TMI Blog1977 (7) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... . On the same day, the Income-tax Officer issued another notice to the appellant under section 271/274, inter alia, stating therein that the case for levy of penalty under section 271(1)(c) was being referred by him to the Inspecting Assistant Commissioner under section 274(2) of the Act. On March 18, 1969, the assessment order for 1964-65 was passed by the Income-tax Officer. At the foot of the said order it was stated that the penalty notice under section 274 had been issued for default under section 271(1)(c) of the Income-tax Act, 1961. Thereafter, on February 6, 1971, the Inspecting Assistant Commissioner issued a notice to the appellant calling upon it to show cause why an order imposing a penalty should not be made under section 271(1)(c) of the Act. The appellant filed a writ petition in this court challenging the legality of the said notices and praying for quashing of the same. A rule nisi was issued on the said petition of the appellant. It was contended by the appellant that the Income-tax Officer was not satisfied during the course of the assessment proceedings about the existence of the conditions mentioned in clause (c) of subsection (1) of section 271. It was furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws : " The power to impose penalty under section 28 depends upon the satisfaction of the Income-tax Officer in the course of proceedings under the Act ; it cannot be exercised if he is not satisfied about the existence of conditions specified in clauses (a), (b) or (c) before the proceedings are concluded. The proceeding to levy penalty has, however, not to be commenced by the Income-tax Officer before the completion of the assessment proceedings by the Income-tax Officer. Satisfaction before conclusion of the proceeding under the Act, and not the issue of a notice or initiation of any step for imposing penalty is a condition for the exercise of the jurisdiction. There is no evidence on the record that the Income-tax Officer was not satisfied in the course of the assessment proceeding that the firm had concealed its income. The assessment order is dated the 10th of November, 1951, and there is an endorsement at the foot of the assessment order by the Income-tax Officer that action under section 28 had been taken for concealment of income indicating clearly that the Income-tax Officer was satisfied in the course of the assessment proceeding that the firm had concealed its income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mum penalty imposable exceeds the sum of Rs. 1,000. It is contended that in making a reference under section 274(2), the Income-tax Officer acts judicially or quasi-judicially which implies a determination by him of the amount of penalty that may be imposed. Such determination can be made only after the completion of the assessment proceedings and not before that. Section 274(2) provides : " Not, withstanding anything contained in clause (iii) of sub-section (1) of section 271, if in a case falling under clause (c) of that sub-section, the minimum penalty imposable exceeds a sum of rupees one thousand, the Income-tax Officer shall refer the case to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty." The contention of the appellant is that the Income-tax Officer has to come to a finding as to the amount of penalty that will be imposed on an assessee and if the minimum amount of penalty imposable exceeds the sum of Rs. 1,000, he shall refer the proceeding to the Inspecting Assistant Commissioner. Section 274(2) does not cast a duty on the Income-tax Officer to determine the exact amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the said observation, the Supreme Court did not intend to lay down as an abstract proposition of law that the penalty proceeding cannot be initiated by the issue of a notice before the completion of the assessment proceedings. In this connection, we may refer to a later decision of the Supreme Court in D. M. Manasvi v. Commissioner of Income-tax [1972] 86 ITR 557. Khanna J., who delivered the judgment of the court, observed as follows at page 561 : " The fact that notices were issued subsequent to the making of the assessment orders would not, in our opinion, show that there was no satisfaction of the Income-tax Officer during the assessment proceedings that the assessee had concealed the particulars of his income or had furnished incorrect particulars of such income. What is contemplated by clause (1) of section 271 is that the Income-tax Officer or the Appellate Assistant Commissioner should have been satisfied in the course of proceedings under the Act regarding matters mentioned in the clauses of that sub-section. It is not, however, essential that notice to the person proceeded against should have also been issued during the course of the assessment proceedings. Satisfact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng has become infructuous and should be quashed. In support of his contention that the penalty proceeding was started on the basis of the said sum of Rs. 27,62,346 strong reliance has been placed on paragraph 3(c) of the affidavit-in-opposition of the respondents which was sworn by Amalendu Chatterjee, the Income-tax Officer, Central Circle I, Calcutta, who is not the Income-tax Officer, who issued the penalty notice. In paragraph 3(c), it has been stated as follows : " After persual of the concerned papers the income-tax authorities also came to the conclusion that there has been suppression of income on various counts in respect of this carpet backing cloth export business. As the exports had been made actually by Messrs. Becker Gray Co. (1930) Ltd., in the case of that company the following additions were made : Rs. 1962-63 Asstt. year : Excess commission to White Lamb Finlay ... 11,27,730 Concealed profits retained in U.S.A. ... 5,16,200 1963-64 Asstt. year : Excess commission to White Lamb Finlay ... 19,46,970 Profits retained in U.S.A., under-invoicing, etc ... 15,54,162 Interest on extended credits ... 4,86,000 1964-65 Asstt. year : Excess com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner. In these circumstances, we are unable to accept the said contention of the appellant that the penalty proceeding has become infructuous after the said order of the Appellate Assistant Commissioner. It is next contended on behalf of the appellant that is the particulars about the concealed income of the appellant have not been given in the impugned notices, they are not in conformity with the provisions of section 274(1) of the Act which enjoins that a reasonable opportunity should be given to the assesseee of being beard before any penalty is imposed. In other words, it is submitted that for want of particulars the assessee is unable to show cause and, as such, he is deprived of a reasonable opportunity of being heard. This contention, in our view, is without any substance Under section 274(1) no order imposing a penalty shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard. Section 274(1) does not provide for the issue of any notice, but only requires that the assessee should either be heard or be given a reasonable opportunity of being heard before the imposition of penalty. The penalty has not yet been imposed. The ..... 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