1997 (8) TMI 105 - AT - Income Tax

Assessing Officer Assessment Year Income Tax Act Late Filing Notice Of Penalty Penalty Proceedings Protective Assessment Protective Penalty

Summary

Issues Involved:
1. Validity of assessments made against the orders of the Hon'ble Delhi High Court.
2. Validity of protective assessments and protective penalties.
3. Validity of penalty notice issued under the wrong provision of law.
4. Adequacy of opportunity given to the assessee for hearing.
5. Applicability of amnesty provisions to the returns filed by the assessee.
6. Bar of limitation for penalty proceedings.

Detailed Analysis:

1. Validity of Assessments Made Against the Orders of the Hon'ble Delhi High Court:
The assessee argued that the assessments were made in contravention of the clear directions given by the Hon'ble Delhi High Court, making the assessments invalid. The High Court had issued an interim order stating that if the assessment in respect of the properties seized was not already made in the hands of any third party, it should not be made until further orders. The assessments for the years 1982-83 to 1984-85 were passed as protective assessments after the date of the interim order, thus violating the High Court's directions.

2. Validity of Protective Assessments and Protective Penalties:
The assessments against the assessee-HUF were protective assessments. The Tribunal noted that while protective assessments are valid in law, protective penalties are not. The Calcutta High Court in CIT v. Super Steel (Sales) Co. held that there can be a protective assessment, but not a protective penalty. Similarly, the Punjab & Haryana High Court in CIT v. Behari Lal Pyare Lal and the Gauhati High Court in Metal Stores v. CIT also held that protective penalties are not permissible.

3. Validity of Penalty Notice Issued Under the Wrong Provision of Law:
For the assessment year 1984-85, the penalty notice was issued under section 271(1)(a) of the Income-tax Act, 1961, instead of section 18(1)(a) of the W.T. Act, 1957. The Tribunal referred to the Kerala High Court judgment in N. N. Subramania Iyer v. Union of India, which held that a penalty notice issued under the wrong provision of law is invalid. Consequently, the penalty proceedings for the year 1984-85 were deemed invalid.

4. Adequacy of Opportunity Given to the Assessee for Hearing:
The penalty notice dated 15-3-1990 fixed the hearing date as 22-3-1990, but the notice was served on the assessee on 23-3-1990, after the date of hearing. This lack of adequate opportunity to be heard rendered the penalty proceedings illegal. The Tribunal emphasized the importance of adhering to the principles of natural justice, which were violated in this case.

5. Applicability of Amnesty Provisions to the Returns Filed by the Assessee:
The assessee contended that the returns for the assessment years 1982-83 to 1984-85 were amnesty returns filed during the amnesty period (15-11-1985 to 31-3-1987). The Tribunal agreed, citing CBDT circulars and the assurance given by the Finance Minister that if the assessee made a full and true disclosure of wealth during the amnesty period, they would not be liable for any penalty. The returns were filed on 8-12-1986, within the amnesty period, and fulfilled all the conditions for obtaining amnesty benefits.

6. Bar of Limitation for Penalty Proceedings:
The Tribunal examined the dates on which the wealth-tax returns were filed, the dates of assessment orders, and the dates of penalty orders. For the assessment years 1982-83 and 1983-84, the penalty proceedings were completed within the two-year limitation period from the end of the financial year in which the assessment orders were passed. However, for the assessment year 1984-85, the date of the assessment order was not available, making it impossible to determine the limitation period.

Conclusion:
The Tribunal allowed the appeals of the assessee and canceled the penalties for the assessment years 1982-83, 1983-84, and 1984-85 imposed under section 18(1)(a) of the W.T. Act, 1957. The assessments were deemed invalid due to the violation of the High Court's orders, the improper issuance of penalty notices under the wrong provisions, the lack of adequate opportunity for hearing, and the applicability of amnesty provisions. Protective penalties were also deemed impermissible in law.