TMI Blog1973 (10) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... g of section 275 of the Income-tax Act, 1961, penalty order must not only be made within two years of the completion of the proceedings for the imposition of penalty concerned but also communicated to the assessee within the said period of limitation ? " The facts relating to the said question may briefly be stated. The Income-tax Officer, City Circle, Bangalore, imposed a penalty under section 271(1)(c) of the Income-tax Act, 1961, against the assessee in relation to the assessment for 1963-64. The assessment for the said year was made on 22nd January, 1964. Certain cash credits were noticed in the books of the assessee amounting to Rs. 11,500 and the sources for these were not explained by the assessee. The Income-tax Officer included a sum of Rs. 12,500 as concealed income of the assessee in the computation of the total income. On the ground that the assessee had concealed the said income, the Income-tax Officer initiated proceedings under section 271(1)(c) and a notice to show cause why penalty should not be imposed was issued. There was no response to this. A further opportunity was afforded to the assessee to offer his explanation by 10th March, 1965, but even then the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that under section 153, it is provided that no order of assessment shall be made under section 143 or section 144 at any time after the expiry of the periods mentioned therein and similarly in section 263(2) it is provided that no order shall be made under sub-section (1) after the expiry of two years from the date of the order sought to be revised whereas under section 275 it is provided that no order imposing penalty under this Chapter (Chapter 21) shall be passed after the expiration of two years from the date of completion of the proceedings in the course of which proceedings for the imposition of penalty had been commenced. It is, therefore, contended that the expression "passed" denotes something other than "made" and must be construed as an order issued. He further contended that in order to be an order "passed" it must be an effective order and unless it is communicated to the party affected thereby, there is no effective order. Reliance was placed in this behalf on the rulings in N. N. Majumdar v. N. M. Bardhan and Abdul Ali v. Mirja Khan and also Secretary of State for India in Council v. Gopisetti Narayanaswami Naidu, which have been referred to in N.N.Majumd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . N. M. Bardhan and in the other cases referred to therein were in a different context and were not applicable in construing the provisions of the Income-tax Act. Reliance was placed in this behalf on the decision in Badri Prosad Bajoria v. Commissioner of Income-tax, Esthuri Aswathiah v. Commissioner of Income-tax and Viswanathan Chettiar v. Commissioner of Income-tax. A proceeding for imposition of penalty or the making of an assessment is a quasi-judicial proceeding in nature, whereby liability is imposed on an assessee to pay a certain sum of money and thus affects his right in regard to his property. He should know how and to what extent his rights are affected or liability is created against him before it can become effective and enforced against him. Chandavarkar J., while construing the expression " making an order " in section 77 of the Indian Registration Act (Act III of 1877), held in Abdul Ali v. Mirja Khan, that it meant not merely recording the order of refusal in writing, but communicating it to the party concerned so as to bind him by it. He further held that an order does not become an order unless and until steps are taken by the officer passing it to bring it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ively made until it has been brought to his notice." In Secretary of State f or India v. Gopisetti Narayanaswami Naidu, it was observed that : " A decision cannot properly be said to be passed until it is in some way pronounced or published under such circumstances that the parties affected by it have reasonable opportunity of knowing what it contains. Till then, though it may be written out, signed and dated, it is nothing but the decision which the officer intends to pass. it is not passed so long as it is open to him to tear up what he has written and write something else. " An order imposing a penalty does affect the rights of an assessee and in order to be complete and effective it must be communicated to the party. If an officer draws up an order imposing a penalty but wishes to change his mind or take a different view, he could do so until the said decision is made known to the party affected thereby. Merely because he signs an order, it cannot be said to have become final because there is no publication of it, and the process of publication would not commence until steps are taken to issue the order for communication to the party affected. In the present case secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpiry of two years from the date of the order sought to be revised ", in sub-section (3) the expression used is " an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court." It is, therefore, seen that the expressions "made" and "passed" are used as being synonymous. Section 274 provides: "(1) No order imposing a penalty under this Chapter shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard." The expression used in this section is "made". It is in regard to such an order that is going to be "made" that section 275 prescribes the time limit. It provides that no order imposing a penalty (under Chapter XXI) shall be passed after the expiration of two years. Therefore, the subject-matter under reference under both sections 274 and 275 is the same and the expression used in section 274 is "made" and the expression used in section 275 is "passed". It is, therefore, obvious that no special significance need be attached to the u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s after the end of the assessment year. It is true that the order of assessment has been communicated to the assessee on 1st April, 1959, which date falls four years after the end of the assessment year. But the date of communication of the order cannot be the date of making the order because communication presupposes the determination of the thing to be communicated. From the point of view of the taxability or liability to pay tax on the part of the assessee, the date of communication may be the most effective date. An order to be communicated presupposes the existence of an order and the existence of the order is only possible when the Income-tax Officer has made that order. From the point of view of the Income-tax Officer, he has discharged the statutory liability to assess if he makes an order of assessment within four years after the end of the assessment year. The statute does not say that the Income-tax Officer must communicate the order of assessment within four years after the end of the assessment year." Therefore, the contention for the assessee that the date of communication of the order of assessment was the date of making the order was rejected. This court in Esth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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