Shere Punjab Silk Store Vs Commissioner of Income Tax

D.K. Kapur, J.@mdashThe question referred to us by the present reference u/s 256(1) relating to the assessment year 1967-68 is as follows :

"Whether, on the facts and in the circumstances of the case and on a true interpretation of sections 274(2) and 275, the Tribunal was right in upholding the orders of the Inspecting Assistant Commissioner ?"

2. Learned counsel for the assessed contended that, in fact, there were other questions which had been sought in the reference application and we should reframe the question referred to us so as to cover the real controversy which was "whether penalty should be imposed in this case" ? As we see it, the only question referred to us is the question as to what is the limitation period for passing the penalty order. The question whether the penalty should be imposed or not is not covered by the question. We cannot reframe the question so as to cover a completely different question. The question which has been refused to be referred has to be agitated by way of a petition u/s 256(2) before the High Court. So, we are powerless to amend the question as submitted to us for opinion.

3. As far as the question referred is concerned, the controversy is as to what is the period after which the penalty order cannot be passed. Section 275 of the Act was amended by the Taxation Laws (Amendment) Act, 1970, with effect from April 1971. The present reference relates to the assessment year 1967-68. However, the assessment was completed on January 29, 1972, after the amendment had been made.

4. The limitation period for passing a penalty order was amended by altering the language of section 275 of the Act. The present section fixes the period as two years from the end of the financial year in which the proceedings in the course of which the penalty action has been completed. In other words, as the assessment order was passed in the financial year 1971-72, the penalty order could be passed latest on March 31, 1974. In fact, the penalty order was passed on March 30, 1974. So, it is within time.

5. The learned counsel for the assessed has cited Continental Commercial Corporation Vs. Income Tax Officer and Another, , which is a judgment of the Madras High Court. However, that judgment deals with the effect of the amendment by which the Income Tax Officer got the jurisdiction to deal with the penalty proceedings. The amendment had the effect of enlarging the jurisdiction of the Income Tax Officer from Rs. 1,000 to Rs. 25,000. Such an amendment is substantive in nature. The present amendment fixing the limitation period for passing the penalty order is of a procedural nature. It gives a time in which the order is to be passed. If not passed (within that time), it cannot be passed later. This time can be varied from time to time and, if varied, the varied time will apply and not the previous time. Any amendment of the Act necessarily repeals the previously existing provision. Unless there is a law that the previous provision is kept alive, we cannot look at it. Accordingly, the answer to the referred question has to be in the affirmative, in favor of the Department and against the assessed. There will be no order as to costs.