Punjab & Haryana H.C : Whether the Tribunal was correct in rejecting the assessee’s contention that the Explanation to s. 271(1)(c) of the IT Act, 1961, gives rise to a separate charge as distinguished from the substantive provisions of s. 271 (1 ) (c) and that the provisions of the main s. 271(1)(c) having not been specifically invoked, penalty cannot be levied ?

High Court Of Punjab & Haryana

Capital Cinema vs. CIT

Section 271(1)(c)

Asst. Year 1972-73

Gokal Chand Mital & S.S. Sodhi, JJ.

IT Ref. Nos. 32 & 33 of 1980

10th April, 1989

Counsel Appeared

B.R. Mahajan & Suvir Sehal, for the Assessee : Ashok Bhan with Ajay Mittal, for the Revenue

GOKAL CHAND MITAL, J. :

The assessee was finally, assessed at Rs. 1,55,492 against the returned income of Rs. 94,846. Since the returned income was less than 80 per cent. of the assessed income, in the penalty proceedings, the Explanation to s. 271 (1) (c) of the IT Act, 1961 (for short “the Act”), became applicable and presumptions were raised against the assessee and since he was not able to furnish any explanation, penalty was imposed for the asst. yr. 1972-73.

2. The assessee got the following question referred for opinion : ” Whether the Tribunal was correct in rejecting the assessee’s contention that the Explanation to s. 271(1)(c) of the IT Act, 1961, gives rise to a separate charge as distinguished from the substantive provisions of s. 271 (1 ) (c) and that the provisions of the main s. 271(1)(c) having not been specifically invoked, penalty cannot be levied ? “

3. The question as posed shows the misunderstanding of the assessee about the legal position. The penalty provision is contained in s. 271 of the Act and on different counts, penalty of different amounts is imposable, wherever there is concealment of income. If the concealment is beyond 20 per cent. of the returned income, then the Explanation becomes applicable and presumptions have to be raised against the assessee which he can rebut but in case concealment does not exceed 20 per cent, the penalty is still leviable but, in this situation, the onus lies on the Department to prove concealment. Therefore, the Explanation has to be r/w s. 271 ( 1) (c) of the Act and there is no question of considering the Explanation as separate or distinct from it. The law has to be applied to the given facts. Even if, in the order, a specific reference to the Explanation is not mentioned but the Explanation is applied and the onus is placed on the assessee because the returned income is less than 80 per cent. of the assessed income, from this an inference has to be drawn that the assessing authorities were conscious of the fact that the Explanation was applicable. We are not in agreement with counsel for the assessee that because mention of Explanation was not made in the order, that was not applied and the levy of penalty should be set aside. The matter of raising presumptions against the assessee on the given facts is covered by the following decisions of our Court :1. Vishwakarma Industries vs. CIT (1982) 29 CTR (P&H) 243 (FB) : (1982) 135 ITR 652 (P&H) (FB). CIT vs. Shri Rajeshwar Singh (1986) 55 CTR (P&H) 73 : (1986) 162 ITR 173 (FB). CIT vs. Surinder Singh (1986) 57 CTR (P&H) 212 : (1986) 160 ITR 456 (FB).

The Full Bench judgment of this Court in Vishwakarma Industries’ case (supra) has been approved by the Supreme Court in CIT vs. Mussadilal Ram Bharose (1987) 60 CTR (SC) 34 : (1987) 165 ITR 14 (SC) and Chuharmal vs. CIT (1988) 70 CTR (SC) 28 : (1988) 172 ITR 250 (SC). Accordingly, the aforesaid question is answered in favour of the Revenue, in the affirmative.

5. For the asst. yrs. 1972-73 and 1973-74, the ITO, by order dated March 6, 1975, initiated penalty proceedings. Since the penalty imposable on March 6, 1975, was beyond his jurisdiction but was within the powers of the IAC, the matter was referred to him. By the time the IAC issued notice and called upon the assessee to appear before him in penalty proceedings, there was an amendment in s. 274 of the Act w.e.f. April 1, 1976, and, as a result of the amendment, the power to impose the amount of penalty w.e.f. April 1, 1976, came to vest in the ITO himself. The IAC imposed the penalty and that was challenged before the Tribunal on the ground that the IAC had no jurisdiction to do so either on the date he issued notice or on the date he passed the order of penalty. The question posed for determination is as to the relevant date for seeing the jurisdiction of the authority to impose penalty. On this question of law, the Tribunal has referred the following question for opinion : ” Whether the Tribunal erred in law in holding that the IAC who levied the penalty was not legally incompetent to conduct and conclude the penalty proceedings due to the amendment in s. 274, by which sub-s. (2) of s. 274 was omitted w.e.f. April 1, 1976 ? “

6. The matter stands concluded in favour of the Revenue by the following judgments of this Court : CIT vs. Mehanga Ram Baldev Singh (1989) 80 CTR (P&H) 129 : (1989) 179 ITR 624 (P&H), CIT vs. Mela Ram Jagdish Rai and Co. (1980) CTR (P&H) 218 : (1981) 132 ITR 897 (P&H) and CIT vs. Mohinder Lal (1987) 63 CTR (All) 360 : (1987) 168 ITR 101 (All) (FB).

7. According to the rule laid down in the aforesaid decisions, penalty proceedings stand initiated when the ITO takes the decision for issuing notice under s. 271(1)(c) of the Act, and not from the date the notices are actually issued or the penalty order is passed. In this case, the proceedings were initiated on March 6, 1975, and, according to the aforesaid decisions, the law as it stood at that time has to be seen. Undisputably, the IAC had the jurisdiction on March 6, 1975, to impose the penalty. Hence, the Tribunal was right in law in upholding the levy of penalty by the IAC.

8. Accordingly, we answer this question in favour of the Revenue, and in the negative. No costs.

[Citation : 179 ITR 628]

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