Madhya Pradesh H.C : Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that since penalty proceedings were not initiated during the course of the regular assessment proceedings but were initiated while revising the assessment under s. 155(1) of the IT Act, the levy of penalty under s. 273(b) of the IT Act is bad in law ?

Counsel Appeared

R.C. Mukati, for the Revenue : Bagadiya, for the Assessee

G.G. SOHANI, J.:

By this reference under s. 256(1) of the IT Act, 1961 (hereinafter referred to as ” the Act”), the Tribunal, Indore Bench, has referred the following question of law to this Court for its opinion:

” Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that since penalty proceedings were not initiated during the course of the regular assessment proceedings but were initiated while revising the assessment under s. 155(1) of the IT Act, the levy of penalty under s. 273(b) of the IT Act is bad in law ?”

2. The material facts giving rise to this reference, briefly, are as follows : The assessee, who is a partner in a registered firm, filed returns of income for the asst. yrs. 197475 to 1976-77 declaring his share income from the firm. The ITO completed the assessment and did not initiate any action against the assessee under s. 273 of the Act. Later on, on completion of the assessment of the firm, the ITO proceeded to rectify the assessments under s. 155 of the Act and at that stage, proceedings under s. 273(b) of the Act were initiated against the assessee. The objection raised on behalf of the assessee that as the penalty proceedings were not initiated against the assessee in the course of regular assessment, the proceedings commenced by the ITO were not valid, was not upheld by the ITO who levied penalty under s. 273(b) of the Act. Aggrieved by those orders, the assessee preferred appeals. The AAC upheld the contention urged on behalf of the assessee and the orders imposing penalty passed by the ITO were set aside. Aggrieved by those orders, the Revenue preferred appeals before the Tribunal which dismissed the appeals. The Revenue, therefore, sought a reference and it is at the instance of the Revenue that the aforesaid question of law has been referred to this Court for its opinion.

3. At the time of hearing, learned counsel for the parties conceded that the facts and the question of law arising in this case are similar to those which arose in CIT vs. Smt. Mamta Tiwari (Misc. Civil Case No. 63 of 1985) decided by this Court on July 17, 1987—(1987) 66 CTR (MP) 83 : (1988) 171 ITR 59. We see no valid reason to take a view different from that taken in Misc. Civil Case No. 63 of 1985. (supra P. 59). Following that decision, therefore, the penalty proceedings in the instant case must be held to have been initiated during the course of proceedings in connection with the “regular assessment ” within the meaning of that expression as defined by s. 2(40) of the Act. In our opinion, therefore, the Tribunal was not justified in holding that the levy of penalty under s. 273(b) of the Act was bad in law.

Our answer to the question referred to this Court is, therefore, in the negative and against the assessee. In the circumstances of the case, parties shall bear their own costs of this reference.

[Citation : 171 ITR 66]