M/S. Guduthur Bros. Vs. The Income-Tax
Officer, Special Circle, Bangalore  INSC 112 (22 July 1960)
CITATION: 1960 AIR 1326
by Income-tax Officer without reasonable 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
Income-tax Act, 1922 (II of 1922), SS. 28 (I)(a) and 28(3).
The appellants failed to file their return
within the prescribed time and on a notice issued under S. 28(1)(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 Income-tax Officer imposed a
penalty on them. On appeal the Appellate Assistant Commissioner set aside the
order and directed refund of the penalty. Thereafter the Income-tax Officer
issued a further notice giving an opportunity to the appellants of being heard.
The appellants objected to this notice and 72 contended that the Income-tax
Officer could no longer proceed to re-assess the penalty in the absence of an
express order of remand by the Appellate Assistant Commissioner whose order had
Held, that where an order of imposition of
penalty made by the Income-tax Officer under S. 28(1)(a) of the Indian Income
tax Act was vitiated, not by any initial illegality but by one which supervened
during the course of the proceedings and the said order was vacated on appeal,
the Income-tax Officer was well within his jurisdiction in continuing the
proceedings from the stage at which the illegality had occurred and could
re-assess the penalty though no express order of remand was made.
Jos Chacko Poothokaran v. Income-tax Officer,
Ernakulam Circle,  32 I.T.R. 648, not applied.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 261 of 1958.
Appeal by special leave from the judgment and
order dated November 6, 1956, of the Mysore High Court in Writ Petition No. 215
S. N. Andley, J. B. Dadachanji, Rameshwar
Nath and P. L. Vohra, for the appellants.
K. N. Rajagopal Sastri and D. Gupta, for the
1960. July 22. The Judgment of the Court was
delivered by HIDAYATULLAH J.-This appeal has been filed with the special leave
of this Court against a decision of the High Court of Mysore, by which it
dismissed in limine an application by the appellants under Art. 226 of the
Constitution for a writ of prohibition or some other appropriate writ against
the Income-tax Officer, Bellary, Special Circle, Bangalore.
The facts of the case are as follows. For the
assessment year 1948-49, the appellants failed to file a return within the
prescribed time and the Income-tax Officer, acting under s. 28(1)(a) of the
Indian Income tax Act, issued a notice to them to show cause why penalty should
not be imposed. In answer to this notice, the appellants filed a written reply
and the Income-tax Officer proceeded 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
Income-tax 73 Act. The matter was taken up in appeal before the Appellate Assistant
Commissioner of Income-tax, who, pointing out that an opportunity of being
heard was not granted to the appellants, held that the order was defective. He
therefore set aside that-order and directed the refund of the penalty if it had
On receipt of the order, the Income-tax
Officer issued a further notice calling upon the appellants to 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 statement
which had been filed earlier. Before, however, the Income-tax Officer could
decide the case, the appellants filed a petition under Art. 226 of the
Constitution for the issuance of the writs mentioned above. This petition was
dismissed in limine by the High Court holding that the contention raised by the
appellants may perhaps be raised before the Income-tax authorities. The
appellants thereupon applied for special leave to this Court and leave having
been granted, this matter comes up before us.
There is no question here that the
requirements of s. 28(1)(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. (1) 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 supervened, ,not at the initial stage of the proceedings, but
during the course of it. The order of the learned Appellate Assistant
Commissioner pointed out the ground on which the illegality proceeded and his
order directing the refund of the penalty, if recovered, cannot but be
interpreted as correcting the error and leaving it open to the Income-tax
Officer to continue his proceedings from the stage at which the illegality
10 74 No express remand for this purpose, as
is contended, was necessary.
Our attention was drawn to a decision of a
learned Single Judge of the Kerala High Court reported in Jos Chacko
Poothokaran v. I. T. O., Ernakulam Circle(1), in which, in similar
circumstances, it has been held that since an appeal was not taken by the
Commissioner of Income-tax to the Appellate Tribunal under sub-s. (2) of s. 33,
the order of the Appellate Assistant Commissioner became final and the Income
tax 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 Income tax 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 to show cause why penalty should not be 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 proceedings,
because the action will relate back to the time when the first notice was
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
(1)  32 I.T. R. 648.