ii) as the ITO had not given notices has contemplated under Section 154(3) of the Act before passing orders under Section 154 of the Act, the penalty proceedings were bad in law, and (iii) the AAC by his order dated 7th March, 1968, had processed the assessee's case by observing that the quantum of penalty imposed was as per the provisions of the Act and cannot, therefore, be considered excessive. Overruling the contention of the assessee, the AAC upheld the action of the ITO.

7. Being aggrieved by the order of the AAC, the assessee came up in appeal before the Tribunal. At the outset, the learned representative for the assessee very fairly stated that he cannot possibly dispute the application of the provisions of Section 271(2) of the Act. He, however, submitted that since the ITO had not issued notices in writing as contemplated under Section 154(3) of the Act, nor did he verbally inform the assessee of the proposed rectification, the entire proceedings were ab initio bad in law. In this connection, he referred to the decisions of the Tribunal as well as of the High Court in the case of Lohia Jute Press (Pvt.) Ltd. wherein, dealing with the provisions of Section 23A of the Indian I.T. Act, 1922, it was held that the assessee should be given an opportunity of being heard before passing an order under Section 23A of the Indian I.T. Act, 1922. The learned representative for the Department, on the other hand, strongly relied on the order of the AAC and justified his notice. He further submitted that once the assessee had not disputed the applicability of the provisions of Section 271(2) of the Act, there was no merit in the appeals preferred by the assessee inviting the attention of the Tribunal to Section 154(3) of the Act. The learned representative for the Department submitted that as there was no statutory notice prescribed under the said section, it would be sufficient if the assessee had been verbally told about the proposed rectification. In this connection, he invited the attention of the Tribunal to the order sheet entry made on 25th January, 1968 (reproduced above), and submitted that it could not be disputed that the assessee was, in fact, informed by the ITO about the proposed rectification under Section 154 of the Act.

8. The Tribunal, after considering the rival submissions of the parties, observed as follows:

' We have carefully considered the rival submissions of the parties and we do not find any substance in the appeals preferred by the assessee. We entirely agree with the submissions made on behalf of the Revenue that once the assessee concedes that the provisions of Section 271(2) of the Act are applicable in the case, the assessee cannot challenge the proceedings initiated by the Income-tax Officer under Section 154 of the Act merely on the ground that the show cause notice was not issued to it intimating the proposed rectification. On a plain reading of the provisions of Section 154(3) of the Act, we entirely agree with the submissions made on behalf of the Revenue that since no statutory notice is prescribed under the statute, it would be sufficient if the assessee is made aware of the fact of the Income-tax Officer's intention to rectify the order under Section 154 of the Act verbally or otherwise. In the present case, it cannot be denied that the assessee was made aware of the Income-tax Officer's intention to rectify the order under Section 154 of the Act in view of the order-sheet entry referred to above. We, therefore, have no hesitation in upholding the order of the Appellate Assistant Commissioner under appeal.'

9. Thereafter, the Tribunal referred the question as indicated above. We have noticed the question. The factual aspect has not been challenged. There is no question of perversity. It appears from the record that the learned representative of the assessee did not object to the rectification in the matter of calculation of penalty. In that view of the matter and in further view under Section 154, no formal notice as such is required. In our opinion, in this matter, the Tribunal arrived at the correct conclusion. In the decision of the Supreme Court in the case of Maharana Mills (P) Ltd. v. ITO, : [1959]36ITR350(SC) , in dealing with Section 35, which was the correspondingsection of the Indian I.T. Act, 1922, the Supreme Court observed at page 355 of the said report as follows :

' The object of the provision as to notice in the second sub-section of Section 35 is that no order should be passed to the detriment of an assessee without affording him an opportunity but it cannot be said that the rule is so rigid that if, as a matter of fact, the assessee knows of the proceedings and the matter has been discussed with him then an adverse order would be invalid merely because no notice under Section 63 was given. Of course this postulates that the reasonable opportunity has been given to show cause. Secondly, this provision is applicable only where the assessment is enhanced or refund is reduced. Neither of those contingencies has arisen in the present case.'

10. In that view of the matter, we are of the opinion that the Tribunal was right in arriving at its conclusion and, in the premises, the question must be answered in the affirmative and in favour of the Revenue.

11. Parties will pay and bear their own costs.

Suhas Chandra Sen, J.

12. I agree.


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