COMMISSIONER OF INCOME-TAX vs. RAMDAS N DESAI

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ITR/176/1983HC GujaratGJHC24011647198305 October 1996Author: HONOURABLE MR. JUSTICE S.M.SONI,HONOURABLE MR. JUSTICE Y.B.BHATT2 pages
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What did the High Court hold?

The High Court held that the Income-tax Appellate Tribunal was right in law in deleting the penalty of Rs. 30,000. The reasoning was that the penalty under Section 271(1)(c) was imposed as a consequence of re-assessment proceedings under Section 147. Since this Court had previously determined that the action for reopening the assessment was not justified, the penalty imposed as a result of those proceedings must also fail. The ratio decidendi is that a penalty contingent upon an invalid reassessment order cannot stand. The operative direction was to answer the reference in the affirmative, meaning in favour of the assessee and against the revenue. No issue was expressly left undecided.

What were the facts?

The Commissioner of Income-tax (Revenue) preferred this reference to the High Court against an order of the Income-tax Appellate Tribunal. The Tribunal had deleted a penalty of Rs. 30,000 imposed by the Inspecting Assistant Commissioner (IAC) under Section 271(1)(c) of the Income Tax Act, 1961. The penalty proceedings were initiated as a consequence of re-assessment proceedings under Section 147 for the Assessment Year 1967-68. The assessee had challenged the re-assessment order, and this Court had previously held that the action for reopening the assessment was not justified. The penalty was imposed as a result of these now-invalidated re-assessment proceedings.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in deleting the penalty of Rs. 30,000 imposed by the Inspecting Assistant Commissioner under Section 271(1)(c) of the Income Tax Act, 1961? (Question of law) Assessee's Contention: The judgment does not record specific arguments made by the assessee before the High Court. However, the operative part of the judgment implies that the assessee would have argued that the penalty must fail if the reassessment proceedings are held to be unjustified. Revenue's Contention: The judgment does not record specific arguments made by the revenue before the High Court. However, the reference itself indicates the revenue's challenge to the Tribunal's deletion of the penalty.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 147

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 176 of 1983

For Approval and Signature:

Hon'ble MR.JUSTICE S.M.SONI and MR.JUSTICE Y.B.BHATT ============================================================ 1. Whether Reporters of Local Papers may be allowed to see the judgements?

2.

To be referred to the Reporter or not?

3.

Whether Their Lordships wish to see the fair copy of the judgement?

4.

Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge?

-------------------------------------------------------------- COMMISSIONER OF INCOME-TAX Versus RAMDAS N DESAI -------------------------------------------------------------- Appearance: MR MIHIR THAKORE for Petitioner MR JP SHAH for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE S.M.SONI and MR.JUSTICE Y.B.BHATT Date of decision: 05/10/96

ORAL JUDGEMENT

The following question is referred to us in compliance with the directions issued by this Court:

"Whether on the facts and in the circumstances of the case, the Income-tax

Appellate Tribunal was right in law in deleting the penalty of Rs.30,000/- imposed by the Inspecting Assistant Commissioner u/s.271(1)(c) of the I.T.Act,1961?"

The Assessee preferred an appeal from the order of the I.A.C. dated 8-2-1974 imposing the penalty of Rs.30,000/- under section 271(1)(c) of the Act. The penalty proceedings were initiated because of the re-assessment proceedings under section 147 for the Assessment Year 1967-68. The petitioner had challenged the order of re-assessment for the Assessment Year 1967-68 by Reference No.ITR 134/83. This Court (Coram: N.J.Pandya and S.D. Pandit, JJ. passed an order holding that the action for reopening the assessment was not justified. Penalty came to be imposed by the Inspecting Assistant Commissioner under section 271(1)(c) of the Income Tax Act,1961 as a result of re-assessment proceeding. When the re-assessment proceedings are held not justified, the penalty imposed thereon also must fail as a consequence thereof. In view of this, the question referred to us is required to be answered in the affirmative i.e. against the revenue and in favour of the assessee.

Reference stands disposed of accordingly. No costs.

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