High Court Of Madhya Pradesh
Dharamdas Agrawal vs. CIT
Asst. Year 1956-57
N.D. Ojha, C.J. & K.K. Adhikari, J.
Misc. Civil Case No. 186 of 1983
25th August, 1987
H.S. Shrivastava, for the Petitioner : B.K. Rawat, for the Respondent
N.D. OJHA, C.J.:
On an application made by the assessee under s. 256(2) of the IT Act, 1961 (hereinafter referred to as âthe Act’), this Court directed the Tribunal to draw up a statement of the case and refer the following question to this Court for its opinion:
“Was the Tribunal right in law in refusing to entertain the following ground which was raised by the assessee at the stage of argumentâ âthat the inordinate delay in passing the order under s. 28(1)(c) be held good ground for not levying the penalty’ ?”
The facts in a nutshell which are necessary for answering this question are that the order for the asst. yr. 1956-57 was made on 18th March, 1961 and the order imposing penalty was passed on 31st July, 1974 under s. 28(1)(c) of the 1922 Act. The order of imposing penalty under s. 28(1)(c) was maintained in appeal by the AAC and also by the Tribunal in second appeal.
Before the Tribunal, during the course of arguments, a prayer was made for permitting a question to be raised as to whether it was expedient to impose penalty after about 13 years of the passing of the order of assessment. The Tribunal did not grant permission to raise this question for the first time during the course of arguments. The Tribunal held that the assessee could not be allowed to raise the additional ground of appeal because the reasonableness of delay in finalising the penalty proceedings is a question of fact and not a question of law and that even though a question of law could be raised at any stage, provided the proceedings were pending either before the assessing authority or before the appellate authorities, this privilege could not be availed of as of right in regard to the question of fact. Thereafter, the assessee made an application under s. 256(1) of the Act requiring the Tribunal to refer certain questions to this Court for its opinion. The said application having been dismissed, the assessee made the application under s. 256(2) of the Act on which the order requiring the Tribunal to draw up a statement of case and refer the aforesaid question, was passed by this Court.
It has been urged by learned counsel for the petitioner that since penalty had been imposed after about 13 years, the undue delay was a good ground for not levying penalty and the Tribunal ought to have permitted the plea which was sought to be raised before it and, therefore, committed an error of law in refusing to grant permission prayed for. We find it difficult to agree with this submission. It is not the case of the assessee that the order imposing penalty was passed in breach of any statutory provision prescribing limitation for passing an order of penalty.
The case which the assessee wanted to set up before the Tribunal for the first time during the course of arguments in second appeal was that it was not expedient to pass an order of penalty after the expiry of about 13 years. In MCC No. 14/83, CIT vs. Dr. Manoranjan Mohanty [reported as (1988) 67 CTR (MP) 104 : (1988) 171 ITR 95 (MP)] it was held by us while giving opinion on almost a similar question that on the facts and in the circumstances of the case, the Tribunal was not correct in law in holding that the penalty order passed by the IAC under s. 271(1)(c) of the Act on 30th Jan., 1979 was bad in law as having been made after an inordinate delay of six years of the order of the remand without recording relevant finding and fixing responsibility for the delay and finding its effect upon the penalty order. When a question comes up for consideration as to whether it was expedient or not to impose penalty on account of delay, relevant finding had to be recorded as to whether there was sufficient cause for the delay or not. Responsibility for the delay has to be fixed and a further finding has to be recorded in regard to the effect upon the penalty order of the relevant facts and circumstances that may be proved by the parties on the question of expediency to pass an order of penalty even after inordinate delay.
In the instant case, the question as to whether it was expedient or not to impose penalty in view of the inordinate delay, was never raised by the assessee before the ITO or before AAC. It also does not seem to have been raised even before the Tribunal in the memo of appeal and was sought to be raised for the first time during the course of arguments. Indeed, as is apparent from the appellate order of the Tribunal, before the AAC, the leaned counsel for the assessee, in place of raising the question of expediency to impose penalty even after inordinate delay, submitted that he did not want to press the appeal on merits, but pleaded that the quantum of penalty may be reduced as the penalty imposed was excessive. Learned counsel for the assessee also conceded before the AAC that the penalty had been rightly imposed by the ITO under s. 28(1)(c) of the 1922 Act. It is, therefore, a case where a pure question of law was not sought to be raised by the assessee before the Tribunal. It was also not a case where even though the question of fact was sought to be raised, all the relevant material to decide that question was already on record. On the other hand, it was a case where relevant facts, in order to find out as to whether it was expedient to impose penalty in spite of inordinate delay, had yet to be brought on record. For that purpose, the parties were to be given an opportunity of adducing evidence. It is in this background that the order of the Tribunal refusing to admit the question to be raised for the first time during the course of arguments has to be considered. In our opinion, considering the said order in this background, it is not possible to take the view that the discretion which the Tribunal exercised in not permitting the said question to be raised, was, in any manner, arbitrary. It has not been disputed that the question, being one which can be treated to be, at best, a mixed question of fact and law, it was in the discretion of the Tribunal to permit or not to permit the said question to be raised. Of course, discretion has to be exercised judicially and not arbitrarily. In view of the facts of the instant case pointed out above, it is difficult to hold that the discretion exercised by the Tribunal was not judicial, but was arbitrary.
In view of the foregoing discussion, our answer to the question referred to us is that the Tribunal was right in law in refusing to entertain the following ground which was raised by the assessee at the stage of argument: “That the inordinate delay in passing the order under s. 28(1)(c) be held good ground for not levying penalty.”
In other words, the question is answered in the affirmative, against the assessee and in favour of the Department. In the circumstances of the case, however, there shall be no order as to costs.
[Citation : 171 ITR 104]