1993 PLP 678 (PTD)

In order to appreciate the question referred to this Court, it would be pertinent to quote the relevant provisions of law relating to imposition of penalty in force on the date of submission of the return and those in force on the date of initiation of the penalty proceedings, the first relevant provision of law is section 274(2). The said section as it stood on the date of submission of the return may be quoted below: "274. (2) Notwithstanding anything contained in clause (iii) of subsection (1) of section 271, if in a case falling under clause (c) of that subsection, the minimum penalty imposable exceeds a sum of rupees one thousand, the Income Tax Officer shall refer the case to the Inspecting Assistant Commissioner, who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty." It may be stated that the words "the minimum penalty imposable exceeds a sum of rupees one thousand" were substituted by the words "the amount of income (as determined by the Income Tax Officer on assessment) in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twenty-five thousand rupees" by the Taxation Laws (Amendment) Act 1970, with effect from April 1, 1971. This subsection was omitted by section 65 of the Taxation Laws (Amendment Act, 1975, with effect from April 1, 1976. Thereafter, the following was inserted as subsection (2) by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989. "274. (2) No order imposing a penalty under this Chapter shall be made. (a) by the Income Tax Officer, where the penalty exceeds ten thousand rupees; (b)by the Assistant Commissioner, where the penalty exceeds twenty thousand rupees, except with the prior approval of the Deputy Commissioner." Section 275 which creates a bar of limitation against imposition of penalty under Chapter XXI of the Act is also relevant. The said section ac it stood prior to its amendment by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971, may be quoted as below: "

275. Bar of limitation for imposition of penalty,

No order imposing a penalty under this Chapter shall be passed after the expiration of two years from the date of the completion of the proceedings in the course of which the proceedings for the imposition of penalty have been commenced." The said section as amended with effect from April 1, 1971, by the Taxation Laws (Amendment) Act, 1970, in so far as it is relevant for the purpose of this case, may be quoted below: "

275. Bar of limitation for imposing penalties.

No order imposing a penalty under this Chapter shall be passed. (a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Appellate Assistant Commissioner under section 246 or an appeal to the Appellate Tribunal under subsection (2) of section 253, after the expiration of period of-- (i) two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or (ii) six months from the end of the month in which the order of the Appellate Assistant Commissioner or, as the case may be, the Appellate Tribunal is received by the Commissioner, whichever period expires later; (b) in any other case, after the expiration of two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed." It is evident that while section 271 is a substantive charging provision section 274 provides the procedure to be followed in giving effect to the said substantive charging provision and section 275 creates a bar of limitation against the imposition of penalty. The Tribunal in its order giving rise to the present reference has held that the provision of law enacted in section 274(2) with regard to the jurisdiction of the officer who is to dispose of the penalty proceeding is a matter of procedure and so is the provision regarding the limitation enacted in section

275. Accordingly, it held that the law in these matters as it stood amended on the date of the initiation of penalty proceedings and not the law in force on the date of the submission of the return would be applicable. The question regarding the jurisdiction of the officer who is to dispose of the penalty proceedings is certainly a question relating to a matter of procedure and any amendment in the procedural law is normally retrospective and applies to pending proceedings. In Anant Gopal Sheorey v. State of Bombay, AIR 1958 SC 915, 917 the Supreme Court held that "no person has a vested right in any course of procedure. He has only the right of prosecution or defence in the manner prescribed for the time being by or for the Court in which the case is pending and if, by an Act of Parliament, the mode of procedure is altered, he has no other right than to proceed according to the altered mode". This view has been repeatedly expressed by the Supreme Court in a number of reported decisions. In a recent case, viz., Mithilesh Kumari v. Prom Bchari Khare (1989) 177 ITR 97, 107; AIR 1989 SC 1247, the Supreme Court has held "every law that impairs or takes away rights vested agreeably to existing laws is retrospective and is generally unjust and may be oppressive". However, it is well settled that the rules of limitation are not meant to destroy the rights of the parties. They merely bar the remedy. Similarly, no one has a vested right in a particular forum for the adjudication of one's rights and liabilities. The law of limitation being the law of procedure, the one which is applicable in a particular suit or proceeding is the law which is in force on the date on which such or proceeding is instituted notwithstanding that the cause of action may have arisen before such law of limitation came into force. Kallu Khan v. Kamrul Nisa (1962) All IJ 1039 (FB) supports this view in so far as the question of forum and jurisdiction is concerned. Now, the question to be considered is whether the amendment of sections 274(2) and 275 of the Act as stated hereinbefore affects any right, privilege, obligation or liability acquired, accrued, or incurred under the law as it stood on the date of submission of the return or does it affect in respect of any offence committed at the time of submission of the return. In Brij Mohan v. CIT (1979) 120 ITR 1; AIR 1979 SC 1897, the Supreme Court, while considering a question as to whether the assessee who had concealed the particulars of his income was liable to penalty under clause (iii) of subsection (1) of section 271 of the Act as it stood on the date of concealment, namely, the date on which the return was filed or as it stood during the assessment year relevant to the previous year in which the income was earned. In paragraph 4 of the report, the Court observed (at p. 4 of 120 ITR): "In the case of a penalty, however, it must be remembered that a penalty is imposed on account of the commission of a wrongful act, and plainly it is the law operating on the date on which the wrongful act is committed which determines the penalty. Where penalty is imposed for concealment of particulars of income, it is the law ruling on the date when the act of concealment takes place which is relevant". On this basis, the Supreme Court held that the concealment of the particulars of income was effected by the assessee on the date he filed a return of his total income, i.e. on April 24, 1968. Accordingly, the Supreme Court held it was the substituted clause (iii) brought in by the Finance Act, 1968, with effect from April 1, 1968, which governs the case. This decision of the Supreme Court was, however, one dealing with the effect of the amendment in the charging section which affects substantive rights. Clause (iii) of subsection (1) of section 271 is a charging section while section 274(2) and section 275 of the Act deal with procedural matters. As such, we are of the opinion, that, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the authority by whom the penalty was to be imposed and the period within which the order of penalty was to be passed were to be governed by the law in force at the time of initiation of the penalty proceeding and not by the law in force at the time of filing of the return. The Tribunal was justified in holding that the Income Tax Officer was empowered to pass the order of penalty and that the proceeding for imposition of penalty was within the time limit of two years from the end of the relevant financial year in which the proceeding for imposition of the penalty was initiated. Question No.l is, accordingly, answered in the affirmative, i.e. in favour of the Revenue and against the assessee. So far as question No.2 is concerned, it appears from the judgment of the Appellate Tribunal that learned counsel for the assessee did not make any serious effort to deny the factum of concealment. Claim of vacancy was wrongly made by the assessee. It was as a result of the queries of the Income Tax Officer that the assessee was obliged to withdraw its claim with regard to the vacancy of the property, making a wrong claim with regard to the vacancy allowance when it was in fact not available to the assessee. It was rightly held by the Tribunal to be sufficient to attract the provisions of section 271(1)(c) of the Act. Accordingly on the facts and in the circumstances of the case, the Appellate Tribunal was correct in holding that the imposition of penalty was justified. Therefore, we answer question No.2 as well in the affirmative, i.e. in favour of the Revenue and against the assessee. Reference is answered accordingly. There shall be no order as to costs. M.BA./2246/T Reference answered.