TMI Blog2002 (8) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... th the tax case references as a common question is involved. The following question was referred to us at the instance of the Revenue and under the directions of this court: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal's view that the provision of section 249(4) as amended would not apply to the assessee's case is sustainable in law?" A few facts first: The relevant assessment years for these two tax case references are 1973-74 and 1974-75. The Income-tax Officer levied a penalty of Rs. 1,799 and Rs. 1,902 for these two years, respectively, under section 271(1)(a) of the Income-tax Act, 1961 (in short "the Act"), as the assessee had failed to file the returns in time. The assessee preferred appeals against these penalties. The Appellate Assistant Commissioner, however, found that the admitted taxes for the, assessment years had not been paid up to June 2, 1978, when the appeals were presented by the assessee before him. The Appellate Assistant Commissioner also found that there were no extenuating circumstances for non-payment of taxes on the admitted income and, therefore, he rejected the appeals without admitting the same in terms of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty proceedings were taken against him and eventually the penalty was inflicted against him. The further contention is that an appeal against these penalties being under section 246 can be conveniently called an appeal under Chapter XX of the Act and would be covered under section 249(4) and could not be admitted unless the assessee had paid the tax due as per her returns. Learned counsel points out that though this section has come by way of an amendment with effect from October 1, 1975, and though the relevant assessment years are prior to that date and further though this amounts to a penal section, it would still apply in the present case particularly because the returns in these cases were filed after the amendment had come into force. According to learned counsel, the lis, therefore, started only on March 12, 1976, or, as the case may be, when the assessment was made and both those dates being after the amendment came into force, the amendment would be applicable. In short, the contention is that the year of assessment even if it is prior to the amendment is irrelevant particularly because the lis came into effect after the amendment was made applicable by the Legislature. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceedings of the assessee-company were initiated prior to the amendment of the section though the order of assessment was made after the amendment. It was clarified by the apex court that the imposition of the restriction by the amendment of the section could not affect the assessee's right of appeal from a decision in proceedings which commenced prior to such amendment and which right of appeal was free from such restriction under the section as it stood at the time of commencement of the proceedings. A close look at the decision suggests that therein it was an admitted position that the lis had already commenced even prior to the amendment came on the scene. The Supreme Court observed in this behalf as follows: "It will appear from the dates given above that in this case the lis in the sense explained above arose before the date of amendment of the section. Further, even if the lis is to be taken as arising only on the date of assessment, there was a possibility of such a lis arising as soon as proceedings started with the filing of the return or, at any rate, when the authority called for evidence and started the hearing and the right of appeal must be taken to have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 22(1) of the Act overlooks the fact of existence of the old law for the purpose of supporting the pre-existing right and really amounts to begging the question." In the same time, the Supreme Court further observes: "There can be no doubt that the new requirement 'touches' the substantive right of appeal vested in the appellant. Nor can it be overlooked that such a requirement is calculated to interfere with or fetter, if not to impair or imperil, the substantive right. The right that the amended section gives is certainly less than the right which was available before. A provision which is calculated to deprive the appellant of the unfettered right of appeal cannot be regarded as a mere alteration in procedure. Indeed the new requirement cannot be said merely to regulate the exercise of the appellant's pre-existing right but in truth whittles down the right itself and cannot be regarded as a mere rule of procedure." Relying on these observations, we have no doubts that even in the present case the amendment has the effect of interfering with or bringing clouds on or fettering the right of appeal which was pre-existing. Therefore, there would be no question of holding tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch were important but it was the satisfaction of the income-tax authority that a default has been committed by the assessee which would attract the provisions relating to penalty. Examining the scheme of section 274(1) and section 275 of the 1961 Act, the Supreme Court held that the order imposing penalty must be made after the completion of the assessment. It, therefore, proceeded to hold that the crucial date for the purposes of penalty was the date of such completion. In the same tune is the decision in Maya Rani Punjs case [1986] 157 ITR 330 (SC), which was heavily relied upon by Mr. Ramanujam. This was also a case under section 271(1)(a) of the Act. Herein also for the assessment year 1961-62, the returns had to be filed by September 28, 1961, but it was not so filed; nor was any extension asked for. It was filed with a delay of seven months, on May 3, 1962, i.e., after the 1961 Act came into force. Proceedings under section 271(1)(a) of the 1961 Act were initiated and penalty was imposed as per 1961 Act. Examining the correctness and extent of the penalty, the Supreme Court reiterated the law laid down in Jain Brothers' case [1970] 77 ITR 107, and held that another contrary d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave commenced latest by the date when the notice under section 143(2) of the Act was issued, that is, a date prior to April 1, 1989, and that being the date prior to April 1, 1989, the law as amended with effect from April 1, 1989, could not apply. The above two judgments were relied on by Mr. Ramanujam to suggest that in both the cases the lis was held to have started only when the notice under section 143(2) of the Act was issued. Strictly speaking, we need not go to that portion because we are of the clear opinion that in the present case, the lis started much after the amendments have come into effect, i.e., firstly when the returns themselves have been filed on March 12, 1976, or, as the case may be, when the assessments were made on that basis which would be much after the amendments. The lis thus having started after the amendment that would be the relevant and the deciding period for holding as to which law applies. The Tribunal has obviously taken an incorrect view that the application of the amendment would depend upon the year of assessment. In our view, the year of assessment would be irrelevant. What would be relevant would be the starting point of the lis between th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal. The judgment has absolutely no relevance with the present controversy. We are, therefore, of the clear opinion that in the circumstances, no appeal against the penalty can be admitted unless the admitted tax liability is paid by the assessee. Mr. Janarthana Raja then pointed out from the order that at least in so far as the assessment year 1973-74 is concerned though belatedly, the assessee has made the payment of the tax liability. Our attention was invited to the appellate order passed by the Appellate Assistant Commissioner and more particularly to paragraph 2 therein. It was, therefore, argued by Mr. Janarthana Raja that the appellate authority should have shown discretion. We do not propose to consider this argument on the merits because we find that the Tribunal has disposed of the appeals only on the preliminary ground that the relevant assessment years were 1973-74 and 1974-75 and, therefore, it was only the old law which was applicable. On that ground the Tribunal stayed the order of the appellate authority solely taking into consideration the nonpayment of the admitted tax liability and that order was set aside, restoring the earlier order. In our opinion, the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X
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