Citation Codes

Equivalent Citations

citation codes

Case Number

O.J.C Case No. 1216 of 1975

Judges

Hon'ble Mr. Justice Kunja Behari Panda

Acts

section 271(1)(c) of the Income-tax Act of 1961 (hereinafter referred to as the Act)
Taxation Laws (Amendment) Act of 1975 deleted sub-section (2) of section 274
SECTION 6 GENERAL CLAUSES ACT
clause (iii) of sub-section (1) of section 271,
Taxation Laws (Amendment) Act, 1970,
sub-section (2) of section 274
Sub-section (4) of section 264
Amending Act of 1970,

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Smart Summary

Judgment Summary — R.N. Misra, J. (with Panda, J. concurring)

Factual and Procedural Background

The petitioner, an assessee for assessment year 1967–68, was assessed by the Income-tax Officer (ITO) at Titilagarh. The ITO found two cash credits — Rs. 4,250 (in the name of Banwarilal Agrawala) and Rs. 12,000 (in the name of Tulsiram Agrawala) — which he did not accept the assessee's explanation for and accordingly added them as income from other sources. The assessment order was passed on 17 October 1970 and initiated proceedings under section 271(1)(c) of the Income-tax Act, 1961.

The ITO referred the penalty matter to the Inspecting Assistant Commissioner (IAC) under section 274(2). A notice was issued on 24 January 1973 fixing the hearing for 15 February 1973. On 12 February 1973 counsel for the petitioner sought an adjournment; the hearing was adjourned to 9 March 1973. A written explanation was filed on behalf of the petitioner. On 16 March 1973 the IAC imposed a penalty of Rs. 16,250.

The petitioner did not appeal to the Income-tax Appellate Tribunal (the available remedy under section 253(1)(b)) but instead invoked the revisional jurisdiction of the Commissioner of Income-tax under section 264(1). By order dated 18 June 1974 the Commissioner refused to interfere and upheld the penalty. The petitioner then filed the present writ of certiorari seeking quashing of the penalty as upheld on revision.

Legal Issues Presented

Whether the Inspecting Assistant Commissioner had jurisdiction to impose the penalty on 16 March 1973 in view of amendments to section 274(2) of the Income-tax Act applicable from 1 April 1971.
Whether the petition for writ of certiorari has abated under article 226(3) of the Constitution because an alternate statutory remedy (appeal to the Appellate Tribunal) was available and not availed of.
Whether the petitioner's challenge falls within article 226(1) of the Constitution (in particular clauses (b) and (c)) because of an alleged contravention of statutory provisions.
Whether the provisions of section 6 of the General Clauses Act operate to preserve the Inspecting Assistant Commissioner's jurisdiction in these circumstances.

Arguments of the Parties

Revenue (learned standing counsel)

Raised a preliminary objection that the writ application had abated under article 226(3) since an alternate remedy by way of appeal to the Appellate Tribunal was available and not availed of.
Contended the case is not covered by sub-article (1) of article 226, arguing that none of its three clauses applied.
Argued that the ratio in Commissioner Of Income-Tax, Orissa v. Dhadi Sahu (1976) 105 ITR 56 (Orissa) was not applicable, on two grounds: (i) subsequent deletion of the relevant sub-section meant the law is no longer as in the principal Act, and (ii) section 6 of the General Clauses Act (effect of repeal) — not considered in Dhadi Sahu — would vitiate that decision and required re-examination.

Petitioner

Contended that the Inspecting Assistant Commissioner who imposed the penalty had no jurisdiction to do so; this amounted to contravention of the statutory provision and caused a substantial injury, bringing the matter within article 226(1)(b) (and possibly clause (c)).
Maintained that the amendment to sub-section (2) of section 274 effective 1 April 1971 applied to pending proceedings and therefore the IAC lost jurisdiction in the instant case.
Waived the remedy of appeal and invoked the Commissioner's revisional jurisdiction under section 264(1); it was conceded (and accepted by court) that there is no remedy against the Commissioner's revisional order.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Commissioner Of Income-Tax, Orissa v. Dhadi Sahu, [1976] 105 ITR 56 (Orissa)	Where a reference to the Inspecting Assistant Commissioner becomes incompetent due to a change of procedure while the matter is still pending, the Inspecting Assistant Commissioner has no jurisdiction to complete the proceedings; had the final orders been passed prior to the Amending Act, there would be no question of loss of jurisdiction.	The court adopted the ratio in Dhadi Sahu and applied it to the present facts: because the amended sub-section 274(2) (effective 1 April 1971) excluded the petitioner's case, the IAC had, from that date, no jurisdiction to impose penalty; therefore the IAC's exercise of jurisdiction on 16 March 1973 was a nullity.

Court's Reasoning and Analysis

The court proceeded in several analytical steps, grounded in the record and the statutory scheme as it existed at relevant dates:

On the preliminary objection of abatement: the court observed that the relevant enquiry is whether any effective remedy was available against the Commissioner's revisional order (not the earlier IAC order). Since the learned standing counsel conceded there was no remedy against the revisional order, the court found no force in the preliminary objection and dismissed it.
On whether the matter was maintainable under article 226(1): the court accepted the petitioner's contention that the IAC's lack of jurisdiction constituted a contravention of statutory provisions and an institutional error of substance, bringing the matter prima facie within article 226(1)(b) (and arguably clause (c)) of the Constitution.
On the statutory provisions governing referral and jurisdiction: the court examined section 274(2) as it stood when the ITO referred the penalty matter (the earlier text permitting referral when minimum penalty exceeded Rs. 1,000), and then the amended provision introduced by the Taxation Laws (Amendment) Act, 1970 effective 1 April 1971 (which linked referral to cases where the income implicated exceeded Rs. 25,000). The court noted that a later deletion (by the 1975 Amendment Act, effective 1 April 1976) does not affect the question of jurisdiction on the date it was exercised.
The court applied the precedent in Dhadi Sahu: because the amended sub-section (effective 1 April 1971) did not cover the petitioner's case, the IAC could not, after that date, be validly invested with jurisdiction over such a penalty matter. The IAC therefore had lost jurisdiction from 1 April 1971, and any subsequent order purporting to exercise jurisdiction (including the order of 16 March 1973) was a nullity.
The court rejected the standing counsel's attempt to distinguish Dhadi Sahu on the ground of subsequent deletion of the sub-section and on the basis of section 6 of the General Clauses Act. The court reasoned that the decisive inquiry is what the law was on the day the IAC purported to exercise jurisdiction; that the instant case was not a case of repeal within the meaning of the General Clauses Act provision, and therefore section 6 did not save the proceeding. Accordingly, the contentions advanced by the revenue failed.

Holding and Implications

Core Ruling: The application was allowed and the imposition of penalty by the Inspecting Assistant Commissioner as upheld in revision was quashed.

Implications and direct consequences:

The penalty levied by the Inspecting Assistant Commissioner on 16 March 1973 (and the upholding of that penalty by the Commissioner on 18 June 1974) has been declared a nullity and is quashed.
Each party was directed to bear their own costs. The court expressly based this costs order on the fact that the petitioner had not advanced the present jurisdictional contention either before the Inspecting Assistant Commissioner or specifically before the Commissioner.
The court grounded its decision on and adopted the earlier Orissa High Court decision in Commissioner Of Income-Tax, Orissa v. Dhadi Sahu, [1976] 105 ITR 56 (Orissa). The opinion does not purport to lay down a new broad precedent beyond applying the existing ratio to the facts; rather, it follows the earlier ruling that a change in the statutory procedure which rendered references incompetent deprived the IAC of jurisdiction over pending matters of that type.

This summary is limited to and derived exclusively from the content of the provided opinion.

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Radheshyam Agarwalla v. Commissioner Of Income-Tax, Orissa, And Others

R.N Misra, J.:— This is an application for a writ of certiorari for quashing the order imposing penalty under section 271(1)(c) of the Income-tax Act of 1961 (hereinafter referred to as the “Act”) by the Inspecting Assistant Commissioner as upheld in revision by the Commissioner of Income-tax.

2. The petitioner is an assessee under the Act. For the assessment year 1967–68, he was assessed to income-tax by the Income-tax Officer at Titilagarh. The Income-tax Officer found two cash credits of Rs. 4,250 and Rs. 12,000 in the names of Banwarilal Agrawala and Tulsiram Agrawala, respectively. He did not accept the explanation of the assessee and added these amounts as income from other sources. The order of assessment was passed on October 17, 1970, and he directed a proceeding under section 271(1)(c) of the Act to be initiated. In due course, the penalty matter was referred to the Inspecting Assistant Commissioner of Sambalpur under section 274(2) of the Act. On January 24, 1973, the Inspecting Assistant Commissioner issued a notice to the petitioner fixing the matter to February 15, 1973, for hearing. On 12th of February 1973, counsel for the petitioner asked for an adjournment and the matter was adjourned to March 9, 1973, and not March 8, 1973, as pleaded by the petitioner. A written explanation was filed on behalf of the petitioner. On 16th of March, 1973, on a consideration of the explanation, the Inspecting Assistant Commissioner levied penalty of Rs. 16,250. Two remedies were open to the assessee against the levy of penalty—an appeal to the Income-tax Appellate Tribunal under section 253(1)(b) of the Act or a revision before the Commissioner of Income-tax under section 264(1) of the Act. Petitioner did not avail of the remedy by way of appeal and moved the Commissioner of Income-tax invoking his revisional powers. By his order dated 18th of June, 1974, the Commissioner refused to interfere in the matter and upheld the imposition of penalty. This application for certiorari is directed against the imposition of penalty as upheld in revision. As the hearing opened, learned standing counsel for the revenue raised a preliminary objection that the application has abated under article 226(3) of the Constitution, inasmuch as an alternate remedy by way of appeal was available to the petitioner though he did not avail of it. Undoubtedly, against the levy of penalty by the Inspecting Assistant Commissioner, an appeal lay to the Appellate Tribunal. An assessee suffering imposition of penalty and not preferring an appeal is entitled to move the Commissioner under section 264(1) of the Act for revision of the penalty. Sub-section (4) of section 264 makes it clear that jurisdiction of the Commissioner can be invoked only when the remedy of appeal is waived. Admittedly, the petitioner on waiver of his right of appeal had moved the Commissioner. Learned standing counsel concedes that there is no remedy open against the order of the Commissioner in exercise of revisional jurisdiction. Petitioner has come before this court asking for a writ of certiorari after the Commissioner disposed of the matter. The question of alternate remedy has to be examined with reference to the order of the Commissioner and not that of the Inspecting Assistant Commissioner. In view of the concession of learned standing counsel that there is no other remedy against the revisional order of the Commissioner, we find no force in the preliminary objection.

3. It was next contended by learned standing counsel that the case is not covered by sub-article (1) of article 226 of the Constitution as, according to him, neither of the three clauses under the sub-article is attracted. As we shall presently show, the petitioner's contention is that the Inspecting Assistant Commissioner who imposed the penalty had no jurisdiction to do so and, therefore, it is said that there has been a contravention of the statutory provision and the injury is indeed of a substantial nature. Therefore, prima facie the matter is covered by article 226(1)(b) of the Constitution. There is also force in the submission of learned counsel for the petitioner that the matter would come within the purview of clause (c).

4. At the time the Income-tax Officer referred the penalty proceeding to the Inspecting Assistant Commissioner, section 274(2) of the Act read thus:

“Not with standing anything contained in clause (iii) of sub-section (1) of section 271, if in a case falling under clause (c) of that sub-section, the minimum penalty imposable exceeds a sum of rupees one thousand, the Income-tax Officer shall refer the case to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty.”

5. By the Taxation Laws (Amendment) Act, 1970, with effect from 1st of April, 1971, the sub-section was substituted and the new provision ran thus:

Not with standing anything contained in clause (iii) of sub-section (1) of section 271, if in a case falling under clause (c) of that sub-section, the amount of income (as determined by the Income-tax Officer on assessment) in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twenty-live thousand rupees, the Income-tax Officer shall refer the case to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty.” The Taxation Laws (Amendment) Act of 1975 deleted sub-section (2) of section 274 with effect from 1st of April, 1976. It is thus clear that the Income-tax Officer had appropriately referred the matter of penalty to the Inspecting Assistant Commissioner soon after he had initiated the proceeding by his order dated October 17, 1970. While the penalty matter was pending before the Inspecting Assistant Commissioner, sub-section (2) of section 274 was amended with effect from April 1, 1971. It is conceded that the amended sub-section (2) did not cover the petitioner's case, and, therefore, after April 1, 1971, the petitioner's case for imposition of penalty could not have been referred to the Inspecting Assistant Commissioner. Counsel for the petitioner has taken the stand that the amendment with effect from April 1, 1971, applied to pending proceedings and the Inspecting Assistant Commissioner lost jurisdiction in the instant case by virtue of the amendment. The decision of this court in the case of Commissioner Of Income-Tax, Orissa v. Dhadi Sahu., [1976] 105 ITR 56, 62 (Orissa) directly applies. After referring to several authorities, this court observed:

“If the Inspecting Assistant Commissioner had passed final orders prior to the Amending Act of 1970, there would have been no question of loss of jurisdiction, but as the matter was still pending and by change of procedure the references became incompetent, the Inspecting Assistant Commissioner had no jurisdiction to complete the proceedings because he had no longer jurisdiction to deal with the matter of this type.”

6. Learned standing counsel takes the stand that the ratio in Dhadi Sahu's case, [1976] 105 ITR 56 (Orissa) is not applicable to the present case on two grounds, namely, (i) sub-section (2) having already been deleted, the law applicable may not be found to be as incorporated in the principal Act; and (ii) the effect of section 6 of the General Clauses Act which had not been considered on the earlier occasion by this court vitiates the decision of the court and the matter, therefore, must be re-examined. Both these contentions do not impress us. The question for consideration is as to whether the Inspecting Assistant Commissioner had jurisdiction when he exercised it in the matter of imposition of penalty. The answer to the question would depend not upon what the law subsequently has been as a result of the amendment with effect from April 1, 1976, but by finding out what the law was when jurisdiction was exercised. Without examining the tenability of learned standing counsels contention on other aspects, it is sufficient to conclude against his contention by saying that on the day when the Inspecting Assistant Commissioner exercised jurisdiction, he did not have any, as held in Dhadi Sahu's case, [1976] 105 ITR 56 (Orissa), and, therefore, the exercise of his jurisdiction was a nullity and cannot have legal force. The provisions of section 6 of the General Clauses Act have no application at all. That section provides:

“Effect of repeal.—Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made then, unless a different intention appears, the repeal shall not—

(a) revive anything not in force or existing at the time at which the repeal takes effect; or

(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or

(c) affect any right, privilege, obligation or liability, acquired, accrued or incurred under any enactment so repealed; or

(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or

(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture, or punishment as aforesaid;

and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.”

7. The instant case is not one of repeal and nothing is said in the section which would save the proceeding before the Inspecting Assistant Commissioner. We do not find any support for the contention of the learned standing counsel. Both the contentions fail and we adopt the ratio of this court's decision in Dhadi Sahu's case, [1976] 105 ITR 56 (Orissa) for our conclusion that the Inspecting Assistant Commissioner had no jurisdiction to impose penalty on 16th of March, 1973. He had lost jurisdiction with effect from April 1, 1971.

8. The application is accordingly allowed and the imposition of penalty by the Inspecting Assistant Commissioner as upheld in revision is quashed. Parties are directed to bear their own costs inasmuch as the petitioner had not taken the present stand either before the Inspecting Assistant Commissioner or specifically before the Commissioner.

Panda, J.:— I agree.

Radheshyam Agarwalla v. Commissioner Of Income-Tax, Orissa, And Others

Judgment Summary — R.N. Misra, J. (with Panda, J. concurring)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Revenue (learned standing counsel)

Petitioner

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Radheshyam Agarwalla v. Commissioner Of Income-Tax, Orissa, And Others

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