Translate
Text Highlighter

Bookmark

PDF

Share

Report a problem
AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • N.D Ojha, C.J
  • K.K Adhikari, J.
Acts
  • Section 22 of the Bombay Sales Tax Act, 1946, and Section 31 of the Bombay Sales Tax Act, 1953,
  • provisions of Section 28(1)(c) of the Indian Income-tax Act, 1922,
  • section 256(1) of the Income-tax Act, 1961 (hereinafter referred
  • Section 41(1) of the Kerala Agricultural Income-tax Act, 1950,
  • Section 28(1)(b) of the Indian Income-tax Act, 1922.
  • Section 28(1 )(c) of the Indian Income-tax Act, 1922.
  • Section 271(1)(c) of the Income-tax Act, 1961,
  • Clauses (a) and (b) of Section 275,
  • Section 28(1)(c) of the 1922 Act
  • Indian Income-tax Act, 1922
Are you a practicing lawyer?
Enhance your digital presence and reach by creating a Casemine profile.
Upload pleading to use the new AI search
Click here to upload
Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • N.D Ojha, C.J
  • K.K Adhikari, J.
Acts
  • Section 22 of the Bombay Sales Tax Act, 1946, and Section 31 of the Bombay Sales Tax Act, 1953,
  • provisions of Section 28(1)(c) of the Indian Income-tax Act, 1922,
  • section 256(1) of the Income-tax Act, 1961 (hereinafter referred
  • Section 41(1) of the Kerala Agricultural Income-tax Act, 1950,
  • Section 28(1)(b) of the Indian Income-tax Act, 1922.
  • Section 28(1 )(c) of the Indian Income-tax Act, 1922.
  • Section 271(1)(c) of the Income-tax Act, 1961,
  • Clauses (a) and (b) of Section 275,
  • Section 28(1)(c) of the 1922 Act
  • Indian Income-tax Act, 1922
See more information ...
Smart Summary

Summary of the Court's Opinion (Reference under Section 256(1) of the Income-tax Act, 1961)

Factual and Procedural Background

An assessment order was passed against the assessee on 12 August 1969. An initial order imposing penalty was passed by the Inspecting Assistant Commissioner on 9 August 1971. The assessee appealed and the Income-tax Appellate Tribunal allowed the appeal on 18 November 1972 and remanded the matter to the Inspecting Assistant Commissioner for fresh decision. Pursuant to the remand, the Inspecting Assistant Commissioner passed a fresh penalty order on 30 January 1979. The assessee again appealed to the Tribunal, which on 16 October 1980 allowed the appeal and quashed the penalty order. The Commissioner of Income-tax filed applications for reference under section 256(1) of the Income-tax Act: R.A. No. 43 (JAB) of 1980 (question (i)) and, following a miscellaneous application by the assessee raising a point about delay in passing the penalty after remand, R.A. No. 4 (JAB) of 1982 (question (ii)). The Tribunal framed a common statement of case and referred the two questions to this Court.

Legal Issues Presented

  1. Whether, on the facts and in the circumstances of the case, the Tribunal was, in law, right in holding that the penalty order dated January 30, 1979, made by the Inspecting Assistant Commissioner under section 271(1)(c) of the Act was bad in law?
  2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the penalty order passed by the Inspecting Assistant Commissioner under Section 271(1)(c) of the Income-tax Act, 1961, on January 30, 1979, was bad in law as having been made after six years of the order of remand?

Arguments of the Parties

Assessee's Arguments

  • The assessee relied on earlier authorities (notably Mohd. Atiq v. ITO) to contend that proceedings for imposition of penalty were barred by time or rendered invalid because of inordinate delay, effectively arguing that the delay in passing the penalty defeated the validity of the penalty order.
  • Learned counsel for the assessee placed reliance on several authorities, including Mohd. Atiq v. ITO, S.B. Gurbaksh Singh v. Union of India (for the proposition that a reasonable time rule applies where no statutory limitation is prescribed), and the Kerala decision in Krishna Bhatta (where a 16-year delay was held prima facie unreasonable in the absence of explanation).

Commissioner/Revenue's Position (as reflected in the opinion)

  • The Commissioner applied to have the Tribunal's findings referred to this Court under section 256(1), challenging the Tribunal's quashing of the penalty order and the Tribunal's conclusion that the penalty order was bad in law for being passed after an alleged inordinate delay.
  • The opinion records the Revenue's contention implicitly through the reference and the Court's analysis that statutory limitation (Section 275 clauses) and prior authorities should be considered; however, detailed adversarial submissions by the Revenue are not set out in the provided opinion.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Vasani & Co. v. CIT [1978] 112 ITR 819 (Guj) Interpreted Section 275 to mean the two-year limit applies to the initial/first order imposing penalty and is not intended to be a limit for final completion of all proceedings. The Court relied on this to support the proposition that the two-year limitation would not necessarily apply when a penalty is imposed consequent to a remand; thus, a penalty passed after remand is not automatically invalid for being beyond two years from the remand.
CIT v. Rupsa Rice Mill [1964] 54 ITR 328 (Orissa) Held that absence of an express statutory period within the 1922 Act meant an order could not be held bad in law merely due to delay; Tribunal could set aside penalty on propriety but not by treating delay as a statutory bar. The Court relied on the Orissa High Court's reasoning to distinguish the Mohd. Atiq decision and to hold that delay alone does not render a penalty void as a matter of law; the Rupsa principle was treated as persuasive authority.
Mohammad Atiq v. ITO [1962] 46 ITR 452 (All) In that case the penalty order was quashed, but not solely for delay; the Court emphasised that a rule of limitation must be expressly provided and delay alone, where no statutory period is prescribed, does not of itself render an order bad in law. The Court discussed and distinguished this decision, noting that Mohd. Atiq involved other findings on merits and should not be read as laying down that inordinate delay in every case invalidates a penalty order as a matter of law.
Vir Bhan Bansi Lal v. CIT [1938] 6 ITR 616 Earlier authority cited for the proposition that no period of limitation can be implied from Section 28 of the 1922 Act. Referenced as a precedent relied upon in the Mohd. Atiq reasoning and noted as part of the historical line of authorities regarding implication of limitation periods.
Swastik Oil Mills Ltd. v. H.B. Munshi, Dy. CST [1968] 21 STC 383 (SC) Where no period of limitation is prescribed for exercise of revisional powers in statute, no such limitation has necessarily to be read into the statute. The Court cited this Supreme Court authority to support the proposition that absence of an express limitation does not automatically import a time bar; it was used to temper any suggestion that delay alone invalidates orders where statute is silent.
Ram Kishan Baldeo Prasad v. CIT [1967] 65 ITR 491 (All) Held that inordinate delay does not, as a matter of law in every case, invalidate a penalty order; delay is a relevant factor in determining propriety but not an automatic legal bar. The Court relied on the Division Bench's statement to reinforce that delay must be considered as one factor and that the Tribunal should examine responsibility for delay and changed circumstances before invalidating a penalty order.
Bisheshwar Lal v. ITO [1970] 75 ITR 698 (All) Distinguished on facts; involved quashing of pending proceedings on ground of inordinate delay (vexatiousness), and in so far as cases where penalty had already been passed, approved Rupsa Rice Mill's view. The Court observed this authority to show the law's application in related contexts and to note that Bisheshwar Lal did not dissent from Rupsa Rice Mill's principle regarding already-passed penalty orders.
CIT v. Ajodhya Prasad Gopi Nath [1977] 107 ITR 951 (All) Held the Tribunal was not justified in cancelling levy of penalty without recording relevant findings and fixing responsibility for the delay and finding its effect upon the penalty order. The Court cited this decision to underscore that appellate authorities must record findings about delay and its consequences before setting aside penalty orders.
Lalta Prasad Goenka v. CIT [1980] 122 ITR 399 (Bom) Considered the trio of Mohd. Atiq, Rupsa Rice Mill and Ram Kishan Baldeo Prasad; in that case the Bombay High Court answered in favour of the Revenue that the penalty was leviable. The Court noted this decision as part of the spectrum of precedents and as an example where, on the facts, penalty was held leviable despite reliance on Mohd. Atiq by the assessee.
S.B. Gurbaksh Singh v. Union of India [1976] 37 STC 425 (SC) Held that where no limitation is prescribed, the rule of reasonable time applies; what is reasonable depends on the facts of each case. The Court acknowledged this authority but clarified it cannot be treated as supporting the proposition that delay alone makes a penalty order legally bad where no statutory limitation is prescribed.
Krishna Bhatta v. Agricultural Income-tax Officer [1981] 132 ITR 21 (Ker) In a case of penalty imposed after 16 years, the court recorded that prima facie the delay was unreasonable in the absence of any explanation. The Court mentioned this Kerala decision as an example cited by the assessee, noting its factual circumstances (very long delay) but did not treat it as controlling for the facts of the present case.

Court's Reasoning and Analysis

The Court proceeded by identifying the statutory scheme under Section 275 of the Income-tax Act and the factual matrix. It was undisputed that the assessment order of 12 August 1969 was not appealed by the assessee; therefore Clause (b) of Section 275 applied. Clause (b) prescribed a two-year limitation to be computed from the end of the financial year in which the proceedings in the course of which action for imposition of penalty had been initiated were completed. The Court observed that the initial penalty order dated 9 August 1971 was within the two-year limitation prescribed by Clause (b).

The Tribunal had taken the view that the fresh penalty order of 30 January 1979, made after remand by the Tribunal on 18 November 1972, was bad in law because it was made about six years after the order of remand and therefore should have been passed within two years of the remand. The Court found this to be an error of law. It analysed precedent law and statutory interpretation to conclude that the two-year limitation in Section 275 was directed at the initial order and was not necessarily intended to set an outer limit for final completion of all proceedings following appellate intervention or remand.

The Court reviewed relevant authorities. It recorded that the Orissa High Court in Rupsa Rice Mill held that in the absence of an express statutory limitation an order could not be held bad in law merely because of inordinate delay, and that the question was one of propriety for the Tribunal to consider. The Court observed that Mohammad Atiq had been relied upon by the assessee but that in Mohammad Atiq the penalty order had been quashed not only on the ground of delay but also on additional findings on merits. The Division Bench decision in Ram Kishan Baldeo Prasad was cited for the proposition that delay is a relevant factor but not an automatic ground for invalidity; similarly Ajodhya Prasad Gopi Nath emphasized that the Tribunal must record relevant findings and fix responsibility for the delay before cancelling a penalty.

Applying these principles to the facts, the Court found that the Tribunal had not applied its mind to whether the delay was innocuous or whether it had been caused without sufficient cause. The Tribunal had not considered whether changed circumstances arose which might justify the penalty being sustained after the delay. Because the Tribunal quashed the penalty order solely on the ground of delay without recording relevant findings about responsibility for the delay or its effect on the penalty order, the Court concluded that the Tribunal's conclusion was legally unsound.

Holding and Implications

Holding: The Court's answers to the referred questions were that the Tribunal was, in law, not right in holding that the penalty order dated January 30, 1979, was bad in law; and that the Tribunal was not correct in law in holding the penalty order bad for having been made after an inordinate delay of six years from the order of remand without recording relevant findings and fixing responsibility for the delay and its effect upon the penalty order.

Implications:

  • The Tribunal's quashing of the penalty order solely on the ground of delay (without requisite findings on responsibility for delay or changed circumstances) was set aside by this Court's response to the reference.
  • The decision underscores that where no express statutory period is prescribed for final completion of proceedings, delay is a relevant factor in assessing propriety but does not ipso facto render a penalty order legally void; appellate authorities must record findings as to the cause and effect of delay before invalidating a penalty.
  • On the facts of this case, the direct effect is that the Tribunal's conclusion that the penalty order was bad in law for delay was not sustained. The Court recorded that there shall be no order as to costs in the circumstances of the case.
  • This opinion does not purport to lay down a wholly novel rule; it applies and reconciles existing authorities and emphasizes procedural requirements (recording findings, fixing responsibility) when delay is relied upon to challenge penalty orders.

No information beyond the provided opinion has been added. The summary strictly reflects the reasoning, authorities and outcomes as stated in the supplied text.

Show full summary ...

    Commissioner Of Income-Tax v. Dr. Manoranjan Mohanty.

    1. The Income-tax Appellate Tribunal, Jabalpur Bench, Jabalpur, has referred the following questions to this court for its opinion under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as " the Act ") :

    "(i) Whether, on the facts and in the circumstances of the case, the Tribunal was, in law, right in holding that the penalty order dated January 30, 1979, made by the Inspecting Assistant Commissioner under section 271(1)(c) of the Act was bad in law ?

    (ii) Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the penalty order passed by the Inspecting Assistant Commissioner under Section 271(1)(c) of the Income-tax Act, 1961, on January 30, 1979, was bad in law as having been made after six years of the order of remand ?"

    2. The facts in a nutshell, necessary for answering the aforesaid questions, may be stated as under : An order of assessment was passed against the assessee on August 12, 1969. Subsequently, on August 9, 1971, an order imposing penalty on the assessee was passed by the Inspecting Assistant Commissioner. An appeal was preferred by the assessee against this order which was allowed by the Income-tax Appellate Tribunal on November 18, 1972, and the matter was remanded to the Inspecting Assistant Commissioner for being decided afresh. In pursuance of the order of remand, the Inspecting Assistant Commissioner passed a fresh order on January 30, 1979, imposing penalty on the assessee. An appeal was again preferred against this order by the assessee before the Tribunal which was allowed on October 16, 1980, and the order imposing penalty was quashed. The Commissioner of Income-tax thereupon made an application for referring question No. (i) stated above. This application was numbered as R. A. No. 43 (JAB) of 1980. A miscellaneous application was filed by the assessee before the Tribunal asserting that apart from the point on which the appeal had been allowed by the Tribunal, another plea had been raised to the effect that the order of the Inspecting Assistant Commissioner dated January 30, 1979, imposing penalty was bad in law inasmuch as it had been passed after an inordinate delay of more than six years of the passing of the order of remand dated November 18, 1972, but the same had not been considered by the Tribunal in its appellate order. This plea found favour with the Tribunal and holding that even though the point had been raised but had not been decided, the Tribunal decided this point also in favour of the assessee whereupon on another application, being R.A. No. 4 (JAB) of 1982 made on behalf of the Commissioner of Income-tax, the second question stated above was referred by the Tribunal. It may, however, be pointed out that while referring both these questions, the Tribunal has drawn up a common statement of case and referred these questions by the same order.

    3. As regards question No. (i), it may be pointed out that it has not been disputed before us that against the order of assessment passed on August 12, 1969, no appeal had been preferred by the assessee. In this view of the matter, it is apparent that it was a case which would be governed by Clause (b) of Section 275 of the Act. On a plain reading of Clauses (a) and (b) of Section 275, it appears that Clause (a) applies to those cases where the relevant order of assessment is the subject-matter of an appeal. In any other case, namely, where the order of assessment is not the subject-matter of an appeal, it is Clause (b) which is applicable. According to Clause (b) of Section 275 of the Act, the limitation for passing an order imposing penalty was two years, which was to be computed from the end of the financial year in which proceedings in the course of which action for imposition of penalty had been initiated, were completed. Since the order of assessment was passed oh August 12, 1969, and the initial order imposing penalty by the Inspecting Assistant Commissioner was passed on August 9, 1971, it was apparently passed within the limitation of two years prescribed by Clause (b) of Section 275 of the Act. The view taken by the Tribunal, however, was that since the subsequent order dated January 30, 1979, imposing penalty was passed by the Inspecting Assistant Commissioner after about six years of the order of remand dated November 18, 1972, passed by the Tribunal, it was bad in law inasmuch as the order of penalty could, at best, have been passed within two years of the order of remand. In our opinion, the Tribunal has apparently committed an error of law in taking this view.

    4. In Vasani and Co. v. CIT [1978] 112 ITR 819 (Guj), a question came up for consideration in regard to the scope of an order of penalty to be passed under Section 275 of the Act. It was held that on a plain reading of this provision, it was obvious that the term "no order imposing a penalty under Chapter XXI shall be passed" would refer prima facie to the initial order or the first order which would have to be passed by the competent authority and the two years' period was never intended to set up a limit for final completion, of all proceedings.

    5. In CIT v. Rupsa Rice Mill [1964] 54 ITR 328 (Orissa), a similar question came up for consideration before the Orissa High Court under Section 28(1 )(c) of the Indian Income-tax Act, 1922. In that case, the assessment proceedings were completed on October 31, 1950. Thereupon notice under Section 28(1)(c) of the 1922 Act was issued to show cause why penalty should not be levied for concealment of income. A fresh notice was again issued to him on April 1, 1955, and the matter was posted for hearing on April 13, 1955, It was again adjourned to April 25, 1955, on which date the Income-tax Officer merely directed that orders will be passed on receipt of the records. Nothing was done for nearly two years and on January 28, 1957, the officer fixed the case for hearing on September 11, 1957, and after obtaining the explanation from the assessee, levied penalty on January 11, 1958. It may have to be further noted that the assessee did not file any appeal against the order of assessment dated October 31, 1950, which became, therefore, final long before the penalty proceedings were disposed of. The Tribunal, in the proceedings for imposition of penalty, held that there was unconscionable delay in passing the order of penalty and, relying on some observations in Mohammad Atiq v. ITO [1962] 46 ITR 452 (All), took the view that there being no special circumstances for the considerable delay which had taken place in completing the order of penalty, the penalty order was bad in law. The learned judges of the Orissa High Court pointed out that the Tribunal had misconstrued the judgment in the case of Mohd. Atiq [1962] 46 ITR 452 (All). It was pointed out that in the case of Mohd. Atiq [1962] 46 ITR 452 (All), the penalty order had been quashed not on the only ground of delay, but also on a further finding that had been recorded on merits, to the following effect (p. 331 of 54 ITR):

    " It is well-settled that a rule of limitation must be expressly provided in a statute and cannot be inferred merely on account of unreasonable delay. Once it is conceded that in the Indian Income-tax Act, 1922 (which provides for special rules of limitation for the various proceedings under that Act), there is no express provision prescribing the period within which an order of penalty should be passed, no such order can be held to be bad in law merely because of the inordinate delay. Mr. D. Mohanty for the Department rightly invited my attention to an earlier decision of the Lahore High Court in Vir Bhan Bansi Lal v. CIT [1938] 6 ITR 616, where the learned judge held on a construction of Section 28 of the Act that no period of limitation can be even impliedly inferred from the other provisions contained in that section.

    But as the Tribunal is the final appellate authority over orders passed by the Income-tax Officer, it had undoubtedly jurisdiction to set aside the order of penalty, if, after taking all the facts and circumstances of the case into consideration, it was of the view that the penalty should not have been imposed. The question is mainly one of propriety and not of law, and, as the final court of appeal, the Tribunal could exercise all the powers which the original taxing authority had. But this reference was necessitated because the order of penalty was set aside solely on the ground that it was bad in law, and for the reasons already given above this view of the Tribunal was based on a misconception."

    7. In Swastik Oil Mills Ltd. v. H.B. Munshi, Dy. CST[1968] 21 STC 383 (SC), while dealing with the scope of the revisional powers under Section 22 of the Bombay Sales Tax Act, 1946, and Section 31 of the Bombay Sales Tax Act, 1953, it was held by the Supreme Court that since there was no period of limitation prescribed for exercise of revisional powers under these sections, no such limitation had necessarily to be read into the two Acts. Considerable reliance, we may point out, was placed by learned counsel for the assessee on the decision of the Allahabad High Court in the case of Mohd. Atiq [1962] 46 ITR 452. As already seen above, that case has been distinguished by the Orissa High Court in the case of Rupsa Rice Mill [1964] 54 ITR 328 and we agree, with respect, with the distinction pointed out therein.

    8. In this connection, it may further be pointed out that the case of Mohd, Atiq [1962] 46 ITR 452 (All) came up for consideration before a Division Bench of the same High Court in Ram Kishan Baldeo Prasad v. CIT [1967] 65 ITR 491 (All). After referring to the observations, made in the case of Mohd, Atiq [1962] 46 ITR 452 (All), it was held by the Division Bench as under (p. 494):

    " If the learned single judge intended to lay down that inordinate delay in every case, as a matter of law, would lead to the invalidity of the penalty order, then we cannot, with respect, subscribe to it. 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."

    9. In that case, the question which was referred was as to whether for the assessment year 1945-46, the assessment for which was made in March, 1950, penalty could be imposed in August, 1957. The question was answered by saying that a penalty in respect of the assessment year 1945-46, as a matter of strict law, could have been imposed in August, 1957, even though assessment was completed in March, 1950, but propriety required the changed circumstances to be taken into consideration and the responsibility for the inordinate delay to be fastened before levying the penalty and upholding it.

    10. The Tribunal has placed reliance on Bisheshwar Lal v. ITO [1970] 75 ITR 698, another Division Bench decision of the Allahabad High Court. In our opinion, the facts of that case are distinguishable. Indeed, that case seems to approve the law laid down by the Orissa High Court in the case of Rupsa Rice Mill [1964] 54 ITR 328. Bisheshwar Lal's case [1970] 75 ITR 698 was one where the writ petition had been filed challenging the pending proceedings for levying penalty and those proceedings were quashed on the ground that on account of inordinate delay, it would be vexatious to the assessee if the proceedings were allowed to continue. Reliance in that case was placed on behalf of the Department on the case of Rupsa Rice Mill [1964] 54 ITR 328 (Orissa). After referring to the law laid down in that case, it was pointed out as under (p. 700):

    " An order imposing penalty had been passed by the Income-tax Officer. The question before the High Court was whether that order was bad in law. It was held by the High Court that the order imposing penalty could not be said to be bad in law merely on the ground of delay. In the present case, we are not dealing with any order imposing penalty. The question before us is whether the pending proceedings under Section 28(1)(c) of the Act should be allowed to proceed or not."

    11. It is in view of these observations that we are of the opinion that the law laid down by the Orissa High Court in Rupsa Rice Mill's case [1964] 54 ITR 328, in so far as the cases where an order of penalty had already been passed are concerned, was approved in the case of Bisheshwar Lal [1970] 75 ITR 6.98 (All). At any rate, no dissent was expressed in that case.

    12. The case of Mohd. Atiq [1962] 46 ITR 452 (All) came up for consideration again in a subsequent case before the Allahabad High Court in CIT v. Ajodhya Prasad Gopi Nath [1977] 107 ITR 951. The observations which had been made by the Division Bench of that court in the case of Ram Kishan Baldeo Prasad [1967] 65 ITR 491 (All) in regard to the decision in the case of Mohd. Atiq [1962] 46 ITR 452 (All) were approved. In the case of Ajodhya. Prasad Gopi Nath [1977] 107 ITR 951 (All) also, an order imposing penalty had been cancelled by the Tribunal on the ground that the order had been passed after inordinate delay. The question referred to the High Court in that case was as to 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 the assessment years 1952-53 and 1953-54, respectively. It was held as under (P. 954) :

    " In the present case, the Tribunal which was the final court of fact did not apply its mind to the rival contentions of the parties and did not fix the responsibility for the delay. There is no finding as to whether the delay was innocuous or it affects the levy of penalty because of any changed circumstances. In this view of the matter, we would answer the question referred to us by saying that the Appellate Tribunal was not justified in cancelling the levy of penalty without recording relevant findings and fixing responsibility for the delay and finding its effect upon the penalty order."

    13. The matter came up for consideration before the Bombay High Court also in Lalta Prasad Goenka v. CIT [1980] 122 ITR 399 (Bom). That case took into consideration the three decisions mentioned above in the cases of Mohd. Atiq [1962] 46 ITR 452 (All), Rupsa Rice Mill [1964] 54 ITR 328 (Orissa) and Ram Kishan Baldeo Prasad [1967] 65 ITR 491 (All). The question referred to the Bombay High Court in that case was whether, on the facts and in the circumstances of the case, any penalty was leviable against the assessee under Section 28(1)(b) of the Indian Income-tax Act, 1922. The plea which had been raised before the Tribunal on behalf of the assessee relying on the case of Mohd. Atiq [1962] 46 ITR 452 (All), was that the proceedings for penalty must be held to be barred by time The question was answered in the affirmative and in favour of the Revenue.

    14. According to the view taken in Vasani & Co.'s case [1978] 112 ITR 819 (Guj), it is apparent that the limitation of two years would not apply when an order of penalty is to be passed consequent upon an order of imposition of penalty being set aside and the matter being remanded for fresh decision. Reliance has been placed by learned counsel for the assessee also on the case of S.B. Gurbaksh Singh v. Union of India. [1976] 37 STC 425 (SC), where it was held by the Supreme Court that even if no limitation is prescribed, the rule of reasonable time will apply and that what is reasonable time will depend upon the facts of each case. The rule in this behalf is well-settled. However, the said decision cannot be taken to be an authority for the proposition that an order imposing penalty would become bad in law simply on the ground of delay in passing the said order when no period of limitation is prescribed therefor.

    15. Reliance was also placed by learned counsel for the assessee on a decision of the Kerala High Court in Krishna Bhatta v. Agricultural Income-tax Officer [1981] 132 ITR 21. That was a case where penalty had been imposed under Section 41(1) of the Kerala Agricultural Income-tax Act, 1950, after a gap of 16 years. A finding was recorded in that case that prima facie the delay was unreasonable if there was no explanation at all for the same.

    16. Coming to the facts in the instant case, it may be seen that the Tribunal has not applied its mind at all as to whether the delay was innocuous or had been caused without any sufficient cause. The Tribunal has also not gone into the question as to whether it was proper or not to sustain the order of penalty on account of any changed circumstances that may have come into being during the intervening period. It is, therefore, not possible to say in the instant case that the order imposing penalty was necessarily bad simply because it was delayed.

    17. In view of the foregoing discussion, our answer to question No. (i) stated above is that, on the facts and in the circumstances of the case, the Tribunal was, in law, not right in holding that the penalty order dated January 30, 1979, made by the Inspecting Assistant Commissioner under Section 271(1)(c) of the Act was bad in law. Our answer to question No. (ii) is that, on the facts and in the circumstances of the case, the Tribunal was not correct in law in holding that the penalty order passed by the Inspecting Assistant Commissioner under Section 271(1)(c) of the Act, on January 30, 1979, was bad in law as having been made after an inordinate delay of six years of the order of remand without recording relevant findings and fixing responsibility for the delay and finding its effect upon the penalty order. In the circumstances of the case, there shall be no order as to costs.

    Use AI to get other relevant cases.
    Try AI Pro free for 7 days Upgrade to AI Pro

    Comments

    Commissioner Of Income-Tax v. Dr. Manoranjan Mohanty.
    (Aug 12, 1987)