COMMISSIONER OF Income Tax vs ANWARKHAN MEHBOOB CO.

J. S. VERMA J. - This is an application by the Revenue u/s 256(2) of the Income Tax Act, 1961, for a direction to the Income Tax Appellate Tribunal to state the case and refer the question of law which arises in the case.

The assessee, Anwarkhan Mehboob Co., Jabalpur, filed its return late for the assessment years 1969-70 and 1970-71. The Income Tax Officer issued notices on April 30, 1976, u/s 271(1)(a) read with section 274 of the Income Tax Act, 1961, to the assessee to show cause why penalty should not be imposed on it. The notices were served on the assessee on May 1, 1976, and the explanation was filed on May 6, 1976. The Income Tax Officer who issued the notices was then transferred and it was his successor who passed the final order on March 8, 1977, for both these years, imposing penalties amounting to Rs. 48,705.50 and Rs. 57,270, respectively, for these two assessment years. The assessee preferred appeals before the Commissioner of Income Tax (Appeals) which were dismissed for both the years. The assessee then preferred second appeals to the Tribunal, which were disposed of by a common order dated March 18, 1980 "annexure-E" of the Tribunal. Separate orders were passed by the two Members of the Tribunal.

The grievance made by the assessee, which found favour with the Tribunal, was that it was not given a reasonable opportunity of hearing by the Income Tax Officer before penalty was imposed for both these years. Both the Members of the Tribunal in their separate orders upheld this objection. However, one of them, Shri P. S. Dhillon, came to the conclusion that this infirmity rendered the penalty imposed by the Income Tax Officer to be illegal and the orders passed by the Income Tax Officer and the Commissioner of Income Tax (Appeals) were quashed. The other Member, Shri D. Wangdi, came to the conclusion that even though the orders imposing the penalty were quashed, the Income Tax Officer was required to give proper opportunity of hearing to the assessee and to pass a fresh order on that basis. Accordingly, such a direction to the Income Tax Officer was given in his order.

The result of the separate orders of the two Members of the Tribunal therefore, is that according to one of them, the imposition of penalty is quashed and no further proceeding is to take place while the other order directs the Income Tax Officer to pass a fresh order in accordance with law after giving proper opportunity of hearing to the assessee. To this extent there is a difference between the two orders and no attempt to reconcile the same has been made by the Tribunal for the assessment year 1970-71 which has given rise to this reference. Shri Rawat, learned counsel for the Revenue, states that for the assessment year 1969-70, which is governed by the same order, a reference has been made to a third Member of the Tribunal for resolving this conflict, but the same has not been done in respect of the assessment year 1970-71, with which we are concerned.

In view of the above anomalous situation resulting from the conflicting directions given by the two Members of the Tribunal for the assessment year 1970-71, an application was made by the Revenue to the Tribunal for making a reference to this court u/s 256 (1) of the Act, but the same has been rejected on the ground that no question of law arises for the decision of the court. Hence, this application u/s 256 (2) of the Act to this court.

In our opinion, the conflicting directions contained in the separate orders of the two Members of the Tribunal for the assessment year 1970-71 in respect of which the matter has not been referred to a third Member for resolving the controversy, does give rise to a question of law. The question is about the final decision of the Tribunal in respect of the penalty imposed for the assessment year 1970-71 and the final direction given by the Tribunal in its order, in the absence of any reference being made to a third Member for resolving the conflict arising from the two conflicting directions The question of law, which arises for decision in the present case, in our opinion is as under :

"Whether the Tribunal has made any operative order in accordance with law relating to the imposition of penalty for the assessment year 1970-71 ?"

We accordingly direct the Tribunal to state the case and refer the above question of law for the decision of this court Since no one has appeared to oppose there shall be no order as to costs.