M/s. Guduthur Bros. v. the Income Tax Officer , Special Circle, Bangalore

Judgment

71 . charge against a police officer above the rank of a constable under the Police Act and such a magistrate has to 'be a )!'irst Class Magistrate. These sections nowhere. exclude departmental enquiry. All that they lay down is that where. an offence punishable under the Police Act is committed by a police officer above the ra,nk of a constable and is to be tried by a court oflaw it has to go before a :First Class Magistrate. That, however, does not mean that no departmentalenqu\iry can be held with respect to a matter where it is afiio possible· to prosecute a police officer under the Police . Act. There is no force in this contention also and it i~ hereby rejected. The appeal therefore fails and is hereby dismissed) but in the circumstances of this case we pass no ordef' as to costs. Appeal dismissed. M/s. GUDUTHUR BROS. THE INCOME-TAX OFFICER, SPECIAL . CIRCLE, BANGALORE. (S. K. DAS, M. HIDAYATULLAH and J. c. SHAH, JJ.)

Income-tax-Assessment-Penalty-Imposition, 'by Income-tax Officer without reason.al!le opportunity given to assessee of being heard-Order set -aside on appeal and refund directed-No express . order of remand-Continuance of proceedings by the Income-tax Officer-Legality-Indian 1ncome-tax Act, z922 (II of .z922), ss. 28 (r)(a) and 28(3). The, appellants failed to file their return within the prescri- . bed time and on a notiCe issued under s. 28(r)(a)' of 'the Indian . Income-tax Act, 1922, to show cause why penalty should not be imposed on them, they filed a written reply. Without affording . them an opportunity of being heard as required by s. 28(3) of the Act the Incoi:ne'tax Officer· imposed a penalty on them. On . appeal the Appellate Assistant Commissiotier set aside the order . and direded refund of the penalty. Thereafter the Income-tax Officer issued a further notice giving an opportunity to the appel~ !ants of being heard.

The appellants objected to this notice and Bhagat Singh The State of Punjab H1anchoo J. r960 July 2i 72 Sl!PREME COl!RT REPORTS [1961] contended that the Income-tax Olficer could no longer proceed to re-assess the penalty in the absence of an express order of Mfs. Gicdurhur·. remand by the Appellate 1\ssistant Commissioner whose order Bros. The income-tax Officer, Special C1,.clr, Bangalore had become final. Held, that where an order of imposition of penalty made by the Income-tax Officer under s. 28(1)(a) of the Indian Incometax Act was vitiated, not by any initial illegality but by one \Vhich supervened during the course of the procL·tdings and the said order was yacated on appCal, the Income-tax Officer was well within his jurisdiction in continuing the proceedings from the stage at v.·hich the illegality had occurred and could re-assess the penalty t!wugh no express order of remand was made . jos Chacko Poothokara11 ''· Income-tax Officer, Ernakulam Circle, [1957] 32 l.T.R. 648, not applied.

C:iHL APPELi.ATE JURISDICTION: Civil Appeal No. 261 of 1958. Appeal by special leave from the judgment and ardor dated November 6, 1956, of the Mysore High ~ourt in Writ Petition No. 215 of 1956. S_ N. Andley, J.B. Dadachanji, Rameshwar Nath'and p_ L. Vohra, for the appellantH. · K. N_ Rajagopal Sastri and D. Gupta, for t.he respondent. 1960. July 22. The Judgment of the Court was delivered by Hidayatull•h ]. HIDAYATULLAH J.-This appeal has been filed '"ith the special lea1•e of this Court ag1>iust a decision of the High Court of Myore, by which it dismissed in limine an application by tho appellants under Art. 226 of the Constitution for a writ of prohibition or some other appropriate writ again8t the Income-tax Officer, 13ellary, Special Circle, Bangalore. The facts of the case are as follows. For the assessment year 1948.49, the appellant!! failed to file a rl't.urn within the prescribed time and the Income-tax Officer, acting under s.

28(l)(a) of tho Jndian Incometax Act, issued a notice to them t-0 show cause why penalty should not be imposed. In answer to this notice, tho appellants filed a written reply and the Income-tax Officer procooded to levy a penalty of Rs. 16,000, without affording a hearing to them as required by the third sub-s. of s. 28 of the lucome-ta:x 73 Ac-t. The matter was taken up in appeal before the r9M Appellate Assistant Commissionllr ofincome-tax, who; Mfs. Guduthur pointing out that an opportunity of being heard was Bros. , not granted tO the appellants, held that the order was · defective. He therefore set aside that order and direct- The Income-ta> ed the refund of the penalty if it had been recovered. Officer, Special ~ On receipt of the order, the Income-tax Officer Circle, Bangalore issued a further notice calling upon _the. appellants to Hida;atullah 1. appear before him; so that they might be given an opportunity of being heard.

He also intimated that _if no appearance was made, then he would proceed to .determine the question of penalty, taking into consideration only the written statemen.t which had been filed earlier. Before, however, the Income.fax Officer < 01ild decide the case, the appellants filed a petition under Art. 226 of the. Constitution for the issuance of tLe writs mentioned above. This petition was disc missed in limine by the High Court holding that the contention raised by the appellants may perhaps be raised before the Income-tax authorities. The appel-. !ants thereupon applied for special leave to this Cour.t and leave having been granted, this matter comes up before us. There is no question here that the requirements of s .. 28(l)(a) of the Income-tax Act were not completely fulfilled. If the appellants had not filed their. return, as ·they were required by. law to do, the omission would attract cl. (a) of sub-s. (l) of s, 28. We say nothing as to that, Sub-section.(3) of s.

28, however, requires that the penalty shall not be imposed without affording to the. assessee a reasonable opportunity of being heard. This opportunity was denied to the appellants and· therefore the order of the ·Income-tax Officer was vitiated by an illegality which superveneq, not at the initial stage of the proceedings, but during the course .of it. The order of the learned · Appellate Assistant Commissfoner pointed out the ground on which the illegality proceeded and his order directing the refund of the penalty, if recovered, connot but be interpreted as correcting the error and leaving it open to the Income-tax Ofµcer to continue his proceedings from the stage at which the illegality occurred 10 i4 SUPRK\JE COURT REPORTS [1961] No express remand for this purpose, as is contended, Afili. Gudtctl110· was necessary. /fros Our attention was drawn to a decision of a learned v Single Judge of the Kern la High Court reported in Th' 1"'".""· 1ax Jos Chacko Poothokaran v. I. T. 0., Ernakulam Off•w. ·'l"""1 C' /e (1 ) h' h . . 'l .Circle, uangal!irt ire , in w IC , 1n s1m1 ar c1rcumstanccs, it as been held that since an appeal was not taken by the H•daya1 ..

11a1o J. Commissioner of Income-tax to tho Appellate Tribunal under sub-s. (2) of s. 33, the order of the Appellate Assistant Commissioner became fin~) and the Incometax Officer could no longer proceed to reassess the penalty. The reason given is, in our opinion, beside the point. What the Appellate Assistant Commissioner did was to vacate the order and direct refund of the penalty in view of an illegality which had occurred during . the course of the assessment proceedings. On receipt of the record it was open to the Incometax Officer to take up the matter from the point at which the illegality supervened and to correct his proceedings. It was pointed out in the course of the statement of the case by the appellants ·that such proceedings could only be taken during the course of assessment proceedings and those proceedings are concluded.

In our opinion, the notice issued to the appellants t-0 show cause why penalty should not ho imposed on them did not cease to be operative, because the Appellate Assistant Commissioner pointed out an illegality which vitiated the proceeding after it was lawfully initiated. That notice having remained still to be disposed of, the proceedings now started can be described as during the course of the assessment pro- . ceedings, because the action will relate back to the time when the first notice was issued. In our opinion, the Income-tax Officer is well within his jurisdiction to continue the proceedings from the stage at which the illegality has occurred and to assess the appellants to a penalty, if any, which the circumstances of the case may require. The appeal is accordingly dismissed with costs. Appeal diamissed.