Punjab & Haryana H.C : Penalty notices under ss. 271(1)(c), 271(1)(a) and 140A and under s. 273 have already been issued

Section 254(4)

Asst. Year 1973-74

Counsel Appeared

L.K. Sood, for the Revenue : D.K. Gupta, for the Assessee

GOKAL CHAND MITAL, J.:

For the asst. yr. 1973-74, the assessee filed a return on 19th Oct., 1973, showing income of Rs. 2,19,410. On 29th March, 1976, the ITO finalised the assessment at Rs. 4,71,798 which was rounded off to Rs. 4,71,800. On the top of the order, it was written:

“Draft assessment order under s. 144B”. By the aforesaid assessment order, the income of the firm was allocated among its partners and in the end, the following lines were written: “Penalty notices under ss. 271(1)(c), 271(1)(a) and 140A and under s. 273 have already been issued.”

The order was signed by the ITO. The aforesaid order was served on the assessee on 30th March, 1976, along with the demand notice and challans. On 7th April, 1976, the ITO passed the following order under s. 144B(3) of the IT Act, 1961 (hereinafter called “the Act”). “The draft assessment order served on 30th March, 1976, on you should be treated as final as the statutory period of one week has already elapsed and no objection has been filed. Demand notice, challan and penalty notices have already been issued and served. However, copies of the same are again enclosed for necessary action.”

The CIT initiated proceedings under s. 263 of the Act for revising the orders of the ITO dt. 29 March, 1976, as he had not followed the provisions of s. 144B and the same was considered to be erroneous and prejudicial to the interests of the Revenue. The Commissioner dropped the proceedings, vide order dt. 31st August, 1976, with the observations that s. 263 of the Act was not applicable for revising the draft statement and issued fresh notice on 1st Nov., 1976, under the same provision to revise the order dt. 7th April, 1976. By order dt. 8th Dec., 1976, the Commissioner cancelled the order of the ITO dt 7th April, 1976, and ordered that fresh proceedings should be taken by the ITO in accordance with law after following the procedure.

In the meantime, the assessee had filed an appeal on 30th April, 1976, against the order of the ITO dt. 29th March, 1976. On 1st March, 1979, that appeal was accepted by the CIT(A) on the ground that the ITO had not followed the procedure laid down for passing order under s. 144B and direction was issued to the ITO to pass a fresh order after following the procedure. On 13th March, 1981, the ITO sent a draft assessment order to the assessee inviting its objections and the draft assessment order along with the objections was sent to the IAC for seeking directions and guidance for enabling him to complete the assessment. On receipt of the directions and guidance, the ITO finalised the assessment on 25th Aug., 1981, and assessed the income at Rs. 3,73,517. The assessee remained unsuccessful before the CIT(A) except regarding depreciation on second hand car and took the matter in further appeal before the Tribunal. The Judicial Member, for the reasons recorded in his order, cancelled the assessment order. However, regarding the plea whether the assessment was barred by limitation, he recorded the following order: “As far as the plea of the assessment, barred by time, is concerned, we may note that it does not arise on facts. Once we have held that the order passed by the CIT(A) lacked jurisdiction, the resultant assessment being vitiated, it is needless to consider the plea that it was barred by time also . For this reason, we refrain from dealing with it.”

The Accountant Member did not agree with the reasoning of the Judicial Member in cancelling the assessment order. However, regarding the point of limitation, he recorded the following order: “Consequently, I am also of the view that the question of limitation raised by the assessee in the grounds of appeal has to be decided by the Tribunal and is not to be left undecided.”

In view of the difference of opinion, the Judicial and Accountant Members passed the following order on 22nd June, 1983, under s. 255(4) of the Act. “As there is a difference of opinion between us on the point as to whether the assessment for the year 1973-74 is barred by limitation, we refer the case to the President of the Tribunal for further action as provided in s. 255(4) of the IT Act, 1961.”

Accordingly, the matter was referred to the President of the Tribunal who entrusted the case for decision to the Vice- President. The Vice-President gave his own reasoning and the operative portion of the order concerning the point for determination is as follows: “I agree with the learned Judicial Member that the assessment not having been made on 31st March, 1979, the date on which the action pursuant to the Commissioner’s order becomes time barred, the subsequent assessment order passed should be treated as barred by limitation. The matter will now go back to the original Bench for disposal according to law.”

4. At the instance of the CIT the Triubnal has referred the following questions for the opinion of this Court:

“(1) Whether, on the facts and in the circumstances of the case, the ITAT, Amritsar Bench, while referring the matter to the President of the Tribunal under s. 255(4) of the IT Act, 1961, correctly summed up the point of difference being, whether the assessment for the asst. yr. 1973-74 is barred by limitation whereas the controversy between the two Members of the original Bench revolved round the maintainability or otherwise of the ITO’s order dt. 25th Aug., 1981, because of lack of jurisdiction on the part of the CIT(A) setting aside the ITO’s first order dt. 29th March, 1976 ?

(2) Whether, on the facts and in the circumstances of the case, the third Member of the Tribunal to whom the matter was referred under s. 255(4) of the IT Act, 1961, was right in law in considering and adjudicating upon the issue of the ITO’s order dt. 25th Aug., 1981, for the asst. yr. 1973-74 being barred by limitation when the said issue was not decided by either of the two Members of the original Bench ?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal’s order dt. 29th May, 1984, is sustainable in law considering that the order is based on the opinion of the third Member alone and does not represent the opinion of the majority of the members who have heard the case, the members of the original Bench having not considered and decided the issue adjudicated upon by the third Member ?

(4) Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the ITO’s order dt. 25th Aug., 1981, passed under s. 143(3)/144B in pursuance of the directions of the CIT(A) contained in the appellate order dt. 1st March, 1979, which was not challenged by the assessee before the Tribunal is barred by limitation ?”

5. On consideration of the matter, we are of the opinion that the matter deserves to go back to the Tribunal for fresh decision of the appeal in accordance with law as there is no majority decision in this case in spite of the reference to the President. The Judicial Member had opined on the point of limitation (opinion reproduced above) that it was needless to consider the plea that it was barred by time and for that reason he refrained from dealing with it. The Accountant Member had concluded (view quoted above) that the question of limitation has to be decided by the Tribunal and was not to be left undecided. When the Acountant and Judicial Members took up the matter to find out the difference of opinion, they considered that there is a difference of opinion between them on the point as to whether the assessment for the year 1973-74 is barred by limitation and chose to refer the matter to the President of the Tribunal by order which has been reproduced above. On a reading of the orders of these two officers, it is clear that there is no difference of opinion on the point of the limitation although one said that it was needless to consider the question of limitation, whereas the other said that it should be decided by the Tribunal. So, the difference of opinion, if at all, was whether the question of limitation should be decided by the Tribunal or not. Assuming that this was the difference of opinion, then the third Member had only to decide whether it was necessary to go into the point of limitation and if yes, then the Tribunal had to decide it, otherwise it was to remain undecided. When the third Member considered the matter, he gave his opinion that the subsequent assessment order was barred by limitation. The third Member had only to decide as to whether the question of limitation had to be gone into by the Tribunal or not, and even if he decided that it was barred by time, we have the opinion of only one person on this point and not of the majority. In this background, we may notice the provisions of sub-s. (4) of s. 255 of the Act. It provides that if the Members of the Bench have difference of opinion on any point, the case shall be referred to the President of the Tribunal for hearing on such point by one or more of the other members of the Tribunal and such point shall be decided according to the opinion of the majority of the Members of the Tribunal who have heard the case including those who first heard it. As we have seen, the Judicial Member left the question of limitation undecided without going into it and the Accountant Member was of the opinion that the point should be decided by the Tribunal and should not be left undecided, whereas the third Member, to whom the case was referred on the difference of opinion, found that the fresh assessment order was barred by limitation. Since there is no majority decision, the only proper course would be to send the case back to the Tribunal for decision of the appeal afresh in accordance with law and return the referred questions unanswered. We order accordingly. However, there will be no order as to costs.

[Citation : 179 ITR 538]