1981 PLP (Trib (PTD)

ABRAR HUSSAIN NAQVI (MEMBER). [9‑6‑1980].‑‑‑This is an appeal against imposition of penalty under section 28(1‑A) of the Income‑tax Act‑for the assessment year 1974‑75.

2. The brief facts of the case are that on 28‑2‑1976 the assessee appeared before the Income‑tax Officer and apparently agreed to be assessed at Rs. 1,00,000 as against declared income of Rs. 39,

232. As per order‑sheet entry dated 28‑2‑1976 the assessee appears to have admitted concealment of parti culars of his income for the year 1974‑75 and a penalty at 100 % of the tax evaded was imposed. It was also mentioned in the order referred to above that the said agreement had been made with the prior approval of the Commis sioner of Income‑tax and Inspecting Assistant Commissioner and in compli ance with their orders. On the margin of the order‑sheet there are signatures of Niamatullah, a partner of the firm in token of the agreement of assessment as well as penalty. The appeal before the Appellate Assistant Commissioner having been dismissed this second appeal has been filed before us.

3. The learned Authorised Representative raised a number of objections challenging the legality of the penalty imposed by the officers below. It was first contended by him that no statutory notice under section 28(3) was given to the assessee before imposition of penalty. It was further argued that in any case the agreed assessment as well as the imposition of penalty having been made on one and the same date it cannot be said that a reasonable opportunity of being heard had been given to the assessee as required by section 28(3) of the Income‑tax Act. The next ground of attack of the learned Authorised Representative was that no prior approval of the Inspecting Assistant Commissioner had been obtained before imposing the penalty as required under section 28(6) although a mention has been made in the order of the Income‑tax Officer 28‑2‑1976. The last contention of the Authorised Representative was that the agreement was obtained through coercion and by undue influence by the Income‑tax Officer. In support of this contention it was submitted that the counsel of the assessee had walked out from the office of the Income‑tax Officer in protest against this coercion which fact is evident that though the presence of the counsel had been marked by the Income‑‑tax Officer but his signatures are not available on the margin of the order‑sheet and it is signed by the assessee alone.

4. As for the first objection, subsection (3) of section 2 requiring a reasonable opportunity of being beard to be provided to the assessee before imposing of penalty of the assessee by the Income‑tax Officer, it appears that notice under section 28(3) was issued on 28‑2‑1976 and assessee's reply was received in which he allegedly admitted to have concealed the true particulars of his income. However the assessee's contention was that the assessment proceedings having been completed on 28‑2‑1976 there was no occasion nor in fact any notice in writing was given to the assessee. According to the Authorised Representative reference to the notice in the order may be to the oral notice given at the time of completing the assessment proceedings. According to the learned Authorised Representative the oral notice given at the time of assessment and an oral reply if any is not sufficient compliance of subsection (3) of section

28. We are inclined to accept this contention as section 28(3) requires specific notice on specific points. In any case even if it be assumed that the assessee was asked to explain in regard to the alleged concealment of particulars of his income it cannot be regarded as reasonable opportunity of being beard. No time whatsoever seems to have been given to the assessee. It appears that the assessee was asked to explain there and then without giving enough time to think or consult, or take legal advice. This cannot be regarded as reasonable opportunity of being beard on any principle of natural justice. In the case of Sree Lal Sagamal ((1955) 281 T R 837), even a regular but vague notice to show cause as to why penalty should not be imposed, was not considered as sufficient compliance of section 28(3). It was held in that case that the points against the assessee should be specifically brought to his notice. The learned D. R. on the other hand submitted that since the assessee had agreed to the imposition of penalty no notice was required at all. We cannot contribute to this view as it is evident from the order‑sheet that enough time to ponder over the matter in issue was not provided to the assessee without going into the controversy as to whether notice in writing is necessary or not the imposition of penalty in such a hurry even with the alleged agreement of the assessee, cannot be regarded to have been imposed after giving a reasonable opportunity of having heard to the assessee. An opportunity of being heard cannot be equated with a reasonable opportunity and distinction has to be drawn between the two phrases. Providing a reasonable opportunity was the statutory right of the assessee which cannot be contracted out even by the assessee. We therefore hold that no reasonable opportunity of being heard was provided to the assessee before the imposition of penalty. We would have set aside the order on this short‑ ground alone but for the order which we propose to pass on another ground. The next contention of the learned Authorised Representative was that Inspecting Assistant Commissioner's price approval had not been obtained by the Income‑tax Officer as has been mentioned by him in his order dated 28‑2‑1976. In reply to this contention the learned D. R. has contended that very fact that in the order‑sheet the Income‑tax Officer had mentioned that prior approval had been obtained is sufficient to prove that Inspecting Assistant Commissioner's prior approval had been obtained. However we pointed out to the Departmental Representative that the mentioning in the Income‑tax Officer's order raises only a presumption of truth, which is rebuttable, and in this particular case the denial 417 the assessee in this regard makes it obligatory on the Department to prove it as a fact. On this the learned D. R. wanted time to produce the necessary approval and the case was adjourned. On the next date of hearing the learned Depart mental Representative produced the order of the Inspecting Assistant Commissioner giving approval to the imposition of penalty which is dated 13‑3‑1976. The reference was made by the Income‑tax Officer in this regard in his letter No. 1 NV‑II/906 dated 13‑3‑1976. We fail to understand the contradictory stand taken by the Department in this case. The Depart ment's case in the first instance was that prior to the passing of the order by the Income‑tax Officer on 28‑2‑1976 Inspecting Assistant Commissioner's approval had been obtained which fact is mentioned in the order but the approval of the Inspecting Assistant Commissioner now produced before us shows that it was given on 13‑3‑1976 which obviously cannot be regarded as prior approval. We also fail to understand that in case prior approval had been obtained before imposing the penalty on 28‑2‑1976 what was the occasion a necessity of asking for approval of the Inspecting Assistant Commissioner on 13‑3‑1976. It is therefore obvious that not approval of the Inspecting Assistant Commissioner had been obtained by the Officer for imposition of the impugned penalty on 28‑2‑1976 which makes the order of the Income‑tax Officer as nullity. We therefore, have no option but to hold that the prior approval of the Inspecting Assistant Commissioner having not been obtained by the Assessing Officer the requirement of subsection (6) of section 28 have not been complied with and therefore the order of imposition of penalty is a nullity. It will also not be out of place to point out that the sole ground of in concealment of the particulars of income mentioned by the Assessing Officer is that against the declared income of Rs. 39,232 the assessee had agreed to be assessed at income of Rs. 1,00,

000. We are afraid that this not a sufficient ground to make our the case of concealment without material evidence having been placed on record. The penalty proceedings are criminal in nature and therefore the standard of evidence required to be adduced should be the same as in criminal proceedings. It therefore follows that even an agreement of the assessee to be penalised would not be by itself sufficient and the department could not absolve of its responsibility to prove the concealment as a fact. As in a criminal case, mere confession cannot be made the basis of conviction without any corroborat ing evidence, the same principle will be applicable in case of imposition of penalties. The learned Authorised Representative has placed reliance on the case of Kerala High Court reported as Many & Co. v. C. I. T., Kerala ((1963) 47 I T R 434). The High Court had relied on an earlier case in C. I. T. v. Gokal Das Harriwalab Das ((1958) 34 I T R 98), in which it was held that the proceedings under section 28(c) by their very nature are penal proceedings and the elementary principles of criminal jurisprudence must apply to these proceed ings which require that the burden of proving that the accused is guilty is always upon prosecution.

5. For the foregoing discussion we have no option but to hold that the orders of the officers below a nullity in the eye of law because no reasonable opportunity had been provided to the assessee as required under section 28(3) and no prior approval of the Inspecting Assistant Commissioner was obtained as required under section 28(6) and that there was no material on record with the Assessing Officer to prove the concealment of particulars of income notwithstanding the agreement of the assessee. We therefore annul the penalty imposed. The appeal succeeds accordingly. M. KARIM (MEMBER).--‑I have gone through my learned brother's proposed order with utmost respect, but I am unable to agree with the facts and views mentioned therein. The order was not passed on 28‑2‑1976, but was passed on 13‑3-1976. The Income‑tax Officer had given a wrong date, the D. O. R. showed that the demand was entered in the Demand and Collec tion Register either on 13‑3‑1976 or later. Therefore, there was no question of imposing of penalty without Inspecting Assistant Commissioner's prior approval. As far as notice under section 28(1) is concerned, the assessee was served with the notice and he appeared before the Income‑tax Officer, and made a confession about suppression of income; he also agreed to the quantum of income therefore, the only thing that was left to be done was quantification of the amount of tax evaded. In fact before the Appellate Assistant Commissioner the assessee's only grievance was that the quantum of tax avoided was not properly calculated. If the assessee had taken the plea that the time given under section 28(3 was short, we could only set aside the order and not annul it, because the notice was not void ab initio. Reasonable opportunity has now-her been defined, and many a person may feel that an hour or a minute was sufficient. Notice under section 28(3) was not illegal, and the assessee did not protest about the inadequacy of time either before Income‑tax Officer or before Appellate Assistant Commissioner. There the 's' should be taken to have agreed to be heard early. The Department seems to have shown indulgency in not imposing the maximum impose-able amount of penalty; this alone may have weighed with the assessee in agreeing to the quantum of penalty. The Department had also waived the question of prosecution. Now when fear of prosecution and imposition of a large amount of penalty has gone the assessee is trying to challenge the order on flimsy ground and going back on everything. I am afraid he has to be stopped from agitating on these points, I therefore dismiss the appeal. MIAN ABDUL KIIALIQ (MEMBER).‑[26‑7‑1980].‑This appeal has been referred to me under subsection (7) of section 5‑A of the Income‑tax Act, 1922. Section 133(7) of the Income‑tax Ordinance, 1979 for decision on the following points of difference of opinion amongst the learned Members:‑ (i) Whether the assessment order was passed on 28‑2‑1976 or subsequently? (ii) Whether prior approval had been obtained by the Assessing Officer for imposing penalty under section 28(6)? (iii) Whether any reasonable opportunity had been given to the assessee before imposing the penalty as required under section 28 (3)? (iv) Whether the penalty could be imposed on the basis of agreement without independent proof or evidence with the Assessing Officer? (v) Whether the penalty imposed by the Assessing Officer is nullity? 2, The brief facts of the case are that the appellant is a registered firm dealing in Cosmetics and General Merchandize goods. For the charge year, 1974‑75 return was filed declaring, net income of Rs. 39,

232. On 28‑2‑1976 the assessee appealed and the Income‑tax Officer passed the following order on the order‑sheet "Mian `A' Advocate, A. R. alongwith partner 'N' present. Case has been discussed with the assessee and his A. R. Assessee agrees to be assessed at a net income Rs. 1,00,000 for 1974‑75 and has further admitted that he has concealed true particulars of income for the assessment year 1974‑

75. Penalty under section 28 will be imposed at 100 % of the tax evaded and no prosecution proceedings will be launched on payment of composition fee of Rs. 2,000 (Rupees Two Thousand), The basis of computation is available on P. The agreement has been with the prior approval of the C. I. T. and the I. A. C. and in compliance with direction, the assessee will continue to pay Rs.

monthly till the total arrear demanded is not cleared." On the margin of order‑sheet, signatures of one of the partners of the appellant‑firm were obtained in token of tile agreement of assessment and penalty. This order was maintained in appeal by the learned A. A. C. In the assessee's further appeal the learned Judicial Member after very elaborate discussion concluded as under:‑‑ (a) That the penalty was imposed on 28‑2‑1976 whereas approval of the Inspecting Assistant Commissioner was obtained on 13‑3‑1976. The penalty having been imposed without prior approval of the Inspecting Assistant Commissioner was nullity. (b) The agreed assessment and the penalty having been imposed on the same date, no reasonable opportunity was afforded to the assessee rendering the orders of imposition of penalty not to be in accordance with provisions of subsection (3) of section

28. The learned Accountant Member brushed aside the conclusion of the learned Judicial Member on the issue of approval by holding that the Income‑tax Officer had given a wrong date and the order was not passed on 28‑2‑1976 rather was passed on 13‑3‑1976. On the second point the learned Accountant Member held that even if the time allowed under section 28(3) was short, the notice issued under section 28(I) could not be held to be void ab initio and at the maximum the matter could have been set aside.

3. I have heard the appellant learned counsel as well as the learned D. R. After going through the entire record of the case with the help of the learned Departmental Representative and the concerned Assessing Officer. I have no hesitation in holding that the finding of the learned Accountant Member on the issue of date of penalty order and approval of the Inspecting Assistant Commissioner is factually incorrect. The order of agreed assessment in imposition of penalty was passed by the Assessing Officer on 28‑2‑1976. Even on that date, i.e. 28‑2‑1976 I. T.‑30 form was prepared for assessed income as well as the imposed penalty. The Income- tax Officer went a step further in imposing additional tax of Rs. 11,7501 Rs. 1,034=Rs. 12,784 on 28‑2‑1976 as is apparent from copy of the Demand Notice available on record. It seems that the Assessing Officer, while passing the order of imposition of penalty on 28‑2‑1976 totally lost sight of provision of subsection (6) of section 28(1‑A). Penalty was imposed without obtaining prior approval of the Inspecting Assistant Commissioner. The record establishes that the Income‑tax Officer's finding regarding approval of Inspecting Assistant Commissioner recorded on 28‑2‑1976 is factually incorrect. I‑act of preparation of IT‑30 for the assessed income as well as the imposed penalty on 28‑2‑1976 lends full support to this conclusion. It was only on 13‑3‑1976 when the Assessing Officer realized the mistake and that too on receipts of letter of the learned Commis sioner of Income‑tax. At page 27 of the relevant cover there exists letter No. 4661 of 13‑3‑1976 whereby the learned C. I. T. (Investigation) directed the Income‑tax Officer that penalty proceedings under section 28 (3) should be finalized with the prior approval of the Inspecting Assistant Commis sioner, Copy of this letter was forwarded to the Inspecting Assistant Commissioner (Investigation) by name. At this stage, the Income‑tax officer immediately requested the I. A. C. on 12‑3‑1976 vide letter No. INVIII/906 for approval to levy penalty. In second cover at page 13 there exists the approval granted by the Inspecting Assistant Commissioner (Investigation) vide letter No. Con‑II/1244 dated 13‑3‑1976. It is pertinent to reproduce the contents of this letter which, run under:

"Please refer to your letter No. INV‑III 906 dated 13‑3‑1976 on the above subject. Draft order under section 28(1‑A) of the Income‑tax Act, submitted in respect of the above assessee for the assessment year 1974‑75 is hereby approved with penalty of Rs. 36,205." This approval order was received by the Assessing Officer on 16‑3‑1976. A perusal of these documents leaves me in no doubt that the impugned order of imposition of penalty was passed by the Assessing Officer on 28‑2‑1.976 but the Inspecting Assistant Commissioner's approval was sought and granted on 13‑3‑1976. The finding of the learned Accountant Member on the issue of date of penalty order as well as approval of the Inspecting Assistant Commissioner thus stands belied from the facts on record. The learned Accountant Member very strangely relied on entries of demand and collection register wherein entry of levy of penalty was stated to have been made on 13‑3‑1976. This entry had nothing to do with the actual date of penalty order. Date of order will be traceable from the order- sheet of the Assessing Officer and not from entries made in demand and collection register. The approach of the learned Accountant Member in locating the date of penalty order from demand and collection register does not have anything of judicial approach. For judicial and quasi‑judicial proceeding demand and collection register is alien as the appeal Courts have nothing to do with that. Maintenance of the register is the liability of the Assessing Officer for the purposes of record of assessed income. Under section 18 (1‑A) of the Income‑tax Act, the provision is for levy of penalty for conceal ment etc. and any order passed therein shall have its own entity regarding date of order. It is well‑settled principle of law as observed in the case Commissioner of Income‑tax of Agricultural Income‑tax, East Bengal v. M. Abdul Rehman, Manager, Taki Bara Taraf Wards Estate (1973 S C M R 445), that in inter preting a fiscal statute only the letter or the law must be looked to and there is no room for any intendment. In another case reported as 1971 S C M R 128 it was held that in interpreting a taxing statute the Courts must look to the words of the statute and interpret it in the light of what is clearly expressed. It cannot imply anything, which is not express, it cannot import provision in the statute so as to support assumed deficiency. In the instant case, the learned Accountant Member has just tried to protect the Income‑tax Officer's negligence by importing date of entry of penalty from demand and collection register whereas the order had to be taken from its date on which it was passed.

4. There is no dispute in the proposition that powers of Income‑tax Officer under section 28 (1‑A) for levy of penalty is subject to prior approval of the Inspecting Assistant Commissioner as provided under subsection (6). The I. T. O. himself cannot levy any penalty as scope of his jurisdiction is restricted to the extent of proposal only. So far as the actual levy of penalty is concerned the I. T. Ws proposal is subject to the prior approval of the I. A. C. The restriction of approval of the Inspecting Assistant Commissioner by the Legislature is just a check on the powers of the Assessing Officer. Order passed under section 28(1‑B) is complete only after the approval of the Inspecting Assistant Commissioner is obtained, otherwise it remains just a proposal having no legal force at all.

5. The impugned penalty having been imposed on 28‑2‑1976 under section 18 (1‑A) of the Income‑tax Act, 1922 without obtaining prior approval of the Inspecting Assistant Commissioner as required under subsection (6) is thus nullity in the eye of law. I agree with the conclusion arrived at by the learned Judicial Member that only on this score the impugned orders of the officers below imposing penalty of Rs. 36,585 are liable to be declared illegal. The penalty imposed is thus inexigible, The issues having been safely concluded only on the basis of first two points of difference of opinion, i.e. the date of the Income‑tax Officer's order and approval of the Inspecting Assistant Commissioner, I do not feel any necessity of resolving the other points .of difference of opinion amongst the learned Members, which in my opinion, will be nothing short of an academic discussion.

6. As a result of the above discussion, the impugned orders of the officers below are declared illegal and the imposed penalty is knocked off. The appeal succeeds as per majority decision. Appeal allowed.