Full Judgment Text
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PETITIONER:
M/s. GUDUTHUR BROS.
Vs.
RESPONDENT:
THE INCOME-TAX OFFICER, SPECIAL CIRCLE, BANGALORE.
DATE OF JUDGMENT:
22/07/1960
BENCH:
HIDAYATULLAH, M.
BENCH:
HIDAYATULLAH, M.
DAS, S.K.
SHAH, J.C.
CITATION:
1960 AIR 1326
ACT:
Income-tax--Assessment--Penalty--Imposition by Income-tax
Officer without reasonable opportunity given to assessee of
being heard--Order set aside on appeal and refund
directed--No express order of remand--Continuance of
Proceedings by the Income-tax Officer--Legality--Indian
Income-tax Act, 1922 (II of 1922), SS. 28 (I)(a) and 28(3).
HEADNOTE:
The appellants failed to file their return within the
prescribed time and on a notice issued under S. 28(1)(a) of
the Indian Income-tax Act, 1922, to show cause why penalty
should not be imposed on them, they filed a written reply.
Without affording them an opportunity of being heard as
required by S. 28(3) of the Act the Income-tax Officer
imposed a penalty on them. On appeal the Appellate
Assistant Commissioner set aside the order and directed
refund of the penalty. Thereafter the Income-tax Officer
issued a further notice giving an opportunity to the appel-
lants of being heard. The appellants objected to this
notice and
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contended that the Income-tax Officer could no longer
proceed to re-assess the penalty in the absence of an
express order of remand by the Appellate Assistant
Commissioner whose order had become final.
Held, that where an order of imposition of penalty made by
the Income-tax Officer under S. 28(1)(a) of the Indian
Incometax Act was vitiated, not by any initial illegality
but by one which supervened during the course of the
proceedings and the said order was vacated on appeal, the
Income-tax Officer was well within his jurisdiction in
continuing the proceedings from the stage at which the
illegality had occurred and could re-assess the penalty
though no express order of remand was made.
Jos Chacko Poothokaran v. Income-tax Officer, Ernakulam Cir-
cle, [1957] 32 I.T.R. 648, not applied.
JUDGMENT:
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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 261 of 1958.
Appeal by special leave from the judgment and order dated
November 6, 1956, of the Mysore High Court in Writ Petition
No. 215 of 1956.
S. N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L.
Vohra, for the appellants.
K. N. Rajagopal Sastri and D. Gupta, for the respondent.
1960. July 22. The Judgment of the Court was delivered by
HIDAYATULLAH J.-This appeal has been filed with the special
leave of this Court against a decision of the High Court of
Mysore, by which it dismissed in limine an application by
the appellants under Art. 226 of the Constitution for a writ
of prohibition or some other appropriate writ against the
Income-tax Officer, Bellary, Special Circle, Bangalore.
The facts of the case are as follows. For the assessment
year 1948-49, the appellants failed to file a return within
the prescribed time and the Income-tax Officer, acting under
s. 28(1)(a) of the Indian Incometax Act, issued a notice to
them to show cause why penalty should not be imposed. In
answer to this notice, the appellants filed a written reply
and the Income-tax Officer proceeded to levy a penalty of
Rs. 16,000, without affording a hearing to them as required
by the third sub-s. of s. 28 of the Income-tax
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Act. The matter was taken up in appeal before the Appellate
Assistant Commissioner of Income-tax, who, pointing out that
an opportunity of being heard was not granted to the
appellants, held that the order was defective. He therefore
set aside that-order and directed the refund of the penalty
if it had been recovered.
On receipt of the order, the Income-tax Officer issued a
further notice calling upon the appellants to appear before
him, so that they might be given an opportunity of being
heard. He also intimated that if no appearance was made,
then he would proceed to determine the question of penalty,
taking into consideration only the written statement which
had been filed earlier. Before, however, the Income-tax
Officer could decide the case, the appellants filed a
petition under Art. 226 of the Constitution for the issuance
of the writs mentioned above. This petition was dismissed
in limine by the High Court holding that the contention
raised by the appellants may perhaps be raised before the
Income-tax authorities. The appellants thereupon applied
for special leave to this Court and leave having been
granted, this matter comes up before us.
There is no question here that the requirements of s.
28(1)(a) of the Income-tax Act were not completely
fulfilled. If the appellants had not filed their return, as
they were required by law to do, the omission would attract
cl. (a) of sub-s. (1) of s. 28. We say nothing as to that.
Sub-section (3) of s. 28, however, requires that the penalty
shall not be imposed without affording to the assessee a
reasonable opportunity of being heard. This opportunity was
denied to the appellants and therefore the order of the
Income-tax Officer was vitiated by an illegality which
supervened, ,not at the initial stage of the proceedings,
but during the course of it. The order of the learned
Appellate Assistant Commissioner pointed out the ground on
which the illegality proceeded and his order directing the
refund of the penalty, if recovered, connot but be
interpreted as correcting the error and leaving it open to
the Income-tax Officer to continue his proceedings from the
stage at which the illegality occurred.
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No express remand for this purpose, as is contended, was
necessary.
Our attention was drawn to a decision of a learned Single
Judge of the Kerala High Court reported in Jos Chacko
Poothokaran v. I. T. O., Ernakulam Circle(1), in which, in
similar circumstances, it has been held that since an appeal
was not taken by the Commissioner of Income-tax to the
Appellate Tribunal under sub-s. (2) of s. 33, the order of
the Appellate Assistant Commissioner became final and the
Incometax Officer could no longer proceed to reassess the
penalty. The reason given is, in our opinion, beside the
point. What the Appellate Assistant Commissioner did was to
vacate the order and direct refund of the penalty in view of
an illegality which had occurred during the course of the
assessment proceedings. On receipt of the record it was
open to the Incometax Officer to take up the matter from the
point at which the illegality supervened and to correct his
proceedings. It was pointed out in the course of the
statement of the case by the appellants that such
proceedings could only be taken during the course of
assessment proceedings and those proceedings are concluded.
In our opinion, the notice issued to the appellants to show
cause why penalty should not be imposed on them did not
cease to be operative, because the Appellate Assistant
Commissioner pointed out an illegality which vitiated the
proceeding after it was lawfully initiated. That notice
having remained still to be disposed of, the proceedings now
started can be described as during the course of the
assessment proceedings, because the action will relate back
to the time when the first notice was issued.
In our opinion, the Income-tax Officer is well within his
jurisdiction to continue the proceedings from the stage at
which the illegality has occurred and to assess the
appellants to a penalty, if any, which the circumstances of
the case may require.
The appeal is accordingly dismissed with costs.
Appeal dismissed.
(1) [1957] 32 I.T. R. 648.
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