TMI Blog1996 (3) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961 ? " 2. Whether the bar of limitation contained under section 275 of the Income-tax Act, 1961, would attenuate or curtail the powers of the Commissioner of Income-tax, vested in him under section 263 of the said Act ? " The assessee is a firm with five partners. The assessment for the assessment year 1976-77 was completed by the Income-tax Officer on November 2, 1977, under section 143(3) of the Income-tax Act, 1961. In the course of assessment proceedings, penal action under section 271(1)(c) of the Act was initiated for the detailed reasons stated in the assessment order. The Income-tax Officer subsequently dropped the penalty proceedings on March 22, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means. According to the Tribunal any proceedings by way of imposition of penalty should have been completed by March 31, 1980, and if no penalty is imposed by that time, the assessee would naturally get a vested right, which cannot be titled. The Tribunal further pointed out that if the impugned order of the Commissioner of Income-tax were to be upheld by the Tribunal, then the Income-tax Officer gets an extended time to impose penalty and that is against the scheme and provisions of the Income-tax Act, 1961. Accordingly, the Tribunal cancelled the order of the Commissioner of Income-tax passed under section 263 of the Act. Before us, learned standing counsel appearing for the Department submitted that the Commissioner of Income-tax can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiated penalty proceedings under section 271(1)(c) of the Act. Subsequently, the Income-tax Officer dropped the penalty proceedings on March 22, 1980. The Commissioner of Income-tax (Administration), on a scrutiny of the order passed by the Income-tax Officer, came to the conclusion that the order passed by the Income-tax Officer in dropping the penalty was erroneous and prejudicial to the interests of the Revenue. Therefore, the Commissioner of Income-tax initiated proceedings under section 263 of the Act, set aside the order passed by the Income-tax Officer in dropping the penalty proceedings initiated under section 271(1)(c) of the Act, and directed him to reconsider the case in the light of the observations made by him in his order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e considering sections 33(4), 33B(2)(b), (4) of the Indian Income-tax Act, 1922, and section 263(3) of the Income-tax Act, 1961, it held : " The words 'no order shall be made under sub-section (1) after the expiry of two years from the date of the order sought to be revised', in section 33B(2)(b) of the Indian Income-tax Act, 1922, are applicable only to suo motu orders of the Commissioner in revision and not to orders made by him pursuant to a direction or order passed by the Appellate Tribunal under sub-section (4) or by a higher authority. Section 33B is not a charging section. The enactment of section 263(3) of the Income-tax Act, 1961, must be regarded as declaratory of the law which was already prevailing. The enactment of an ex maj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Wealth-tax Act, 1957, even with regard to an order dropping the penalty proceeding. Thus, we have seen that even though the order passed by the Commissioner of Income-tax under section 263 of the Act empowers the Income-tax Officer to complete the penalty proceedings after the two-year period prescribed under section 275(1) of the Act, such an order is a valid order and it is not hit by the provisions of section 275 of the Act as per the decisions cited supra. Accordingly, the order passed by the Tribunal, cancelling the order passed by the Commissioner of Income-tax under section 263 of the Act is not in order. In that view of the matter, we answer the first question referred to us in the negative and in favour of the Department. Inas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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