Commissioner of Income Tax vs Narula Finance P. Ltd.

Arijit Pasayat, C.J.—At the instance of the Revenue, the following question has been referred for the opinion of this court u/s 256(1) of the Income Tax Act, 1961 (in short the "Act"), by the Income Tax Appellate Tribunal, Delhi Bench "C", New Delhi :

"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is justified in cancelling the penalty levied u/s 271(1)(c) for the assessment year 1965-66 ?"

We have heard learned counsel for the Revenue. There is no appearance on behalf of the assessed in spite of notice. The dispute relates to the assessment year 1965-66. Originally, the assessment was completed on February 22, 1968. Subsequently, proceedings were initiated for reassessment u/s 147 of the Act. The assessment u/s 148 of the Act was completed on March 17, 1975. Penalty was imposed by the Inspecting Assistant Commissioner (in short the "IAC") by order dated March 24, 1977. Learned counsel for the Revenue submitted that though the order was passed after April 1, 1976, yet the reference was made prior to that date. Relying on the observations made by the Inspecting Assistant Commissioner in the order imposing penalty to the effect that the reassessment was completed on March 17, 1975, penalty proceedings were initiated and referred to the Inspecting Assistant Commissioner, it was contended that if the reference was prior to April 1, 1976, the imposition of penalty would be in order in view of what has been stated by the apex court in Commissioner of Income Tax, Bangalore Vs. Smt. R. Sharadamma, . The crucial date, Therefore, is the date of reference. Unfortunately, the Tribunal has not recorded any finding as to the date of reference. In the circumstances, we think it would be appropriate for the Tribunal to rehear the appeal only after taking into account the date of reference to the Inspecting Assistant Commissioner. If the reference was prior to April 1, 1976, the decision in Commissioner of Income Tax, Bangalore Vs. Smt. R. Sharadamma, would apply. If the reference is after April 1, 1976, imposition of penalty would be illegal. We dispose of the reference accordingly.