1960 PLP 1075 (PTD)

AMIN AHMED, C. J.‑This is a Reference under subsection (1) of section 66 of the Income‑tax Act (hereinafter referred to in this judgment as the Act only) at the instance of the Commissioner of Income‑tax, East Pakistan.

2. The assessment year is 1949‑50 and the Reference arises out of an order of the Appellate Tribunal, dated the 31st of December 1957, setting aside an order of penalty imposed on the assessee respondent by the Income‑tax Officer under sub section (1) (c) of section 28 of the Act on the 8th of August 1952. The penalty was imposed because the Income‑tax Officer in the course of his examination of the accounts for the assessment year 1950‑51 discovered that certain purchases for the preceding year 1949‑50 were not included in the account books. So, a notice was issued under section 28 of the Act, and the assessee submitted an explanation on the 23rd of February 1950. But, as the assessee did not produce evidence in support of the explanation, on the 13th of December 1951, he recommended, as required by subsection (6) of section 28 of the Act, a fine of Rs. 5,000 and sought the approval of the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioner, suggested that the income tax Offer should recommend not a fine of Rs. 5,000, but of Rs. 15,000, and make a second Reference to him. Thereupon, the Income‑tax Officer, in pursuance of the order of the Inspecting Assistant Commissioner, recommended a penalty of Rs. 15,000 and this was approved by the Inspecting Assistant Commissioner. Against this order, an appeal was filed before the Appellate Assistant Commissioner who in appeal proportionately reduced the penalty according to the assessment made by the Tribunal against the order of assessment of the Income‑tax Officer. Against this order, an appeal was taken to the Income‑tax Appellate Tribunal. The Tribunal set aside the order of penalty holding that there was no proper proposal for the penalty by the Income tax Officer, and the only proposal which was made by the Income tax Officer was not approved by the Inspecting Assistant Commis sioner.

3. In the letter of Reference we find that the Tribunal, among other things, mentions a case of the East Punjab High Court in the case of In Re : Kishorechand Ramji Das ((1950) 18 I T R 680) and says that unfortunately the said case was not placed before them at the time of the disposal of the appeal relating to the penalty. How ever, the two points formulated by the Tribunal for our opinion are as follows: Question No. 1.‑"Whether in the facts and circumstances of the case and in view of subsection (6) of section 28 of the Income‑tax Act there was any illegality in the imposition of penalty of Rs. 15,000 by the Income‑tax Officer vitiating the imposition." Question No. 2.‑"Whether the order of imposition of penalty is vitiated by non‑compliance with the provisions of section 28 (3) of the Income‑tax Act." As to the first point, Mr. Mesbahuddin strongly relies on the provisions of subsections (3) and (6) of section 28 of the Act, which are as follows: (3) "No order shall be made under subsection (1) or sub section (2) unless the‑assessee or partner as the case may be, has been heard, or has been given a reasonable opportunity of being heard." (6) "The Income‑tax Officer shall not impose any penalty under this section without the previous approval of the Inspecting Assistant Commissioner." Mr. Mesbahuddin contends that there cannot be any question of irregularity or illegality in the imposition of the penalty as suggested by the Inspecting Assistant Commissioner, for, not only subsection (3) of section 28 of the Act has been complied with as it will appear from the records, but also subsection (6) of section 28 of the Act has been followed. He argues that sub section (6) expressly requires that the Income‑tax Officer shall not impose any penalty without the previous approval of the Inspecting Assistant Commissioner and, as a matter of fact, without reference to him the Income‑tax Officer has no authority to impose any penalty.

4. Mr. Khandkar who appears for the respondent, does not dispute the proposition that approval has to be obtained of the superior authority like the Inspecting Assistant Commissioner; but the learned Advocate tries to distinguish the present case from that reported in 1950 I T R 680 A I R 1950 E Pun.

314. Ex cepting that he has stated that the case is distinguishable, we have not been told what the distinguishing features are. As a matter of fact, even the learned Tribunal does not say the facts are different: It says that "the facts of that case are almost similar to tile facts of the present case." We have ourselves examined the case, and with respect we accept the view taken in that case. It seems to us that under clause (1) of section 28 powers have been given to three authorities ; the Tribunal, the Inspecting Assistant Commissioner and the Income‑tax Officer to impose penalty, but the Income‑tax Officer is not empowered to impose any penalty without the previous approval of the Inspecting Assistant Com missioner and this latter enactment has been provided by the Legislature, in our opinion advisedly, because an Income‑tax Officer is not as experienced as the other superior officers who have been given unconditional authority to impose penalty, and any proposal made by him is subject to the scrutiny of and further Examination by the superior officer as it has been done in this case. Further, the authority who is competent to approve is also competent to disapprove or modify what is referred to him for this, approval. So, on principle, there cannot be any doubt that the Inspecting Assistant Commissioner has authority to either enhance or reduce the penalty suggested by the Income‑tax Officer. Therefore, we answer the first question in the negative, and hold that in the facts and circumstances of the case, and in view of subsection (6) of section 28 of the Act there is no illegality in the imposition of the penalty by the Income‑tax Officer on the sug gestion, and after previous approval, of the Inspecting Assistant Commissioner.

5. We fail to understand why in question No. 1 the figure `15,000' is still retained though the appeal before the Tribunal was in respect of the amount of penalty that was reduced proportionately by the Appellate Assistant Commissioner, and that was set aside by them. The Tribunal should have reduced the figure accordingly.

6. The other question as to whether the order of imposition of penalty is vitiated by non‑compliance with the provisions of section 28 (3) of the Act, in our opinion, does not arise, as we find from the order of the Tribunal disposing of the appeal relating to the penalty that they have nowhere found that this has not been complied with ; on the other hand, they have set aside the penalty by concluding the order as follows: "The defect in the proceedings (1949‑50) is that the income tax Officer did not submit to test the explanation of the assessee, dated 23rd February 1950. (6) We cannot presume that the books of 1949‑50 income‑tax year were also seized by Customs. So penalty order for 1949 50 should stand cancelled as there was no proper proposal for penalty and the only proposal which emanated from the Income‑tax Officer was not approved by the Inspecting Assis tant Commissioner. (7) The appeal is allowed accordingly." In this connection we have tried to satisfy ourselves as to whether subsection (3) of section 28 of the Act has been complied with or not. We find from the order‑sheets of the Income‑tax Officer that on the 20th of February 1950, the Income‑tax Officer recorded as follows: "Party to submit a written explanation showing cause under section 28 (3)." On the 3rd of October 1951, it was recorded: "Fix up for hearing under section 28 on 20th October 1951, at 11 a.m." It also appears from the statement of the case, and other records that no account or evidence was produced by the assessee in support of their explanation nor do we find anything‑from the record to show that no reasonable opportunity was given to the assessee of being heard under subsection (3) of section 28 of the Act. On the other hand, the assessee submitted an explanation, but did not produce any evidence in support of it. So, as sub section (3) of section 28 has been complied with, the Reference of the second question relating to non‑compliance with the provision of section 28 (3) is misconceived and it is not necessary to answer it.

9. The Reference is disposed of in the above manner. We, however, do not award any costs. CHAKRABORTI, J.‑I agree with my Lord the Chief Justice. Reference answered.