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1980 DIGILAW 127 (ORI)

COMMISSIONER OF INCOME TAX v. GANESHRAM NAYAK

1980-09-09

N.K.DAS, R.N.MISRA

body1980
JUDGMENT : R.N. Misra, J. - On being moved by the revenue u/s 256(2) of the I.T. Act of 1961 (hereinafter referred to as " the Act "), this court called upon the Appellate Bench of the Income Tax Tribunal at Cuttack to state a case and refer the following question for the opinion of the court: " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deleting the penalty levied u/s 273(b) of the Income Tax Act on the ground that the proceedings were not initiated in the course of regular assessment within the meaning of Section 273 read with Section 2(40) of the Act ? " 2. Assessee is a forest contractor. The relevant assessment years are 1963-64, 1964-65 and 1970-71. Assessee omitted to file his returns and action was taken by the ITO u/s 147 of the Act and the assessee was directed to file returns u/s 139(2) of the Act. The ITO initiated proceedings u/s 273(b) of the Act for the imposition of penalty and after hearing the assessee levied penalties of different amounts for the three years. 3. The assessee appealed and the AAC vacated the penalties by saying : " On going through the assessment records it is noticed that the assessments in the course of which these penalty proceedings were initiated were completed u/s. 143(3)/147. Since these penalty proceedings were not started in the course of regular assessment proceedings, the penalties imposed by the Income Tax Officer are cancelled...... " 4. The revenue appealed to the Tribunal and the appellate order was sustained by the Tribunal by placing reliance upon two decisions, one of the Kerala High Court being the case of Gates Foam and Rubber Co. Vs. Commissioner of Income Tax, and the other of the Patna High Court in the case of Commissioner of Income Tax Vs. Ram Chandra Singh, . 5. Vs. Commissioner of Income Tax, and the other of the Patna High Court in the case of Commissioner of Income Tax Vs. Ram Chandra Singh, . 5. Section 273 of the Act, prior to its amendment by the Finance Act of 1969, read thus : " False estimate of, or failure to pay, advance tax.--If the Income Tax Officer, in the course of any proceedings in connection with the regular assessment, is satisfied that any assessee- (a) has furnished u/s 212 an estimate of the advance tax payable by him which he knew or had reason to believe to be untrue, or (b) has without reasonable cause failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of subsection (3) of Section 212, he may direct that such person shall, in addition to the amount of tax, if any, payable by him, pay by way of penalty a sum--...... " 6. After the amendment by the Finance Act of 1969, the provision now reads: " If the Income Tax Officer, in the course of any proceedings in connection with the regular assessment for the assessment year commencing on the 1st day of April, 1970, or any subsequent assessment year, is satisfied that any assessee- (a) has furnished u/s 212 an estimate of the advance tax payable by him which he knew or has reason to believe to be untrue, or (b) has without reasonable cause failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of subsection (3) of Section 212, or (c) has without reasonable cause failed to furnish an estimate of the advance tax payable by him in accordance with the provisions of subsection (3A) of Section 212, he may direct that such person shall, in addition to the amount of tax, if any, payable by him, pay by way of penalty a sum--...... " 7. Assessments for the three years in question were admittedly on the basis of action taken u/s 147 of the Act. The main point for consideration is whether such assessments can be said to be " regular assessments " because jurisdiction to levy penalty u/s 273 of the Act depends upon the ITO's satisfaction that one of the events named therein has happened while the ITO is in seisin of proceedings in connection with regular assessment. The main point for consideration is whether such assessments can be said to be " regular assessments " because jurisdiction to levy penalty u/s 273 of the Act depends upon the ITO's satisfaction that one of the events named therein has happened while the ITO is in seisin of proceedings in connection with regular assessment. "Regular assessment" has been defined in Section 2(40) of the Act to mean "assessment made u/s 143 or Section 144". Section 148 of the Act provides : "(1) Before making the assessment, reassessment or recomputation u/s 147, the Income Tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under Sub-section (2) of Section 139 ; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section...... " 8. A deeming provision is incorporated in Section 148 to make the assessment machinery applicable to proceedings taken pursuant to action u/s 147 of the Act. u/s 246 which provides for appeals, a distinction has, however, been maintained. Clause (c) relates to assessments under Sections 143 and 144 while Clause (e) relates to assessment or reassessment u/s 147 of the Act. If the statute contemplated that the assessment proceeding, after action was taken u/s 147 of the Act, was also an assessment u/s 143 or Section 144, as the case may be, there was no necessity for providing a separate clause in Section 246 of the Act. 9. Learned standing counsel criticised the two Bench decisions relied upon by the Tribunal by contending that all the provisions in the statute have not been kept in view. According to him, the principles indicated in the Bombay decision in Deviprasad Kejriwal Vs. Commissioner of Income Tax (Central), Bombay, and in the Full Bench decision of the Allahabad High Court in the case of Commissioner of Income Tax Vs. Geeta Ram Kali Ram and Suresh Chandra should have been relied upon in preference to the two decisions accepted by the Tribunal, as laying down the correct law. Learned standing counsel further contends that "regular assessment " is not " original assessment " and the Tribunal seems to have gone wrong by equating the two. Section 273 of the Act uses the phrase "regular assessment", and "regular assessment" has a statutory definition. Learned standing counsel further contends that "regular assessment " is not " original assessment " and the Tribunal seems to have gone wrong by equating the two. Section 273 of the Act uses the phrase "regular assessment", and "regular assessment" has a statutory definition. It is confined to assessments under Sections 143 and 144 of the Act. As we have just indicated, Section 246(e) clearly indicates that there can be an assessment u/s 147. Giving a harmonious construction to the different provisions in the same statute, we must hold that " regular assessment " did not cover assessments u/s 147. Therefore, the appellate authorities were correct in their conclusion that Section 273 could not be invoked for levy of penalty in this case. The view of the Kerala and the Patna High Courts has also been followed by a later Punjab & Haryana decision in the case of SMT. KAMLA VATI Vs. COMMISSIONER OF Income Tax (CENTRAL), PATIALA.. Though the reasonings given in these cases are somewhat different, we are inclined to hold that their conclusion is correct. We would accordingly answer the question against the revenue by holding: On the facts and in the circumstances of the case, the Tribunal was justified in deleting the penalty levied u/s 273(b) of the Act on the ground that the proceedings had not been initiated in the course of regular assessment within the meaning of Section 273, read with Section 2(40) of the Act. 10. Assessee shall have his costs. Consolidated hearing fee is assessed at rupees two hundred. Das, J. 11. I agree.