R.R.Rastogi, J. - (1.) This is a reference under Section 27(1) of the W.T. Act, 1957, hereafter referred to as "the Act". For the assessment years 1970-71 and 1971-72, the assessee, Sri Umrao Lal, an individual, should have filed the returns of his net wealth by 30th June, 1970, and 30th Juno, 1971, respectively. He, however, filed them on April 17, 1971, and December 7, 1972, for these two years, respectively. The WTO made the assessment and for the delay that had occurred in the filing of the returns took action under Section 18(l)(a) of the Act. The notices were duly served on the assessee on September 2, 1972. The assessee did not appear on the date fixed nor did he file any written explanation. It appears that some time during the pendency of the proceedings, the officer, who had initiated the same, was transferred and was succeeded by another officer. The successor officer passed penalty orders for both these years on September 14, 1973. He took the view that in spite of service of notice the assessee had not appeared on the date fixed nor he had filed any written explanation and, thus, he had nothing to say in his defence. In the result, he imposed penalties in the sums of Rs. 11,125 and Rs. 5,370 for these two years, respectively.
(2.) The assessec appealed and contended before the AAC that he had not been given any opportunity of a hearing by the WTO before imposing the penalty and, hence, the orders passed by him were bad. This submission found favour with the AAC and he cancelled the penalty orders and allowed the appeals. Aggrieved, the department took up the matter in appeal before the Appellate Tribunal.
(3.) The Appellate Tribunal took up the appeals for both these years together. The contention urged on behalf of the Department was that the notices had been served properly and the assessee had not put in any appearance on the date fixed and hence the view taken by the AAC was not justified. It was, on the contrary, contended on behalf of the assessee that the penalty order was passed about a year after the service of notice and in the meantime the officer had also changed and hence it was the duty of the successor officer to issue a notice to the assessee and afford him a fresh opportunity of a hearing. The Appellate Tribunal accepted this contention and observed : " After hearing both the parties, we are of the view that the order of the Appellate Assistant Commissioner is justified. When there is a change in the incumbent of the office, the principles of natural justice demand that another opportunity should be given by the new officer to the assessee and non-providing of such an opportunity has resulted in violation of the principles of natural justice. Apart from that when an assessee is being subjected to a penalty, a further opportunity, if provided, would have obviated a lot of hardship. After all justice must be tempered with mercy and there should be no element of arbitrariness in imposing penalty, and providing an opportunity to the assessee before imposing the penalty is the first desirable course which should be adopted by the Income-tax Officer--Ram Saran Das Kapur's case [1970] 77 ITR 298 (P & H); Calcutta Tanneries [I944]Ltd. [1960] 40 ITR 178 (Cal) and Satprakash Ram Namnjan [1969] 71 ITR 646 (P & H).";