TMI Blog1981 (3) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... g been passed u/s. 144 of the Income-tax Act, 1961 ? (iii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the validity of the ex parte order could be decided upon in the appeal against the order under section 27 of the Indian Income-tax Act, 1922 ? (iv) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalties under section 271(1)(a)/ 273(a) of the Income-tax Act, 1961 ? " In order to appreciate the questions, we have to refer to certain facts. The above questions arose out of the assessment for the assessment year 1961-62. It is important to bear in mind a few dates before we go to the controversy. A notice under s. 22(2) of the Indian I.T. Act, 1922, was served on the assessee on the 10th June, 1961. On the 1st April, 1962, the I.T. Act, 1961, came into operation. It is the case of the ITO, in his assessment order, that pursuant to the notice under s. 22(2), the return was not furnished by the assessee. For filing the return, from time to time, reminders were given to the assessee but without any effect notice under s. 28(3) of the Indian I.T. Act, 1922, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had become infructuous and ordered the " filing of the proceedings ". Consequently, he also cancelled the penalty order passed by the ITO under s. 27l(1)(a) and s. 273 of the IT. Act, 1961. He, however, had not gone specifically into the merits of these orders. The Revenue, being aggrieved, went up in appeal before the Appellate Tribunal against all these orders. There, various contentions were urged. It was contended that, even if it was necessary, the order might be treated as an order under s. 144 of the I.T. Act, 1961, and whether the ITO had the jurisdiction or not, the reference to a wrong section would not make the exercise of the power invalid. Reliance was also placed for this proposition on certain authorities of the Supreme Court. It is not necessary for us to go into the details of the arguments advanced before the Tribunal as well as to the findings of the Income-tax Appellate Tribunal. The Tribunal was, however, of the view that the old Act was repealed and in the contingency that had happened, s. 297(2) could not save the old provisions and there was contrary intention expressed in s. 297 which indicated that s. 6 of the General Clauses Act would not be applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaining and imposing liability upon the taxpayer. Is there then anything in the context of section 297 which compels us to give to the expression 'procedure for the assessment' the narrower meaning suggested by the learned counsel for the appellant ? In our view, the answer to this question must be in the negative. It seems to us that section 297 is meant to provide, as far as possible, for all contingencies which may arise out of the repeal of the 1922 Act. It deals with pending appeals, revisions, etc. It deals with non-completed assessments pending at the commencement of the 1961 Act, and assessments to be made after the commencement of the 1961 Act, as a result of returns of income filed after the commencement of the 1961 Act. Then in clause (d) it deals with assessments in respect of escaped income; in clauses (f) and (g) it deals with levy of penalties; clause (h) continues the effect of elections or declarations made under the 1922 Act; clause (i) deals with refunds; clause (j) deals with recovery; clause (k) deals generally with all agreements, notifications, orders issued under the 1922 Act; clause (1) continues the notifications issued under section 60(1) of the 1922 Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to the contrary. The aforesaid principle enunciated by the Supreme Court was again reviewed by the Supreme Court in the case of T. S. Baliah v. T. S. Rangachari, ITO [1969] 72 ITR 787. There, the court was concerned with s. 52 of the Indian I.T. Act, 1922. The provisions of s. 52 of the Indian I.T. Act, 1922, did not alter the nature or quality of the offence indicated, according to the Supreme Court, in s. 177 of the Indian Penal Code but they merely provided a new course of procedure for what was already an offence. There was no repugnancy or inconsistency. The two enactments could stand together and must be treated as cumulative in effect. The Supreme Court was of the view that in enacting s. 297(2) of the I.T. Act, 1961, it was not the intention of Parliament to take away the right of instituting the proceedings in respect of which proceedings were pending on the commencement of the Act. Parliament had not made, according to the Supreme Court, any detailed provision for the institution of proceedings or prosecution in respect of any offence under the 1922 Act. Section 6(e) of the General Clauses Act applied for the condonation of such proceedings after the repeal of the Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) did not obliterate the factum of commission of an offence under s. 52 of the 1922 Act and did not transmute the offence into an innocent act because of the imposition of the penalty under s. 28 of the 1922 Act. Such an imposition merely barred the prosecution for trial and conviction for the commission of an offence. Where penalty was imposed under s. 271(1) of the 1961 Act, launching of the prosecution became permissible and was not hit by art. 20(1) of the Constitution of India. The accused would be entitled to rely upon art. 20(1) only to the extent of the awarding of a lesser punishment under s. 52 of the 1922 Act. Where false statement was made in a declaration or in a return submitted under the 1922 Act prior to the coming into operation of the 1961 Act, it was not correct to take recourse to s. 297(2)(h) of the 1961 Act to make the offence come under s. 277 of the 1961 Act. There, the Supreme Court referred to the observations of Ramaswamy J., in the case of T. S. Baliah v. T. S. Rangachari, ITO [1969] 72 ITR 787 (SC) and reiterated the same principle. The question with which we are now faced, that is to say, whether the assessment under s. 23(4) or in respect of which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the assessee had the privilege of filing its return before the completion of the assessment up to 31st March, 1961, the notice issued to the assessee under s. 147 of the Act before March, 1961, would be a valid notice. Failure to file the return, it was observed by me, within the time mentioned under s. 139(2) would attract the provisions of s. 147(a) of the Act. Learned advocate for the assessee sought to urge that the principle enunciated in the aforesaid decision of mine would be contrary to the view taken by Khanna C.J., in the decision referred to hereinbefore. According to learned advocate for the assessee, the facts of the instant case before us would come within the purview of sub-cl. (ii) of s. 297(2)(d) of the I.T. Act, 1961. In this case also the learned advocate for the assessee contended that the income chargeable to tax had escaped assessment within the meaning of that expression in s. 147 which stipulated that if the ITO had reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under s. 139 for any assessment year, he could take action under s. 148, and no proceedings under s. 34 of the repealed Act in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgement delivered on 23rd February, 1965, the observations in respect of which were approved by the Supreme Court in the case of CIT v. Bidhu Bhusan Sarkar [1967] 63 ITR 278. There the Supreme Court again reiterated the principle that where the proceedings for an assessment were pending and action under s. 34 of the Indian I.T. Act, 1922, had to be taken for not filing the return by the assessee, such action could be taken by the ITO, and, in this connection, reliance was placed on the aforesaid observations of the Division Bench of the Calcutta High Court, which we have just referred to hereinbefore. So far as the decision in the case of Amarnath Mehra v. ITO [1977] 110 ITR 376 (Cal), the controversy was not whether when proceedings were pending it can be said that income had escaped assessment and such proceedings for reopening under s. 147 could be taken or not. The controversy was, where the time to file the return was at the option of the assessee, i.e., up to four years, when the assessment was not completed even though the time to file the return under s. 139(2) had expired, whether action could be taken by the ITO under s. 147. There, I had held that s. 139(2) imposed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under s. 147 could not be taken, reference may be made to the observations of the Supreme Court in the case of CIT v. Bidhu Bhusan Sarkar [1967] 63 ITR 278, which we have already referred to and the observation of the Supreme Court in the case of Ghanshyamdas v. Regional Assistant Commissioner of Sales Tax [1964] 51 ITR 557. There, the Supreme Court was dealing with the C.P. Berar Sales Tax Act, 1947. There the Supreme Court observed that the rules laid down in the judgments relating to the incometax that the words " escaping assessment " applied equally to cases where a notice was received by the assessee but resulted in no assessment at all and to cases where due to any reason no notice was issued to the assessee and, therefore, there was no assessment of his income, was applicable to assessments of turnover tax under the C.P. Berar Sales Tax Act, 1947. The Supreme Court further observed that if assessment proceedings had been initiated, income could not be said to have escaped assessment until a final order of assessment was passed on the pending proceedings. In this connection, the Supreme Court referred to the observations of the judicial Committee in the case of Rajendr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of the previous year, and we felt that in the 1961 Act, there was no provision in s. 297 which dealt with this contingency and as it appeared to us from the report of the Commission that there was no contrary intention sought to be expressed by the absence of the similar provisions in s. 297 of the Act. We held that the Tribunal was right in holding that the relief claimed by the assessee under s. 25(3) of the Indian I.T. Act, 1922, even though the relief was granted after the coming into operation of the 1961 Act, was justified. More or less, the same view was expressed by us in the decision in the case of Imperial Chemical Industries Ltd. v. CIT [1979] 116 ITR 516 (Cal). There we had also noted that in certain cases the Legislature had chosen to use the expression " may " in contradistinction to " shall " in the different clauses of s. 297(2) of the Act and where it was so done the expression may " should be construed in the light that it was only a permissive power. In the case of Chhogmal Agarwalla v. ITO [1975] 100 ITR 29 (Cal), we had held that s. 35(5) of the Indian I.T. Act, 1922, enabled the reopening and rectifying of the completed assessment of a partner on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntroversy on cl. (a) of s. 297(2) of the Act. Our attention was drawn to a Bench decision of this court in the case of CIT v. Bidhu Bhusan Sarcar [1966] 59 ITR 590, where the Division Bench of this court held that the judgment of the Calcutta High Court on a reference under s. 66 of the Indian I.T. Act, 1922, would be governed in matters of appeal from that decision or order to the Supreme Court by the provisions of the repealed Act. In respect of such matter, the provisions of s. 261 of the Act were not attracted. The Division Bench observed at p. 596 of the report that the effect of the repeal of an enactment was as if it had never existed except as to matters and transactions past and closed, in the absence of any saving clause which manifested or implied a different intention. If particular matters were kept alive by the saving clause, the repealed enactment was treated for all purposes as alive in respect of such matters. The saving clauses contained in sub-s. (2) of s. 297 did indicate a different intention as contemplated by s. 6 of the General Clauses Act and ousted the operation of the general provisions contained in s. 6 with the result that s. 66A(2) of the Act which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, the Legislature had contemplated such a situation by not using the power under sub-cl. (d) of cl. (2) of s. 297. The Revenue cannot resort to the provisions of the General Clauses Act when an express contrary intention has been expressed by the Legislature in this case by making a specific provision. This argument, in our opinion, cannot be accepted for reasons more than one, firstly, as we have mentioned before, under the law, the proceeding has been initiated, that is to say, a notice has been issued under s. 22(2) of the 1922 Act without terminating the proceeding, that is to say, either by closing the proceeding or dropping the proceeding or making the assessment on a best judgment under s. 23(4) of the said Act. Therefore, under s. 34 of the old Act or s. 147 of the now Act it could not have been taken. Therefore, a situation of this nature had been contemplated (sic). Furthermore, merely because in a certain case an additional power of reopening is given, in our opinion, it does not exhaust the power of the ITO to complete the pending proceedings which he would otherwise have under s. 6 of the General Clauses Act. There is no contrary intention by the grant of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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