Devinder Guptal, J. -
(1.) THE Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh, has, at the behest of the ssessee, referred the following question of law to this court :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the imposition of penalty under Section 271(1)(c) by the Inspecting Assistant Commissioner, vide his order dated May 23, 1977, was within the period of limitation prescribed under Section 275 of the Income-tax Act, 1961 ?"
(2.) THE assessee was assessed in the status of a Hindu undivided family for the assessment year 1965-66, which was completed under Section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), on March 17, 1970, on a total income of Rs. 1,02,300, on the basis of a return which had been filed by the assessee on August 7, 1965, declaring his total income at Rs. 11,093.50, which was later on revised to Rs. 89,318 on August 10, 1967. THE Inspecting Assistant Commissioner, on March 24, 1972, levied a penalty under Section 271(1)(c) of the Act on the basis of this assessment. On an appeal having been preferred by the assessee against the assessment, the Tribunal, vide its order dated November 5, 1973, set aside the assessment and remanded the case to the Income-tax Officer with a direction to make a fresh assessment in accordance with law. Since the basis for imposing penalty by the Inspecting Assistant Commissioner, namely, the order of assessment, had been cancelled, the Tribunal, vide its order dated January 10, 1974, cancelled the penalty imposed on March 24, 1972.
The Income-tax Officer, on September 13, 1974, completed the fresh assessment and again determined the total income of the assessee at Rs. 1,02,300 and further held that the assessee had concealed its income from karyana shop by alteration and manipulation of the account books and further that the assessee also did not disclose any income from the contract business in the original return filed by him. On the basis of this finding, a notice under Section 274 read with Section 271(1)(c) was issued to the assessee to show cause as to why penalty be not imposed. As the penalty imposable exceeded the statutory limit prescribed for the Income-tax Officer, the proceedings were referred to the Inspecting Assistant Commissioner. In the meanwhile, the appeal preferred by the assessee against the fresh order of assessment was dismissed by the Appellate Assistant Commissioner on June 6, 1975, and by the Income-tax Appellate Tribunal on January 21, 1977. After the disposal of the appeal by the Appellate Tribunal, the Inspecting Assistant Commissioner, on May 23, 1977, passed an order imposing penalty for concealment. This order was further challenged by the assessee before the Income-tax Appellate Tribunal.
When the matter was pending before the Tribunal, the assessee gave up his challenge to the order imposing penalty on merits but pressed his challenge on legal grounds by urging that the order imposing penalty was barred by limitation. It was urged by him that, since the original assessment was completed on March 17, 1970, art order imposing penalty, if any, could have been imposed only within a period of two years from that date. Rejecting his contention, the Tribunal held that, when the original order of assessment was set aside in appeal, earlier proceedings came to an end and the only relevant assessment was the order passed by the Income-tax Officer on September 30, 1974. This fresh order of assessment was challenged in appeal which was finally decided on January 21, 1977, and therefore, the order passed on May 23, 1977, was within the period of limitation prescribed under Section 275 of the Act. The assessee, thereafter, sought reference to this court and this is how the aforementioned question of law has been referred.
(3.) WE have heard learned counsel for the assessee as well as for the Revenue and have gone through the record of the case. Before we advert to the respective contentions made by counsel for the parties, it would be pertinent to glance through the provisions of law applicable to the facts of the present case. Section 275 of the Act, as it originally stood, was as under :
"Bar of limitation for imposing penalty.--No order imposing a penalty under this Chapter shall be passed after the expiration of two years from the date of the completion of the proceedings in the course of which the proceedings for the imposition of penalty have been commenced.
Explanation.--In computing the period of limitation for the purpose of this section, the time taken in giving an opportunity to the assessee to be reheard under the proviso to Section 129 and any period during which a proceeding under this Chapter for the levy of penalty is stayed by an order or injunction of any court shall be excluded."
By the Taxation Laws (Amendment) Act, 1970, which came into force on and with effect from April 1, 1971, the main section was substituted by the following, but the Explanation remained unaltered :
"No order imposing a penalty under this Chapter shall be passed-
(a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Deputy Commissioner (Appeals), or the Commissioner (Appeals) under Section 246 or an appeal to the Appellate Tribunal under Sub-section (2) of Section 253, after the expiration of a period of-
(i) two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or
(ii) six months from the end of the month in which the order of the Deputy Commissioner (Appeals) or the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal, is received by the Chief Commissioner or Commissioner,
whichever period expires later ;
(b) in any other case, after the expiration of two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed."