TMI Blog1982 (1) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... he tax deducted at source was more than the tax payable on the total income as estimated, there was no liability to pay advance tax. Eventually the assessee filed a return showing an income of Rs. 1,04,098 and the assessment was completed on a total income of Rs. 1,23,981 giving rise to a net tax demand of Rs. 41,846 and a demand of interest of Rs. 8,447. This assessment was completed on 28th February, 1969. Simultaneously the ITO issued a notice under s. 273 read with s. 274 seeking to penalise the assessee for having filed an under-estimate of advance tax which the assessee knew or had reason to believe to be untrue. Subsequently the assessment was reopened under s. 147(b) in April, 1969, in order to disallow a business loss in dairy farming which has been claimed by the assessee and wrongly allowed at the time of original assessment. The reassessment was completed on April 28, 1970, disallowing this loss of Rs. 7,176 and raising the total income to Rs. 1,31,157. Again, at the time of completion of this reassessment, the ITO issued fresh notice under s. 273 read with s. 274 on 27th April, 1970. On 2nd August, 1972, the ITO passed an order under s. 273 imposing penalty of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken into account they had been completed on April 28, 1970, and the penalty order should have been passed within two years from that date. According to the Tribunal, therefore, the penalty order was beyond time and hence without jurisdiction. In the view taken by it the Tribunal Aid not consider the merits of the assessee's case regarding the levy of penalty. It cancelled the penalty imposed and allowed the assessee's appeal. Aggrieved by the order of the Tribunal the Commissioner has sought a reference to this court on the two questions which have been set out earlier. Learned counsel for the Department, Shri Lalwani, pointed out that the ITO had issued notice under s. 273 not merely at the time of the completion of the original assessment on February 28, 1969, but also at the time of completion of the reassessment on 28th April, 1970. On the law as it then stood the penalty proceedings initiated on April 28, 1970, had to be completed within two years from the reassessment, namely, on or before 28th April, 1972. However, in the meantime, s. 275 had been amended extending the period of limitation available to the department in such cases. This, learned counsel contended, was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made under s. 147 of the Act, Shri Jain relied on the following decisions : Gates Foam Rubber Co. v. CIT [1973] 90 ITR 422 (Ker), CIT v. Ram Chandra Singh [1976] 104 ITR 77 (Pat), Smt. Kamla Vati v. CIT [1978] 111 ITR 248 (P H) and Trustees of H. E. H. Nizam's Religious Endowment Trust v. ITO [1981] 131 ITR 239 (AP). He also referred to the decision of the Madras High Court in Natarajan Chettiar v. ITO [1961] 42 ITR 29 (Mad). Having rested his case principally on the above contention, Shri Jain also contended, alternatively, relying on the decision of the Supreme Court in the case of Brij Mohan v. CIT [1979] 120 ITR 1, that in all matters of penalty the law which would govern the present case would be the law on the date on which the offence was committed. According to the department the assessee's offence consisted in deliberately understating its income subject to advance tax and this default or offence had been committed some time in 1965. That being so, all issues connected with the penalty proceedings, whether they be regarding the quantum of the assessment, the authority authorised to impose penalty or the period of limitation, have to be judged only on the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e then was) in the case of Sir Shadilal Sugar and General Mills Ltd. v. Union of India [1972] 85 ITR 363 (All). Though the question raised before us in that decision was whether the modification of an assessment consequent on appellate orders could be treated as a regular assessment, it was necessary for us to consider, while discussing the scope of the expression " regular assessment ", how far a reassessment made under s. 148 read with s. 143 or s. 144 could be described as a regular assessment for the purposes of the Act. We have noticed the decision of the Madras High Court in Natarajan Chettiar v. ITO [1961] 42 ITR 29, where it was held that an assessment completed under s. 34, to modify an assessment already made on the assessee, could not be described as a " regular assessment " and the subsequent decision of the same High Court in K. Gopalaswami Mudaliar v. Fifth Addl. ITO [1963] 49 ITR 322, which had held that where a first or initial assessment was itself completed by reference to the provisions of s. 34 of the 1922 Act, it could well be described as a regular assessment. In the context of these decisions we have pointed out at p. 947 (of 130 ITR) " (i) the basic concep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes of s. 273. We have not gone to this extent but have qualified ourselves and restricted ourselves only to saying that an assessment under s. 34/147 would be a regular assessment for the purposes of these provisions provided it is the first or initial assessment made on the assessee. We have arrived at this conclusion on the basis of the principle earlier set out, namely, that the advance tax phase comes to an end as soon as an assessment is made under the Act and that, for the purposes of working out the purpose of Chap. XVII-C of the Act, one should not travel outside to supplemental assessment or the revision or modification of an assessment earlier made as that might lead to extreme consequences. Summing up the position, therefore, we have already decided in the case of National Agrl. Co-op. Marketing Federation v. Union of India [1981] 130 ITR 928 (Delhi), that a regular assessment for purposes of ss. 214, 215 and 273 would be the initial or first regular assessment under the Act. This being a so, we find force in the contention of Shri Jain that so far as the present case is concerned the penalty proceedings under s. 273 could have been validly initiated only in the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment and there was no question of this satisfaction being arrived at by the ITO for the first time in the course of the proceedings for reassessment, which could have justified the issue of a fresh penalty notice under s. 273. From this point of view also it would appear to us that the assessment order on the basis of which the limitation period has to be reckoned is only the assessment order dated February 28, 1969, and not the revised assessment order dated April 28, 1970 In the view we have taken on the first contention put forward by the learned counsel for the assessee, it is really unnecessary for us to consider the second contention. However, it seems to us that on the second contention the learned counsel for the assessee cannot succeed in view of the principles laid down by the unanimous rulings of several High Courts which have been relied upon by the learned counsel for the department. The learned counsel for the assessee sought to meet these judgments by relying on the decision of the Supreme Court in the case of Brij Mohan [1980] 120 ITR 1. It is true that in the said case the Supreme Court laid down that so far as penalty matters are concerned the substantive ..... 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