TMI Blog1978 (1) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act, 1958, for deliberately concealing the taxable turnover and filing a false return. A penalty of Rs. 2,000 was also imposed under section 17(3) for late filing of the return. The assessee went up in appeal to the Appellate Assistant Commissioner who decided the appeal by his order dated 13th January, 1969. The Appellate Assistant Commissioner came to the conclusion that there was reason for believing that the real turnover of the assessee was even more than Rs. 3,26,000 which was detected by the Inspector and which was later on accepted by the assessee in its revised return. In the opinion of the Appellate Assistant Commissioner the case needed further inquiry to find out the true measure of turnover. In this view of the matter, the Appellate Assistant Commissioner set aside the assessment and remanded the case for fresh assessment of the turnover. The order levying the penalty was, however, maintained on the view that concealment of turnover in the return filed by the assessee was deliberate. The assessee then went up in second appeal to the Appellate Tribunal. The Tribunal dismissed the appeal. The Tribunal also held that the concealment of turnover was deliberate and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessed". This shows that the penalty under section 17(3) can be imposed only after the tax is assessed. Under section 43(1), when the Commissioner, after giving an opportunity to the assessee of being heard, comes to the conclusion that a penalty is imposable, he has to "direct that the dealer shall, in addition to the tax payable by him, pay by way of penalty a sum not exceeding the amount of tax which would have been avoided if the return furnished by the dealer had been accepted as correct". These words as they occur in section 43(1) also go to show that the penalty under section 43(1) can be imposed only after the completion of the assessment. The question as to at what stage the penalty can be imposed has been considered by the Supreme Court in the context of section 271 of the Income-tax Act, 1961, in the case of Jain Bros. v. Union of India[1970] 77 I.T.R. 107 (S.C.); A.I.R. 1970 S.C. 778. It was observed in that case that penalty has to be calculated and imposed according to the tax assessed and that it logically followed that imposition of penalty can take place only after the assessment is completed. In our opinion, the same view has to be taken of sections 17(3) and 43( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch orders, as it may think fit." 6.. It will be seen from clauses (a) and (b) of section 38(5) that the Appellate Assistant Commissioner is not bound to set aside the penalty whenever he sets aside the assessment. The words "confirm, reduce, enhance or annul the assessment or the penalty or both" as used in clause (a) envisage that the Appellate Assistant Commissioner may annul the assessment without annulling the penalty. Similarly, the words "set aside the assessment or the penalty or both" as used in clause (b) show that while setting aside the assessment the Appellate Assistant Commissioner is not bound to set aside the penalty in all cases. Although the amount of penalty is generally relatable to the amount of tax that may be finally assessed, yet there may be circumstances which may make it clear that reopening of assessment would not reduce the amount of tax or the amount of penalty already imposed. In such cases, the appellate authority in its discretion, while ordering reopening of the assessment, may not think it useful to set aside the order of penalty. That is indeed the position in the instant case. The assessment was set aside by the Appellate Assistant Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inted out that if he had omitted to recall the earlier order, that would not have made the second order invalid though the two orders could not be enforced simultaneously. It will be seen from this case that the earlier order imposing penalty could not be said to have become invalid or inoperative till the passing of the second order simply because the assessment was reopened. This supports our conclusion that simply because the assessment was set aside by the Appellate Assistant Commissioner and the case was remanded for making fresh assessment, he was not bound to set aside the order imposing penalty. As indicated by us, there is absolutely no possibility that the amount of tax imposed or the amount of concealment is going to be reduced after fresh assessment is made and, therefore, the Appellate Assistant Commissioner was competent not to set aside the order of penalty. For the same reason, the Tribunal was justified in maintaining the order of the Appellate Assistant Commissioner. The question whether it would be open to the Sales Tax Officer to pass fresh order imposing higher penalty and to recall the previous order is not before us and we decline to express any opinion on it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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