Satish Chandra, J. - (1.) DURING the course of the assessment proceedings for the year 1952-53, as well as for the year 1953-54, the Income-tax Officer found certain entries in the cash book which disclosed purchases of crystal sugar from L. H. Sugar factory in the accounts of the assessee's munims and which were not included in the return. He included such items as income of the assessee from undisclosed source. The assessment order for the year 1952-53 was passed on 30th November, 1954, while the assessment order for the year 1953-54 was passed on 23rd March, 1955. Aggrieved, the assessee went up in appeal. Meanwhile, the Income-tax Officer drew up penalty proceedings under Section 28(1)(c) of the Indian Income-tax Act, 1922. The case appears to have been fixed for 9th February, 1956, on which date the assessee addressed a letter to the Income-tax Officer requesting postponement of the hearing till the disposal of the appeals pending before the Appellate Assistant Commissioner, The Appellate Assistant Commissioner decided the appeal relating to the assessment year 1952-53, on 4th September, 1956, and the appeal in respect of the assessment year 1953-54, on 2nd September, 1957. In the appeals the amounts of tax were partly reduced.
(2.) AFTER the lapse of over a decade the Income-tax Officer fixed a date for hearing of penalty proceedings somewhere in 1968. AFTER hearing the assessee he passed an order imposing a penalty of Rs. 10,000 on 10th May, 1968. For the assessment year 1953-54 a penalty of Rs. 40,000 was levied by an order dated 26th March, 1968. Aggrieved, the assessee went up in appeal. The Appellate Assistant Commissioner reduced the penalty to Rs. 3,500 and Rs. 16,000, respectively, for the two assessment years. The assessee took the matter to the Tribunal. The Tribunal after giving the facts and after considering the decision of this court in Mohd. Atiq v. Income-tax Officer [1962] 46 ITR 452 (All) and another decision in Ram Kishan Baldeo Prasad v. Commissioner of Income-tax [1967] 65 ITR 491, 495 (All) quoted the following passage from the later decision: "When there is no prescribed period of limitation, as already observed, delay can only be a factor, albeit a very relevant factor, to be taken into consideration in determining the propriety of the order." The Tribunal then held : "In view of the principle laid down by the Allahabad High Court which we are bound to follow, we cannot sustain the levy of penalty in both the years under appeal as a result of which the assessee's appeals succeed and appeals of the revenue fail."
(3.) AT the instance of the Commissioner of Income-tax, the Tribunal has referred the following question of law for the opinion of this court : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in cancelling the levy of penalty under the provisions of Section 28(1)(c) of the Indian Income-tax Act, 1922, relating to assessment years 1952-53 and 1953-54, respectively ?" We may here notice that the Income-tax Officer in his order imposing penalty had explained the delay. In one order he has said that the file was under transfer from one Income-tax Officer to the other and the pendency of penalty proceedings casually escaped notice. The assessee contributed to the delay by the non-submission of the reply to the two opportunities given to him. In the other order dated 26th March, 1968, passed for the assessment year 1953-54, he was a little more elaborate. He observed : "It is necessary to mention here that because of change of jurisdiction of Pilibhit district from Income-tax Officer, Shahjahanpur, to the Income-tax Officer, Bareilly, the records were transferred to the Income-tax Officer, Bareilly. Subsequently, the case was transferred to the Income-tax Officer, Special Investigation Circle, Meerut, by the Income-tax Officer, C-Ward, Bareilly, on July 30, 1960. By a clerical error in the completion of the transfer memo, the pendency of the penalty proceedings for the year 1953-54 was not reported to the Income-tax Officer, Central Circle. After having stayed with the Income-tax Officer, Central Circle, the assessment records were returned to this office under the transfer memo from the Income-tax Officer, Central Circle, Meerut, on November 27, 1967. Unfortunately, this transfer memo also failed to indicate the pendency. While going through the assessment records received, it was discovered that the penalty proceedings for concealment were initiated for the assessment year 1953-54, and the assessee was given two opportunities which the assessee did not avail of. He did not file any written reply. As a last opportunity to the assessee another reminder was served upon him on March 8, 1968, in response to which the assessee attended on March 19, 1968. The assessee wanted some more time for the preparation of his reply as the matter was very old. At the assessee's instance, the time was extended to March 25, 1968." ;