9911796707
TMI Blog1972 (4) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... dits as the assessee's profits, however, declined to treat the debits as the losses of the assessee. However, taking a liberal view, of the matter, and allowing for probable loss in the consignment sales, the Income-tax Officer estimated the net profit in consignment sales at Rs. 25,000 and, therefore, converted the loss of Rs. 1,736. returned by the assessee into a profit of Rs. 23,364 by his order, dated March, 30, 1963. As the Income-tax Officer was satisfied that the assessee had concealed a good portion of his profits in consignment sales, he initiated penalty proceedings and issued a notice under section 274(1) of the Income-tax Act. But, later he referred the assessee's case to the Inspecting Assistant Commissioner under section 271(2) for taking action under section 271(1)(c) of the Act. After such reference the Inspecting Assistant Commissioner, after calling for the assessee's objection and after giving him an opportunity of hearing, levied a penalty of Rs. 5,400 on December 27, 1963, under section 271(1)(c) on the basis that there has been a concealment of income to the extent of Rs. 25,000 by the assessee. The assessee filed an appeal to the Tribunal against that order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led the income in the course of the assessment proceedings. Section 271(1), so far as it is relevant is set out below : Section 271(1) : " If the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person-... (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty-......... (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than twenty per cent. but which shall not exceed one and a half times the amount of the tax, if any, which would have been avoided, if the income as returned by such person had been accepted as the correct income. " The above section contemplates the Income-tax Officer or the Appellate Assistant Commissioner being satisfied in the course of any proceedings under the Act that the assessee has concealed the particulars of income, before initiating proceedings for levy of penalty. As already stated, the Tribunal proceeded on the basis that the words " any proceedings " include not only assessment and appellate proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with section 271 of the Income-tax Act, 1961, to the effect that as he was satisfied in the course of the assessment proceedings before him that there is a deliberate concealment of income by the assessee and as the minimum penalty imposable exceeded a sum of Rs. 1,000, he is referring the penalty proceedings to the Inspecting Assistant Commissioner in accordance with section 274(2) of the Income-tax Act. But, it is only on February 24, 1967, nearly two years from the completion of the assessment proceedings, the Inspecting Assistant Commissioner issued a notice under section 274(2) read with section 271 requiring the assessee to show cause on or before March 2, 1967, as to why an order imposing penalty should not be made under section 271(1)(c). The original notice dated March 31, 1965, issued by the Income-tax Officer and the subsequent notice issued by the Inspecting Assistant Commissioner were challeged by the assessee in writ proceedings before the High Court on the ground that, though the Income-tax Officer is the appropriate authority to initiate and complete the penalty proceedings in cases falling under clauses (a) and (b) of section 271(1), the legislature has intro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty cannot be bifurcated so that the satisfaction can be that of the Income-tax Officer, while the imposition of the penalty would be by the Inspecting Assistant Commissioner. With due respect we are not in a position to agree with the principle enunciated, in that case. If the formation of the satisfaction contemplated in section 271(1) and the imposition of the penalty should be by the same person in cases falling under section 274(2) as has been held by the learned judge in the case referred to above, it will practically make section 274(2) ineffective and otiose. It is a well-established canon of statutory construction that, in construing a statutory provision, the court must assume that the legislature had a specific and definite purpose in making a legislative provision. We cannot, therefore, assume that section 274(2) was enacted to be inoperative or ineffective and that it has been introduced in the statute book as a mere surplusage. If the formation of satisfaction referred to in section 271(1) and the imposition of penalty should be by the same person, there will be no cases, in which the Inspecting Assistant Commissioner can exercise his power, for there can be no assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also the same view was taken. There a Division Bench of the Delhi High Court has expressed the view that the direction given by the Income-tax Officer in the course of his assessment order that the penalty notice should be issued to the assessee for concealment of particulars of income, amounts to a valid initiation of the penalty proceedings, and that there is nothing in section 274(2) which requires that all action for initiating penalty proceedings where the minimum penalty imposable is more than Rs. 1,000 should be taken by the Inspecting Assistant Commissioner before the assessment order is passed by the Income-tax Officer. According to the learned judges, the power conferred on the Inspecting Assistant Commissioner are for the specific purpose of imposition of penalty and those powers can very well be exercised by him when action for initiating penalty proceedings has already been taken by the Income-tax Officer in the course of assessment proceedings and thereafter the case has been referred by him under section 274(2). In Padgilwar Brothers v. Commissioner of Income-tax the Bombay High Court had held that, though the power to impose penalty depends upon the satisfaction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiation of any step for imposing penalty is a condition for the exercise of the jurisdiction. " If, as pointed out by the Supreme Court, the penalty proceedings have to be commenced only after the completion of the assessment proceedings on the basis of the satisfaction arrived at by the Income-tax Officer earlier during the assessment proceedings, there is no possibility of the Inspecting Assistant Commissioner acting under section 274(2), satisfying himself as to the existence of the conditions specified in clause (c) of section 271(1) in the assessment proceedings. The position appears to be that once the Income-tax Officer initiates penalty proceedings after satisfying himself as to the existence of the conditions specified in section 271(1)(c) he refers the matter to the Inspecting Assistant Commissioner it he finds that the penalty leviable exceeds Rs. 1,000, and after such reference the Inspecting Assistant Commissioner continues the penalty proceedings there is no necessity nor is it possible for him to form an opinion as to whether there was concealment of income during the assessment proceedings. In Sivagaminatha Moopanar & Sons v. Income-tax Officer this court has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,000, but if the penalty leviable exceeds Rs. 1,000, he refers the matter to the Inspecting Assistant Commissioner who has been empowered to act as an Income-tax Officer for the purpose of the levy of penalty. It, therefore, appears to be that it is the Income-tax Officer or the Appellate Assistant Commissioner who initiates the penalty proceedings on the basis of a satisfaction come to by him in the course of assessment or other proceedings under the Act that the assessee has concealed his income, and it is only on this foundation laid by the Income-tax Officer, the Inspecting Assistant Commissioner proceeds to act, and he being a person unconnected with the regular assessment proceedings cannot and could not initiate proceedings under section 271(1)(c). The mere fact that the Inspecting Assistant Commissioner is clothed with the power to levy penalty under section 271 by virtue of section 274(2), he cannot be said to have been empowered to deal with assessment proceedings and to initiate penalty proceedings on his independent satisfaction that the assessee has concealed his income in the course of the assessment proceedings. With respect, we are not inclined to accept the v ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
