Commissioner of Income Tax vs Ghasiram Kaluram

S.B. Sakrikar, J.—At the instance of the applicant (Department), the Tribunal, Indore, stated the case and referred undernoted questions for answer with reference to consolidated order passed on 21-9-1990 in IT Appeal Nos. 777 to 780 (Ind) of 1987 relating to the assessment years 1976-77 to 1979-80. (i) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that in view of clause (b) of section 281 of the income tax Act, 1961, the first appeal authority had no power of remand and, therefore, the illegality could be cured by recourse to remanding the case to the ITO?

(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the period of limitation prescribed u/s 275 of the income tax Act, 1961, could not be extended by an order of remand since in the Explanation 3, specific conditions have been given under which period of limitation could be extended?

The facts lie in narrow compass. The non-applicant-assessee is a registered firm. The ITO, Ujjain, levied penalty of Rs. 13,550, 21,820, 16,910 and 15,970 u/s 271(1)(c) of the income tax Act (''the Act''), for the assessment years 1976-77 to 1979-80 respectively. It is said that the incomes in respect of the aforesaid assessment years, were allegedly concealed by the assessee-firm exceeding Rs. 25,000 in each of these four years. The ITO levied penalties without previous approval of the inspecting Assessment Commissioner (IAC) and as such there was contravention of proviso to clause (iii) of sub-section (1) of section 271. Copies of the order of ITO are marked as Annexures A/1 to A/4.

The assessee went in appeal before AAC, who by consolidated order dated 26-8-1987 held that penalty orders though passed without previous approval of the IAC, nonetheless they were not invalid. It was held that it is procedural mistake which could be cured and it was open to the ITO to take up the matter at the point on which legality supervened and to correct the proceedings. The AAC, therefore, remanded the case back to the ITO with a direction to follow the procedure as laid down in the Act to pass penalty order as per law. Copy of the order of AAC is marked as Annexure B.

Aggrieved by the order of AAC, the assessee filed the appeal before the Tribunal. The Tribunal following its order in the case of CIT v. Damodardas Murarilal [IT Appeal No. 1066(Ind) of 1985, dated 27-7-1990] held that the levy of penalty in all four years, was illegal and without jurisdiction. The Tribunal cancelled the penalties. Copy of the order of the Tribunal is marked as Annexure C-I. Aggrieved by the order of the Tribunal, the Department filed the application u/s 256(1) of the Act for reference to this Court. On the application of the Department, the Tribunal stated the statements of the case and referred the aforesaid questions of law for the opinion of this Court.

None appeared for the applicant/Department. Shri Goyal the learned counsel appeared for the NA/Assessee. He is heard.

Shri Goyal, the learned counsel, submitted that the applicant at whose instance reference is made has chosen to remain absent and has, thus, not enabled the hearing of this reference. Under these circumstances, this Court is not under obligation to answer the reference and he accordingly prayed that we should decline to answer the reference. In support of his contention, Shri Goyal placed reliance on the case reported in Jamunadas v. CST 1993 MPLJ 462.

In the case of Jamunadas (supra) considering the legal position on the point, this Court has held as under :

For the foregoing reasons, we are of the opinion that if the party at whose instance the reference is made, fails to appear at the hearing or fails in taking steps for preparation of the paper-books so as to enable hearing of the reference, this Court is not bound to answer the reference. We refuse to answer the reference and also saddle the assessee with the costs of the department quantified at Rs. 150.

The provisions of section 256 of the Act and section 44 of the M.P. General Sales-tax Act, are applied when references are made but consequences in fault of appearance of the party at whose instance the reference is made, result remains the same. The same view was reiterated by us in Azad Bus Service v. CIT [MCC No. 42 of 1989, dated 1-12-1995]. Accordingly, we find that the objection raised on behalf of the non-applicant is proper and deserves to be permitted to prevail.

We, therefore, accept the contention raised by the counsel for the NA and, accordingly, refuse to answer reference. The reference is, thus, not answered. There shall be no order as to costs. Tribunal be informed accordingly. This reference application is, thus, disposed of.