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TMI Blog1988 (10) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... further stated that the appellant has a good case on merits and therefore the short delay of three days in the presentation of the appeals deserved to be condoned. Shri Anil Kumar, the learned departmental representative, opposed these submissions and contended that the reasons stated by the appellant would not constitute sufficient cause and therefore, the appeals should be dismissed as time barred. 3. After considering the submissions urged on both sides, I am satisfied that the reasons stated by the appellant for the delay of three days in the presentation of the appeals are genuine. Accordingly, I condone the said delay and proceed to dispose of the appeals on merits after considering the submissions of the learned counsel on both sides. 4. These appeals are directed against the orders of the AAC sustaining the penalties levied against the appellant under s. 271(1)(c) of the IT Act, 1961 for the six asst. yrs. 1965-66 to 1970-71. These penalties were levied by the ITO for concealment of income by the appellant in his money lending business, which he had not disclosed in the original returns filed by him, but which he admitted subsequently in the returns filed by him in respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i referred to the cash-flow statement from 1954-55 to 1974-75 which was filed by the appellant and which was also the basis of the reassessments made by the ITO and pointed out that the income from money-lending business had in each of these years amounted to Rs. 18,000 for 1965-66 to 1967-68 and Rs. 20,000 each for the remaining three years 1968-69 to 1970-71. The learned counsel submitted that these are all estimates made in the absence of proper books of accounts and that for such estimated additions no penalty would be exigible as for alleged concealment of income by the appellant under s. 271(1)(c) of the Act. In this connection, the learned counsel relied on the order of the CIT(A) for the asst. yr. 1974-75 dt. 5th Dec., 1978 to point out how the estimates made by the ITO were found to be unsustainable and the said assessment was set aside by the CIT(A) for being made in accordance with law. The learned counsel further submitted that the assessment for 1974-75 was set aside for the second time by the CIT(A) for the reason that the directions given by the first CIT(A) were not carried out by the ITO and further submitted that the assessee's appeal against the fresh assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed in response to the notices issued under s. 148 of the Act. In support of these submissions, the learned departmental representative relied on the following decisions of the Madras High Court: 1. CIT vs. J.K.A. Subramania Chettiar (1978) CTR (Mad) 35 : (1977) 110 ITR 602 (Mad) 2. S.R. Arulprakasam vs. Smt. Prema Malini Vasan, ITO (1987) 61 CTR (Mad) 54 : (1987) 163 ITR 487 (Mad) 3. CIT vs. Krishna & Co. (1979) 13 CTR (Mad) 24 : (1980) 120 ITR 144 (Mad) 7. In his reply, Shri. N.C. Ananthachari, the learned counsel for the appellant relied on the finding of fact recorded by the CIT(A) in his order dt. 5th Dec., 1978 accepting the assessee's case that he and his wife were the owners of 65 acres of land and that the appellant was an influential landlord and also a Nattanmaikarar in his village. He also relied on the other findings in the said order of the CIT(A) to show that the estimates made by the ITO were highly inflated as not all the pronotes seized at the time of the search related to the appellant's money lending business. The learned counsel further submitted that the three decisions of the Madras High Court relied on by the learned departmental representative turned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier view in CIT J.K.A. Subramania Chettiar which was a case of a revised return. The same position has been reiterated in the latest decision of the Madras High Court reported in S.R. Arulprakasam vs. Smt. Prema Malini Vasan, ITO 163 ITR 487. In this case it was held by the High Court that where an assessee files a revised return after the concealment had been detected by the ITO, the contumacious conduct on the part of the assessee in filing the original return, which, if it had been accepted, would have resulted in avoidance of tax, would not be wiped out, that in the proceedings for imposition of penalty, the original return alone should not be considered in isolation without reference to the subsequent conduct of the assessee and all the facts and circumstances commencing with the filing of the original return and ending with the assessment have to be taken as relevant for considering the assessee's liability for penalty. It was a case of prosecution and it was held by his Lordship Mr. Justice S.A. Kader that as the filing of a revised return will not expatiate the contumacious conduct on the part of an assessee in not having disclosed the true income in the original return i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the amendment brought about in s. 274(2) by the Taxation Laws (Amendment) Act of 1970 w.e.f. 1st April 1971. In support of these submissions, the learned counsel relied on the decision of the Supreme Court in Brij Mohan vs. ITO (1979) 12 CTR (SC) 198 : (1980) 120 ITR 1 (SC) and in Continental Commercial Corporation vs. ITO (1975) 100 ITR 170 (Mad). The learned counsel argued that this decision of the Madras High Court was directly applicable to the facts of the present case and therefore the penalties levied for the first five years should be cancelled. 11. Shri Anil Kumar, the learned departmental representative, submitted that the argument taken by the learned counsel was not raised either before the ITO or the AAC and, therefore, it should not be allowed to be taken up at this stage and that the same was inadmissible. In support of this plea, he relied on the decision of the Supreme Court in the case of Addl. CIT vs. Gurjargravures P. Ltd. (1978) CTR (SC) 1 : (1978) 111 ITR 1 SC. 12. I am unable to agree with this submission of the learned departmental representative. The point raised by the appellant is purely a question of law which relates to the jurisdiction of the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e IAC could have no jurisdiction to levy the penalty and that in the present case since the reassessment proceedings were completed on 9th Feb., 1984 it was only the ITO who had valid jurisdiction to initiate and levy penalties under s. 271(1)(c) of the Act and that, therefore, the same should be upheld. For this, the learned departmental representative argued that it was satisfaction of the ITO in the course of the reassessment proceedings that the assessee had concealed the particulars of his income that would confer jurisdiction on the ITO to initiate penalty proceedings against the assessee under s. 274(1) of the Act and that the law as applicable at the time of such initiation of penalty proceedings should be followed for the purpose of following the procedure for levy of penalty. 14. Shri Ananthachari, the learned counsel for the appellant in his reply contended that the decisions relied on by the learned departmental representative were distinguishable as they are all contrary to the decision of the Madras High Court in 100 ITR 170 (Mad) and are therefore of no help to the Department. He further argued as an alternative contention that if the Department's view is to be acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 540 (Mad). In the said case the High Court held that as it was the law in force on 22nd Dec., 1970, when the return was filed in the said case that would be applicable s. 274(2) as it stood prior to its amendment on 1st April, 1971, was the relevant provision that was to be applied in the said case and hence the officer had no jurisdiction to levy penalty. 17. In my view, these two decisions clinch the issue in favour of the assessee for the first five years from 1965-66 to 1969-70. It would be seen from col. 2 of the tabular statement wherein the date of filing of the original return for each of these years is set out in para 4 supra the returns were filed on 4th Jan., 1967 and 26th Feb., 1970, respectively. It is, therefore, clear that the provisions of s. 274(2) as it stood before its amendment by Act 42 of 1970 would be applicable to the facts of the present case. On that basis it is only the IAC who will have jurisdiction to impose penalty in the present case and the ITO will have no jurisdiction of levy any penalty. I, therefore, respectfully follow these two decisions of the Supreme Court and the Madras High Court and hold that the penalties levied by the ITO for the firs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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