- (1.) THE following questions of law have been referred to this court for opinion by the Income-tax Appellate Tribunal, Delhi Bench "c" "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the assessment order passed by the Income-tax Officer ?
(2.) WHETHER, on the facts and in the circumstances of the case, the Tribunal was right in law to hold that the penalty proceedings were invalid and cancel the order of penalty passed by the Inspecting Assistant Commissioner of Income-tax ?" 2. The assessment year in question is 1961-62 for which a return declaring an income of Rs. 63,576 was filed by the assessee on March 31, 1962, before the Income-tax Act, 1961, came into force. Later on, the assessee filed a revised return on November 15, 1962, declaring its income as Rs. 71,137. The Income-tax Officer made the assessment under Section 143 (3) of the 1961 Act instead of under Section 23 (3) of the Income-tax Act, 1922, Admittedly, according to the provisions of Section 297 (2) (a) of the 1961 Act, the assessment had to be made under Section 23 (3) of the 1922 Act. The Income-tax Appellate Tribunal has set aside the assessment on the ground that it has not been made under the appropriate provision of law. The Income-tax Officer had added an income of Rs. 37,025 to the return filed by the assessee as its income from undisclosed sources and after notice to the assessee. the Inspecting Assistant Commissioner imposed a penalty of Rs. 31,000 on the assessee on the ground that it had concealed income of Rs. 37,025. The assessee finally filed appeals before the Income-tax Appellate Tribunal against the order of assessment as well as the order of penalty and both the appeals of the assessee were accepted. The Income-tax Appellate Tribunal held that the assessment order passed by the Income-tax Officer could not be assumed to have been passed under Section 23 of the Income-tax Act, 1922, and, therefore, the assessment order passed by him was without jurisdiction and void in law. On that ground, the assessment order was set aside. In the appeal relating to penalty, it was held that the expression "any proceeding under the Act" in Section 271 (1) (c) of the 1961 Act, referred to a valid proceeding and, since the proceedings for assessment were void in law, no penalty could be imposed. The Commissioner of Income-tax, being dissatisfied with those orders of the Tribunal, asked for the reference of the two questions, set out above, for opinion to this court.
(3.) THE submission of the learned counsel for the petitioner is that the order of assessment should have been considered to have been passed under Section 23 (3) of the Income-tax Act, 1922, and should not have been held to be void in law having been passed under Section 143 (3) of the 1961 Act. Strong reliance is placed in support of this submission on a judgment of their Lordships of the Supreme Court in Hazari Mal Kuthiala v. Income-tax Officer, Special Circle, Ambala Cantt. , [1961] 41 I. T. R. 12, [1961] 1 S. C. R. 892 (S. C), wherein an order of the Commissioner of Income-tax passed under Sections 5 (5) and 5 (7a) of the Indian Income-tax Act, 1922, was attacked as ultra vires and incompetent for the reason that the correct provision to be invoked for the assessment in question was Section 5 (5) of the Patiala Income-tax Act. Their Lordships upheld the order treating the same as one passed under Section 5 (5) of the Patiala Income-tax Act, observing : "the exercise of a power would be referable to a jurisdiction which conferred validity upon it and not to a jurisdiction under which it would be nugatory. ";