JUDGMENT
NAZIR AHMAD J. – A statement of the case under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), has been submitted by the Income-tax Appellate Tribunal, “B” Bench, Patna, referring the following question of law for the opinion of this court :
“Whether, on the facts and in the circumstances of the case, the Tribunal were justified in law in holding that the amended time-limit of penalty under section 275 were not applicable to penalty proceedings which were pending on April 1, 1971 ?”
The facts may be briefly stated. The Income-tax Officer initiated penalty proceedings under section 271(1)(a) of the Act for the assessment ears 1966-67, 1967-68, 1968-69 and 1969-70 as the assessee failed to file returns in accordance with the provisions of section 139 of the Act. The due date for these assessment years for filing the return was 30th September for each of the assessment years in question. The assessments were made by the Income-tax Officer on July 13, 1970. The Income-tax Officer issued show-cause notices to the assessee in each of the aforesaid four years and the assessee filed a written explanation. The Income-tax Officer did not accept the explanation and held that the assessee without any reasonable cause failed to furnish returns within the time and in the manner required by section 139(1) of the Act. The Income-tax Officer found that the returns in all these years were filed on June 23, 1970. He, therefore, imposed various amounts of penalty against the assessee under section 271(1)(a) of the Act for all these years. The penalty orders of the Income-tax Officer under section 271(1)(a) of the Act have been annexed and marked as annexures A-l, A-3, A-5 and A-7, respectively.
The assessee as per the provision of section 212(3) of the Act was required to file an estimate of the total income and to pay advance tax accordingly. But the assessee failed to do so. The assessee was given an opportunity of being heard in this respect, vide notice under section 274 read with section 273 of the Act. But the assessee did not give any explanation. The Income-tax Officer, therefore, imposed penalties under section 273(b) for the assessment years 1966-67, 1967-68, 1968-69, 1969-70 and 1970-71. The penalty orders of the Income-tax Officer relating to these penalties have been annexed and marked as annexures A, A-2, A-4, A-6 and A-8, respectively.
The assessee appealed before the Appellate Assistant Commissioner of Income-tax who disposed of all the appeals relating to penalties under section 271(1)(a) of the Act by his consolidated order dated January 11, 1974. Shri D. Sengupta, on behalf of the assessee, raised the point of limitation with regard to the date of imposition of penalty. The Appellate Assistant Commissioner has pointed out that the penalties in these case were imposed on March 23, 1973, and the relevant assessments were completed on July 13, 1970. He held that in terms of section 275 of the Act, the penalty proceedings should have been completed within two years from July 13, 1970, i.e., by July 12, 1972. He, therefore, took the view that penalties were imposed after about eight months from the expiry of the date of limitation. He has also pointed out that the appellant, Smt. Savita M. Thakar, is legal representative of Shri Late Manikant Thakkar. He has also pointed out that amendment regarding the limitation period by Act No. 42 of 1970 was effective from April 1, 1971, and according to the amendment, the limitation period should count from the end of the financial year in which the assessment was made. The Appellate Assistant Commissioner took the view that as the amendment was effective from April 1, 1971, the penalty orders were liable to be cancelled as penalty orders were barred by limitation. He accordingly cancelled the penalty orders. The order of the Appellate Assistant Commissioner relating to penalty under section 271(1)(a) of the Act has been annexed and marked as annexure “B” forming part of the statement of the case. It appears that although the Appellate Assistant Commissioner passed a consolidated order and he also passed separate orders relating to the assessment years 1967-68, 1968-69 and 1969-70, allowing the appeals for the reasons discussed in the consolidated order.
The Appellate Assistant Commissioner passed a consolidated order dated January 11, 1974, relating to penalties under section 273(b) of the Act relating to the assessment years 1966-67, 1967-68, 1968-69, 1969-70 and 1970-71. He has pointed out that all these appeals are against the orders of penalty under section 273(b) of the Act and so they were being disposed of by a consolidated order. He has also pointed out that these penalties were also imposed on March 23, 1973, by the Income-tax Officer and the assessments were completed on July 13, 1970. He held that in terms of Section 275 of the Act, the penalty proceedings should have been completed within two years from July 13, 1970, i.e., by July 12, 1972. He held that the penalties have been imposed after about eight months from the expiry of the date of limitation. As the penalties were imposed on March 23, 1973, he held that the penalty orders under section 273(b) were barred by limitation. He cancelled the penalty orders of the Income-tax Officer and allowed all the appeals.
On the basis of the consolidated order, the Appellate Assistant Commissioner also passed separate orders for the assessment years 1967-68, 1968-69, 1969-70 and 1970-71, allowing the appeals for the reasons discussed in his consolidated order relating to penalty under section 273(b) of the Act. This consolidated order of the Appellate Assistant Commissioner has been annexed and marked as annexure B-l forming part of the statement of case.
The Department being aggrieved by the orders of the Appellate Assistant Commissioner filed appeals against cancellation of the penalty orders relating to section 271(1)(a) as well as section 273(b) of the Act. The Tribunal also took the same view as was taken by the Appellate Assistant Commissioner and the Tribunal held that the penalties should have been imposed within two years from July 13, 1970, and as the penalties were not imposed within two years from July 13, 1970, i.e., July 12, 1972, the penalty orders were barred by limitation and so cancellation of the penalty orders by the Appellate Assistant Commissioner were upheld and all the Departmental appeals were dismissed. A copy of the order of the Tribunal has been annexed and marked as annexure “C” forming part of the statement of the case.
In this case, none has appeared for the opposite party-assessee and so Mr. B. P. Rajgarhia has been heard ex parte on behalf of the petitioner, Commissioner of Income-tax, Bihar, Patna. The facts are not disputed The due dates for returns in the various assessment years were 30th September of each year and the assessments were made for all the years on July 13, 1970. The proceedings for penalties were initiated during the course of the assessment proceedings, i.e., on July 13, 1970. The Income-tax Officer imposed the penalties under sections 271(1)(a) and 273(b) of the At in all the cases on March 23, 1973. It cannot be doubted that under section 275 of the Act, before it was amended by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971, no order imposing a penalty under this Chapter could 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. By the Taxation Laws (Amendment) Act, 1970, the penalty could be imposed within two years from the end of the financial year in which the proceedings, in the course of which action for imposing of penalty has been initiated, are completed. In the present case, the assessments were completed on July 13, 1970, and so, under the unamended section 275, the penalty could be imposed on or before July 12, 1772. But, in view of the amended provision, the penalty could be imposed by March 31, 1973. The penalties have been imposed on March 23, 1973. So, if the amended section 275 is applied, then it will be within limitation. It also cannot be doubted that the limitation had not expired when the amended provision came into force from April 1, 1971.
It has been held in the case of Hajee K. Assainar v. CIT [1971] 81 ITR 423 (Ker), that if the amendment of a statute deals merely with matters of procedure and does not affect the rights of parties, the new procedure will, prima facie, apply to all pending as well as future actions.
It has been held in the case of Addl.CIT v. Watan Mechanical and Turning Works [1977] 107 ITR 743, which is a Full Bench decision of the Andhra Pradesh High Court, that no one has a vested and substantive right in the procedure and limitation has to be considered as a part of the procedural law as distinct from substantive law. It has also been held in this decision that the liability for tax or penalty would always remain on the assessee; but if the time prescribed under the Act expires, the liability cannot be imposed by the authorities, the reason being that the assessee should not be subjected to unending hardship. It has also been held in this decision that before the limitation prescribed expires, if the same is enlarged, the limitation being a procedural one, the extended period of limitation will apply to such proceedings. In the case before the Andhra Pradesh High Court, under the old section 275 as it stood before the Amendment Act, 1970, the limitation for levying penalty was due to expire by February 25, 1972. As section 275 of the Act was amended with effect from April 1, 1971, enlarging the period of limitation, the High Court held that the amended section governs the case under which the impugned orders levying penalty would be in time as they were made before March 21, 1972. Similar view has been taken in the case of CIT v. Bhikari Charan Panda [1976] 104 ITR 73 (Orissa), in the case of CIT v. Soubhagya Manjari, Devi [1976] 105 ITR 82 (Orissa), in the case of Kerala Oil, Mills v. CIT [1980] 121 ITR 254 (Ker), in the case of Saraf Trading Corporation v. CIT [1980] 123 ITR 159 (Ker) and in the case of Addl. CIT v. Raichand Amichand [1983] 144 ITR 754 (MP).
Thus, in view of the various decisions mentioned above, it has to be held that as in this case, the limitation was still running on April 1, 1971, the amended section 275 of the Act will be applicable as it enlarged the period of limitation and so the penalties imposed by the Income-tax Officer on March 23, 1973, were not barred by limitation.
In view of my above discussion, I hold that the penalty orders of the Income-tax Officer were not barred by limitation and so the Tribunal was not justified in law in holding that the amended time-limit of penalty under section 275 of the Act was not applicable to penalty proceedings which were pending on April 1, 1971. The question is answered in the negative and in favour of Revenue and against the assessee. There will be no order as to costs.
UDAY SINHA J. – I agree.