1969 PLP 347 (PTD)

A. S. CHOWDHURY, J.‑‑The Income‑tax Appellate Tribunal, Dacca has referred the following question under section 66(1) of the Income‑tax Act (hereinafter called the Act) for our opinions : "Whether in the facts and circumstances of the case Tribunal was right in holding that imposition of penalty under both the clauses (a) and (b) of section 28(1) of the Income‑tax Act in one order without quantifying the penalty separately was void and illegal ?" In this case a notice under section 22(2) was served on the assessee requiring him to furnish a return for the assessment year 1958‑

59. This notice was issued on the 23rd May 1958 but the assessee did not comply with the same. Thereafter on the 19th September 1958 the Income‑tax Officer issued another notice under section 22(4) of the Act requiring hits to produce books of accounts. But the assessee did not comply with this direction either. In these circumstance the Income‑tax Officer made an ex parte assessment under, section 23(4) of the Act and also in a proceeding under section 28(1)(a) imposed a penalty of Rs. 4,000 on the assessee under clauses (a) and (b) of section: 28(1) of the Act. He did not specify under which particular clause the penalty of Rs. 4,000 was imposed. The assessee thereafter went on appeal to the Appellate Assistant Commissioner who while hearing on appeal under section 31, held that no penalty was liable to be imposed under clauses (b) of section 28(1) of the Act. He, however, imposed a penalty under clause (a) of section 28(1). The penalty imposed by him was not a fixed amount but he directed that it should be 10 % of the tax payable by the assessee. Mr. Afzalul Haque, learned Advocate for the Commissioner of Income‑tax submits that the order made by the Appellate Assistant Commissioner is in accordance with law and the Tribunal illegally interfered with the said order and set aside the order of the penalty imposed by him and therefore the question referred to this Court should be answered in the negative. Mr. Syed Mozaffer Hussain, learned Advocate appearing for the assessee however argues that the Appellate Assistant Commissioner sitting as a Court of Appeal cannot impose the penalty under section 28(1) (a) of the Act and as such the penalty imposed cannot be sustained in law. He, therefore, submits that the question referred should be answered in the affirmative. On a close scrutiny of the facts it appears to us that in this case there was an order of penalty by the Income‑tax Officer. He imposed the penalty under clauses (a) and (b) of section 28(1) of the Act. He therefore did not know under what clause he was imposing the penalty nor did he assign this fixed sum of Rs. 4,000 to clause (a) or to clause (b). When the matter went to the Appellate Assistant Commissioner this order was before him. He could certainly cancel this order if he found that this order was illegal. But in this case illegality is that he bas himself imposed a penalty under clause (a) of section 28(1). That being so, we are of opinion that the question framed does not arise out of the facts stated in this case. We are therefore of opinion that the question which arises out of the order made by the Tribunal should be reframed and we do so in the following terms : "Whether there was an imposition of penalty by the Appellate Assistant Commissioner under Moth clauses (a) and (b) of section 28 (1) of the Income‑tax Act in one order ?" The imposition of penalty is by the Appellate Assistant Commissioner and not by the Income‑tax Officer. The question as reframed must, in our opinion, be answered in the negative. That position appears is clear from the statement of the case as made by the Tribunal when it says : "When the matter went up in appeal the Appellate Assistant Commissioner held that no penalty could be imposed under section 28(1) (b) but imposition of penalty under section 28(1) (a) was quite correct. He, however, reduced the quantum of penalty to 10 % of the tax payable." From the statement quoted above it is clear that the Appellate Assistant Commissioner has imposed the penalty under section 28(1)(a) which he considered to be correct and therefore the penalty now imposed by him is deemed to be under section 28(1)(a) of the Act. In these circumstances, therefore, a further question arises as to whether this order can be sustained in law. We therefore framed a further question in the following terms :‑ "Whether in the facts and in the circumstances of the case the imposition of penalty under section 28(1)(a) of the act by the Appellate Assistant Commissioner was legal ?" This question, we are also of opinion must also be answered in the negative. The Appellate Assistant Commissioner was hearing an appeal under section 31 of the Act. Subsection (4) of section 31 enumerates various orders that the Appellate Assistant Commissioner may make while hearing an appeal. We are concerned with clause (f) of subsection (4) of section

31. Material part of subsection (4) is as follows :‑ "(4) The Appellate Assistant Commissioner may, in the case of an order of assessment, or, in the case of an order under section 28 or sub section (6) of section 44‑E or subsection (5) of section 44‑F or subsection (1) of section 46 ; (f) cancel such order or vary it so as either to enhance or reduce the penalty ;" Mr. Afzalul Haque; learned Advocate for the Commissioner strenuously argues that the Appellate Assistant Commissioner while hearing an appeal could make the, impugned order for he has the authority to impose penalty under clause (f) of subsection (4) of section 31 of the Act. Mr. Hussain, learned Advocate for the assessee however argues that while sitting on appeal against an order the Appellate Assistant Commissioner cannot vary, it unless he finds that the order of the penalty was legal. He also argues that he was proceeding under section 31 and not under section 28 of the Act. His further contention is that in this case the Appellate Assistant Commissioner could not vary the order unless he found that a legal order was in existence and if he cancelled the order there was nothing to vary it. Mr. Haque, learned Advocate for the Commissioner on the other hand says that while sitting as an Appellate autho rity he had wide powers to make any order that was necessary and he has also drawn our attention that under section 28(1)(a) the Appellate Assistant Commissioner could himself impose a penalty and therefore the penalty now imposed cannot be called in question. Short answer to the contention of Mr. Haque is that in this case the Appellate Assistant Commissioner did not himself initiate proceeding under section 28(2). He was hearing an appal against an order of penalty imposed by the Income‑tax Officer. The Income‑tax Officer did not impose penalty under section 28(1)(a) but he imposed penalty under both the clauses (a) and (b) section 28(1). The Appellate Assistant Commissioner has not maintained this order and he has imposed a fresh penalty and clause (f ) does not authorise making of a fresh order without initiating proceeding under section 28(i) and therefore the order made by the Appellate Assistant Commissioner is not within the ambit of sub section (4) of section

31. There has been no order under clause (a) and therefore no variation of a non‑existing order can be made. Mr. Afzalul Haque placed his reliance in the case of Kamlapat Motilal v. Commissioner of Income‑tax U. P, and V. P. ((1902) 45 I T R 266). In that case the Supreme Court of India held that Section 28 of the Income‑tax Act enables the Appellate Assistant Commissioner to take action under that section if in the course of any proceeding under the Act he is satisfied that any person, has, inter alia concealed the particulars of his income or deliberately furnished inaccurate particulars of such income. In this case we have merely said that the Appellate Assistant Commissioner has varied and modified an order which he himself found to be illegal. In other words it was non‑existent in the eye of law. That being so the view taken in the case of the Supreme Court of India has no bearing at all. The next case relied on by the learned Advocate for the Revenue is the decision of the Allahabad High Court in the case of Haji Ghulam Hussain v. Commissioner of Income tax United Provinces ((1953) 33 I T R 309). In that case it was held that the Appellate Assistant Commissioner could impose a penalty under section 28(1)(a) of the Income‑tax Act. We have already said that such a power is available to the Appellate Assistant Commissioner. But in the case before us he has varied the illegal order of the Income‑tax Officer. For the same reason, this case is also of no assistance to the learned Advocate. For the reasons stated above, we answer both the questions as framed by us in the negative and leave the parties to bear their own costs. A. H. KHAN, J.‑I agree. S. Q. Question answered in the negative.