H.N. Seth, J. - (1.) AT the instance of the Commissioner of Income-tax, the Income-tax Appellate Tribunal has referred the following question for the opinion of this court. " Whether, on the facts and in the circumstances of the case, the penalty of Rs. 6,600 levied under Section 271(1)(c) of the Act of 1961 was rightly cancelled? "
(2.) THE assessee (individual) filed a return of his income for the assessment year 1956-57 on 19th of September, 1956. THE assessment was completed on 21st of November, 1956. Subsequently, the Income-tax Officer found that the assessee did not include in his return the value of certain perquisites which were received by him from the Raymond Woollen Mills, Bombay, as its director. He, therefore, reopened the assessment under Section 147(a) of the Income-tax Act, 1961. In response to the notice issued by the Income-tax Officer, for proceedings under Section 147(a), the assessee submitted a return declaring his income for that assessment year as Rs. 94,280 as against the figure of Rs. 67,087 originally declared by him. THE income subsequently returned included a sum of Rs. 7,472 as the value of perquisites received by the assessee in the year relevant to the assessment year 1956-57. THEreafter, the Income-tax Officer reassessed the income of the assessee. THE Inspecting Assistant Commissioner then initiated proceedings against the assessee for imposing penalty under Section 271 of the 1961 Act. In response to the show cause notice, the assessee filed an explanation for not including the value of the perquisites in his income for the assessment year 1956-57 as originally returned by him. He also claimed that no penalty could be imposed under the provisions of the new Act for having filed inaccurate particulars of income in a return covered by the old Act, and that in the circumstances, the provisions of Section 271 did not apply to the facts of his case. THE Inspecting Assistant Commissioner rejected the explanation given by the assessee and held that he clearly committed a default by not declaring the value of the perquisites in the original return, which was punishable under Section 271(1)(c) of the Act. He also held that in view of the provisions of Section 297(2)(g) of the new Act, he had ample jurisdiction to impose the penalty. After rejecting the various contentions raised by the assessee he imposed a penalty of Rs. 6,600. The assessee went up in appeal before the Income-tax Appellate Tribunal and raised a number of grounds against the order of the Inspecting Assistant Commissioner. The Tribunal considered that the appeal could be decided on a preliminary point and that it was not necessary for it to deal with other arguments raised by the assessee for questioning the correctness of the order imposing penalty. According to it, in the case of Mayaram Durga Prasad v. Commissioner of Income-tax, 1931 5 ITC 471, this court has held that in proceedings under Section 34 of the Income-tax Act (which is equivalent to Sections 147 and 148 of the new Act) it is not open to the Income-tax Officer to levy a penalty under Section 28(1) (which corresponds to Section 271 of the new Act), in respect of concealment of income in the original return. In the instant case, the penalty has been imposed in respect, of default that was committed in relation to the original assessment proceedings and, therefore, the Income-tax Officer had no jurisdiction to impose the penalty. In the result the appeal filed by the assessee was allowed by the Tribunal on this preliminary ground without going into other questions raised in the case and the penalty order was quashed. At the instance of the Commissioner of Income-tax, the Tribunal has now referred the question, mentioned earlier, to this court for opinion.
(3.) ACCORDING to the learned counsel for the Commissioner of Income-tax, the case of Mayaram Durga Prasad v. Commissioner of Income-tax does not lay down correct law. ACCORDING to him it was open to the Income-tax Officer while proceeding under Section 34 of the 1922 Act to impose a penalty under Section 28(1)(c) of the Act in respect of a default committed in the original assessment proceedings. In this connection he relied upon the decision of the Patna High Court in the case of K. C. Mukherjee v. Commissioner of Income-tax, [1959] 37 I.T.R. 224 (Pat.), wherein it was held that the Income-tax Officer is competent, in reassessment proceedings of any year under Section 34 of the Income-tax Act, to impose a penalty on any of the grounds open to him under Section 28(1) with respect to a default or concealment in the original assessment proceeding of that year. ACCORDING to this decision, Section 28 does not require that the default or act of concealment should necessarily occur in the same proceeding in the course of which the penalty is imposed. The case of Mayaram Durga Prasad v. Commissioner of Income-tax decided by this court was cited before the Patna High Court which doubted its correctness and declined to follow it. Learned counsel also relied on a decision of the Andhra Pradesh High Court in the case of Commissioner of Income-tax v. Angara Satyam, 1959 37 ITR 230 wherein also a view similar to that taken by the Patna High Court in the case stated above was taken. Both the aforementioned cases make a reference to a decision of the Madras High Court in the case of C.V. Govindrajulu Iyer v. Commissioner of Income-tax, 1948 16 ITR 391. In this case also the decision of this court in Mayaram Durga Prasad v. Commissioner of Income-tax was dissented from and it was held that it was open to the Income-tax Officer to impose a penalty under Section 28(1) in proceedings under Section 34 in respect of a default committed in earlier proceedings.;