Delhi H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in deleting the penalty of Rs. 46,135, Rs. 52,210 and Rs. 58,065 for the asst. yrs. 1967-68, 1968-69 and 1969-70 respectively levied under s. 271(1)(c) ?

High Court Of Delhi

CIT vs. Jain Brothers

Sections 271(1)(c),Expln.

Asst. Year 1967-68, 1968-69, 1969-70

Arijit Pasayat, C.J. & D.K. Jain, J.

IT Ref. Nos. 160 to 162 of 1983

16th August, 2001

Counsel Appeared

Sanjiv Khanna with Ms. Prem Lata Bansal, for the Petitioner : None, for the Respondent

JUDGMENT

ARIJIT PASAYAT, C.J. :

These three reference applications involve identical questions and are, therefore, disposed of by this common judgment. Pursuant to the direction given by this Court under s. 256(2) of the IT Act, 1961 (in short ‘the Act’), by order, dt. 21st Oct., 1981, the Income-tax Appellate Tribunal Delhi Bench-D (‘Tribunal’ in short) has referred the following questions for opinion of this Court :

“Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in deleting the penalty of Rs. 46,135, Rs. 52,210 and Rs. 58,065 for the asst. yrs. 1967-68, 1968-69 and 1969-70 respectively levied under s. 271(1)(c) ?”

“Whether, on the facts and in the circumstances of the case, did not the ITO have jurisdiction to initiate the penalty proceedings under s. 271(1) again, after he had decided the case afresh ?”

2. Factual position is almost undisputed and is as follows : For three assessment years involved, i.e., 1967-68, 1968-69 and 1969-70, assessee had filed its returns of income. For the asst. yr. 1967-68 the return was filed on 28th Oct., 1968, declaring an income of Rs. 3,46,900. The Income-tax Officer (ITO in short) completed the assessment on 30th March, 1972, on total income of Rs. 7,52,304. Matter was carried in appeal before the Appellate Assistant Commissioner (‘AAC’ in short). Vide his order dt. 7th March, 1973, AAC granted partial relief and directed the ITO to look into the genuineness of certain deposits on which interest was disallowed by the ITO. While giving effect to the order passed by the AAC, ITO passed an order on 27th June, 1974, and also initiated proceedings under s. 271(1)(c) of the Act. Matter was referred to the Inspecting Assistant Commissioner (‘IAC’ in short) under s. 274(2) of the Act as the amount, in respect of which there was alleged furnishing of inaccurate particulars of income, exceeded Rs. 25,000. For the asst. yr. 1968-69 the position was factually the same except that the return was filed on 20th March, 1969, declaring an income of Rs. 2,95,517 against which ITO completed assessment on a total income of Rs. 4,43,937. For the asst. yr. 1969-70 similar was the factual position. The assessee had furnished its return of income on 26th June, 1969, declaring an income of Rs. 3,59,650 as against which assessment was completed on a total income of Rs. 4,69,839. The main addition which was the basis for levy of penalty was on account of disallowance of interest on loans which had been surrendered earlier by the assessee and those which were surrendered before the ITO, when he was giving effect to the order passed by the AAC. The interest on account of the amounts surrendered earlier came to Rs. 45,463, Rs. 50,420 and Rs. 56,415, respectively, for the three assessment years. There were other amounts for the three assessment years in question which amounted to Rs. 13,312, Rs. 39,412 and Rs. 50,294, respectively. While giving effect to the order passed by the AAC, ITO found that the figures would be Rs. 672, Rs. 1,790 and Rs. 1,650, respectively. As noted above the original assessments were completed on 30th March, 1972, and matter was referred to the IAC under s. 271(1)(c) r/w s. 274(2) of the Act for alleged concealment of income and for furnishing inaccurate particulars thereof. IAC by order, dt. 26th March, 1974, dropped the proceedings. His order was. “The penalty proceedings started under s. 271(1)(c) in this case are hereby dropped.” Obviously, the order was in relation to the assessments which were originally completed on 30th March, 1972. Proceedings were again initiated under s. 271(1)(c) and rejecting the assessee’s contention regarding non-desirability of continuing with the proceedings, the IAC imposed penalties which were challenged before the Tribunal by the assessee. Tribunal considered the effect of the order passed by the IAC earlier and held that penalties levied could not be sanctioned. Prayer for reference under s. 256(1) of the Act was rejected. However, as stated above, pursuant to the direction given by this Court, the questions as set above have been referred for opinion of this Court.

We have heard learned counsel for Revenue. There is no appearance on behalf of assessee in spite of notice. Learned counsel for Revenue submitted that there is no bar on fresh initiation of proceedings and merely because the proceedings had been dropped earlier, that is no reason to hold that subsequently penalty proceedings cannot be initiated. Though there cannot be any bar and proceedings under s. 271(1)(c) of the Act can be initiated at any stage of the proceedings, on the facts of the case we find that Tribunal’s conclusions are in order. Proceedings initiated on the basis of the orders passed on 30th March, 1972, were in respect of higher figures of income. Subsequently, what has been found to be disallowable was Rs. 672, Rs. 1,790 and Rs. 1,650 respectively. Even if these figures are taken into account, the Explanation appended to s. 271(1)(c) cannot be made applicable. As noted above, IAC, after consideration of the factual position, held that proceedings were to be dropped in respect of the amounts stated above which were subsequently came to be reduced to much lesser figures. In the circumstances the question of imposition of penalty under s. 271(1)(c) does not arise. Accordingly, the first question is answered in the affirmative, in favour of assessee against Revenue. So far as the second question is concerned, that is really of academic interest, and we decline to answer the same.

The references stand disposed of accordingly.

[Citation : 252 ITR 655]

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