Satish Chandra, J. - (1.) FOR the assessment year 1963-64, the assessee returned an income of Rs. 2,689. The Income-tax Officer, however, completed the assessment on a total income of Rs. 30,000 by an order dated 28th February, 1964. He also initiated penalty proceedings. Since he was of the opinion that the penalty imposable exceeded Rs. 1,000, he referred the matter to the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner heard the assessee, and on 4th November, 1965, passed an order imposing a penalty of Rs. 3,000. He observed that the maximum penalty imposable in this case worked out to Rs. 3,630 and so the imposition of Rs. 3,000 as penalty was reasonable. The assessee took this order in appeal to the Tribunal.
(2.) BEFORE the Tribunal it was argued that on the finding that the maximum penalty imposable was Rs. 3,630 which, in other words, meant that this amount was one and a half times of the amount of tax which would have been avoided if the income as returned by the assessee had been accepted as the correct income, the minimum penalty, which should be 20 per cent. of the avoided tax, would work out to Rs. 484, that is, below Rs. 1,000. The Tribunal held that, on the facts as given by the Inspecting Assistant Commissioner in his order, it appeared that the minimum penalty imposable worked out to less than Rs. 1,000 and, therefore, there was sufficient force in the argument that only the Income-tax Officer had jurisdiction to impose penalty. The Tribunal observed that looking to the other facts and circumstances on record, it appeared that the Inspecting Assistant Commissioner had made a mistake in working out the maximum penalty imposable. The Tribunal then held : "In these circumstances, we are of the view that it is a fit and proper case where the order of the Inspecting Assistant Commissioner should be set aside and he should be required to pass a fresh order, if need be, after finding out the correct facts and after giving opportunity to both the parties of being heard." On this view the Tribunal directed : "We accordingly set aside the order of the Inspecting Assistant Commissioner, who shall, if need be, pass a fresh order as he thinks expedient in accordance with law." The Inspecting Assistant Commissioner thereafter heard the assessee and by his order dated 4th November, 1967, imposed a penalty of Rs. 3,000. The Inspecting Assistant Commissioner held that in a case where the order imposing penalty is set aside in appeal by the Tribunal with a direction to pass a fresh order in accordance with law, the limitation imposed by Section 275 will not operate in respect of the fresh order of penalty, and that he was, therefore, competent to pass a fresh penalty order. Aggrieved, the assessee went up in appeal to the Tribunal.
(3.) IT was urged before the Tribunal that the order passed by the Inspecting Assistant Commissioner was barred by limitation of two years provided in Section 275 of the Income-tax Act, 1961. To this contention the departmental representative's reply was that, as held by the Supreme Court in Bhopal Sugar Industries Ltd. v. Income-tax Officer, Bhopal, 1960 40 ITR 618 (SC), the Inspecting Assistant Commissioner was duty bound to carry out the directions of a superior appellate authority, namely, the Tribunal. The Tribunal upheld this plea of the department and held that the Inspecting Assistant Commissioner was bound to pass an order as directed by the Tribunal. The Tribunal then addressed itself to the question whether in its earlier order it had directed the Inspecting Assistant Commissioner to pass an order imposing penalty afresh, and held that it had asked the Inspecting Assistant Commissioner to pass a fresh order as he thought expedient in accordance with law, and that this did not mean that the Tribunal had directed the Inspecting Assistant Commissioner to pass an order irrespective of the fact whether it was or was not in accordance with law. It was further observed that the Tribunal had cancelled the order of the Inspecting Assistant Commissioner and had left it to him to make a fresh order if he could make it in law that there was no positive direction for making a fresh order without any regard to the provision of law and that the period of limitation prescribed by Section 275 of the Act was applicable and no penalty order could be passed after the expiry of two years from the date of the completion of the assessment proceedings. On this view the order imposing penalty was cancelled.;