1977 (6) TMI 20 - HC - Income Tax

Summary

Issues involved:
The issues involved in this judgment include challenging the legality and validity of notices issued under section 274 read with section 271 of the Income-tax Act, the initiation of penalty proceedings without assessment, the bar of limitation under section 153 of the Act, and the reference of the case to the Inspecting Assistant Commissioner without a finding on the penalty amount.

Validity of Notices u/s 274 and 271:
The petitioner challenged the legality of notices issued under section 274 read with section 271 of the Income-tax Act, alleging them to be illegal, mala fide, and invalid. The notices were issued by the Income-tax Officer and the Inspecting Assistant Commissioner for levy of penalties for the assessment years 1967-68, 1968-69, and 1969-70. The petitioner contended that penalty proceedings cannot be initiated without assessment and that the proceedings were barred by limitation.

Initiation of Penalty Proceedings:
The Income-tax Officer initiated penalty proceedings under section 271 of the Act based on prima facie satisfaction that the petitioner concealed income particulars for the mentioned assessment years. The petitioner argued that penalty proceedings cannot be initiated without completion of assessment proceedings and without serving a notice, but the court held that penalty proceedings can be initiated during the pendency of any proceedings under the Act.

Limitation under Section 153 of the Act:
The petitioner claimed that the assessment proceedings for the mentioned years were barred under section 153(1)(c) of the Act. However, the court disagreed, stating that the case falls within clause (c) of section 271, and the period of limitation for penalty proceedings is eight years from the end of the assessment years concerned.

Reference to Inspecting Assistant Commissioner:
The petitioner raised concerns about the reference of the case to the Inspecting Assistant Commissioner without a finding that the penalty amount would exceed a specified sum. The court referred to section 274 of the Income-tax Act, which allows such reference if the concealed income exceeds a certain amount. The court held that the initiation of penalty proceedings before completing the assessment did not prejudice the petitioner.

Judicial Precedent and Conclusion:
The petitioner cited a Bench decision related to a different issue, but the court clarified that it did not apply to the present case. The court discharged the rule challenging the notices, vacated interim orders, and allowed a stay of the judgment's operation for six weeks upon the petitioner's request.