1991 (4) TMI 122 - HC - Income Tax

Summary

Issues:
- Validity of penalties levied by the Income-tax Officer under section 273(a) in fresh assessments after original assessments were set aside by the Appellate Assistant Commissioner for the assessment years 1964-65, 1966-67, 1967-68, and 1970-71.

Analysis:
The case involved a reference made by the Tribunal at the instance of the assessee regarding the validity of penalties imposed by the Income-tax Officer under section 273(a) for the assessment years 1964-65, 1966-67, 1967-68, and 1970-71. The Income-tax Officer had imposed penalties based on the non-compliance of advance tax notices issued under section 210, which the assessee claimed were invalid as they were based on non-existent regular assessments that were set aside by the Appellate Assistant Commissioner. The Appellate Assistant Commissioner upheld the penalties, leading to the appeal before the Tribunal by the assessee.

The main contention raised by the assessee before the Tribunal was that the penalties were invalid as they were initiated during subsequent assessment proceedings after the original assessments were set aside, and not during the regular assessment proceedings under section 143 or 144 as required by section 273(a). The assessee argued that the subsequent assessment proceedings could not be considered as "regular assessment" as defined in the Income-tax Act, 1961. The assessee relied on legal precedents to support this argument, including a Division Bench judgment and a judgment of the Delhi High Court.

On the other hand, the Revenue contended that the expression "regular assessment" in section 273(a) did not necessarily refer only to the initial assessment but could also include subsequent assessment or reassessment proceedings. The Revenue relied on Full Bench and Division Bench judgments to support their interpretation of the term "regular assessment."

The High Court analyzed the legal precedents cited by both parties and concluded that the term "regular assessment" in section 273(a) should be interpreted to mean the initial or first order of assessment under section 143 or 144 of the Act. The Court agreed with the assessee's contention that penalty proceedings initiated during subsequent assessments after the original assessments were set aside did not qualify as "regular assessment" under section 273(a). Therefore, the penalties imposed by the Income-tax Officer were deemed without jurisdiction and illegal.

In light of the above analysis, the High Court answered the reference question in the negative and in favor of the assessee, declaring the penalties levied by the Income-tax Officer under section 273(a) to be invalid and illegal.