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Sardar Harinder Singh vs Income-Tax Appellate Tribunal ...

High Court Of Judicature at Allahabad|27 November, 1995

JUDGMENT / ORDER

JUDGMENT M.C. Agarwal, J.
1. By this petition under Article 226 of the Constitution of India, the petitioner challenges an order dated October 25, 1994, passed by the Income-tax Appellate Tribunal, Allahabad, whereby it allowed the petitioner's appeal against the levy of penalty under Section 271(1)(a) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), and setting aside the penalty order remanded the matter back to the Assessing Officer to comply with the provisions of Section 274(2) of the Act.
2. Counter and rejoinder affidavits have been exchanged and I have heard learned counsel for the petitioner, Shri Navin Sinha and Shri R.R. Agarwal, learned counsel for the respondents.
3. The matter relates to the assessment year 1982-83 for which the petitioner's return of income was due to be filed on July 31, 1982, but was actually filed on February 6, 1984. There was thus a delay of 18 months and the Assessing Officer initiated proceedings for the levy of penalty under Section 271(1)(a) of the Act. After giving the assessee an opportunity of hearing, a sum of Rs. 3,95,300 was levied as penalty by order dated July 13, 1989. The petitioner appealed to the Commissioner of Income-tax (Appeals) contending, inter alia, that the levy of penalty was bad because prior approval of the Deputy Commissioner of Income-tax was not taken, as was required by Section 274(2) of the Act. The learned Commissioner of Income-tax (Appeals) took the view that Section 274(2) that was inserted with effect from April 1, 1989, by the Direct Tax Laws (Amendment) Act, 1987, was not retrospective in operation and, therefore, did not apply to proceedings already initiated. He, however, held that there, was reasonable cause for the delay of two months and, therefore, penalty should be levied for a period of 16 months only. Still aggrieved, the petitioner appealed to the Income-tax Appellate Tribunal contending again that the levy of penalty was illegal because of the non-compliance with Section 274(2) of the Act. The Tribunal accepted this contention and holding that the defect was procedural and curable, set aside the penalty order and remanded the matter to the Assessing Officer to proceed de novo in accordance with law. It is this order of the Tribunal which is challenged in the present writ petition.
4. The Tribunal's order has been passed under Section 254 of the Act on an appeal preferred by the petitioner. Under Section 256(1) of the Act, the petitioner could move an application to the Tribunal requiring it to refer to the High Court any question of law arising out of an order passed under Section 254 of the Act and (he Appellate Tribunal has to refer a question of law arising out of its order for the opinion of the High Court.
5. In the present writ petition, the petitioner's contention is that the remand of the case to the assessing authority is legally unjustified. If, therefore, a question of law arises from the order of the Tribunal, the petitioner has the alternative remedy of seeking a reference under Section 256(1) or 256(2) of the Act and a writ petition is not maintainable. The respondents in their counter-affidavit have raised this plea as well. Learned counsel for the petitioner contended that the existence of an alternative remedy does not debar the jurisdiction of the High Court to entertain a petition under Article 226 of the Constitution of India. It is true that there is no absolute bar, but the courts have in their own wisdom declined to exercise extraordinary jurisdiction under Article 226 of the Constitution of India when a petitioner has an alternative efficacious remedy. In the present case, the petitioner has such an efficacious remedy by seeking a reference under Section 256 of the Act. Therefore, the writ petition deserves to be dismissed on this ground.
6. Even on the merits, the petitioner has no case. Section 274(2) of the Act that has been enacted with effect from April 1, 1989, provides that no order imposing a penalty under this Chapter (Chapter XXI which includes Section 271) shall be made (a) by the Income-tax Officer, where the penalty exceeds Rs. 10,000 ; and (b) by the Assistant Commissioner, where the penalty exceeds Rs. 20,000, except with the prior approval of the Deputy Commissioner.
7. As is evident, this is a procedural requirement and docs not go to the root of the jurisdiction to levy penalty. It does not require prior approval before the initiation of the. penalty proceedings, what is required is that if after hearing the assessee, it is desired that a penalty exceeding the aforesaid amounts should be levied then the approval of the Deputy Commissioner should be sought before the actual order levying the penalty is passed. It is thus a procedural requirement and would apply to all cases pending on April 1, 1989. Since it was a mere procedural lapse, the defect could be cured.
8. In Prabhudayal Amichand v. CIT [1989] 180 ITR 84, the Madhya Pradesh High Court held that the omission to obtain the prior approval of the Inspecting Assistant Commissioner, as required by the proviso to Clause (iii) of Section 271(1) of the Act, was a mere procedural irregularity which can be cured. In that case also, the Tribunal had set aside the penalty order under Section 271(1)(c) of the Act and directed the Assessing Officer to pass a, fresh order in accordance with law. It was held that the Tribunal was justified in doing so.
9. In Guduthur Brothers v. ITO [1960] 40 ITR 298 (SC), penalty was levied under Section 28(1)(a) of the Indian Income-tax Act, 1922 (corresponding to the present Section 271(1)(a)). In that case, the penalty was imposed by the Income-tax Officer without affording the assessee an opportunity of hearing. The Appellate Assistant Commissioner set aside the levy of penalty and directed refund of penalty that might have been recovered. On receipt of the Appellate Assistant Commissioner's order, the Income-tax Officer issued a further notice calling upon the appellants to appear before him so that they might be given an opportunity of being heard. The notice was challenged in a writ petition that was dismissed. The assessee took the matter to the Supreme Court and the Supreme Court held that the illegality (omission to afford an opportunity of hearing) occurred after the proceedings were lawfully initiated and, therefore, the notice issued under Section 28(1)(a) did not cease to be operative and it was open to the Income-tax Officer to take up the matter at the point at which the illegality supervened and to correct his proceedings.
10. Similar is the situation in the present case. The proceedings were lawfully initiated. The petitioner was also given an opportunity of hearings but before actually levying the penalty, the Assessing Officer failed to take the prior approval of the Deputy Commissioner. There was no inherent lack of jurisdiction in the Assistant Commissioner who is the only authority under the Act who can levy penalty though after obtaining the prior approval of the Deputy Commissioner. This procedural error could, therefore, be rectified and the Tribunal set aside the Assistant Commissioner's order so that this procedural defect in the proceedings could be removed.
11. Learned counsel for the petitioner placed reliance on CIT v. Metal Goods Manufacturing Co. (P.) Ltd. [1992] 197 ITR 230 (All) and CIT v. Bihari Lal Moti Lal [1993] 201 ITR 695 (All) in both of which this court held that the authority levying the penalty must have the jurisdiction to levy penalty on the date when the order levying the penalty is actually passed. These were cases where penalties were levied by the Inspecting Assistant Commissioner who by virtue of an amendment of law was not left with jurisdiction to do so. These authorities are thus on a different point. In the ease before us, it is not the case of the petitioner that the Assistant Commissioner who levied the penalty had no jurisdiction either at the time of the initiation of the penalty proceedings or at the time when the order levying the penalty was actually passed.
12. Reliance was also placed on another judgment of this court in Tata Oil Mills Co. Ltd. v. CST [1991] UPTC 1236 in which the remand of a case by the Sales Tax Tribunal to the Assessing Officer was held to be unjustified. That was a case in which a reassessment was made under Section 21 of the U. P. Sales Tax Act. The dealer was challenging the validity of initiation of the reassessment proceedings. The Tribunal without deciding that important point in issue, remanded the matter to the Assessing Officer for making a fresh assessment after making certain inquiries, as directed in its order. This court held that the remand of the matter to the Assessing Officer without deciding the question of the validity of the proceedings under Section 21 was bad because if this contention of the assessee was upheld, there would be no necessity for any inquiries. Therefore, this judgment too has no application to the facts the present case.
13. As stated above, the dealer was contending that the levy of penalty was bad because of non-compliance with the provisions of Section 274(2) of the Act. This contention having been upheld, the remand of the matter to the Assessing Officer was legally justified. Learned counsel for the petitioner contended that by remanding the matter to the Assessing Officer, the petitioner stands deprived of the .benefit of the order passed by the Commissioner of Income-tax (Appeals) giving the assessee some relief. It is true that the petitioner will not get that benefit, but he himself was not satisfied with that little relief and the Tribunal's order grants the petitioner an opportunity of pagitating the matter again even before the Deputy Commissioner under Section 274(2) of the Act and he has all the rights of appeal and can make an attempt to convince the authorities that he had a reasonable cause for the entire period of delay. These are the hazards of litigation and have to be faced. The petitioner cannot make any legal grievance by the remand of the matter to the Assessing Officer by which the order passed by the Commissioner of Income-tax (Appeals) becomes ineffective.
14. For the above reasons, this writ petition has no force and is hereby dismissed with costs to respondent No. 3.
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Title

Sardar Harinder Singh vs Income-Tax Appellate Tribunal ...

Court

High Court Of Judicature at Allahabad

JudgmentDate
27 November, 1995
Judges
  • M Agarwal