# Baldeo Prasad v. CIT(65 I.T.R

- **Citation:** (2006) 2 ILRA 597
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2004-12-01
- **Case number:** I.T.R. No.55 of 1988
- **Bench:** R.K. Agrawal, Prakash Krishna
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/baldeo-prasad-v-cit-65-i-t-r-38975
- **Pages:** 4

## Headnote

Income Tax Act-1922-Section-28 (1)(C)-
Imposition of penalty of Rs.50,000/- by
order dated 7.12.76 on reference of
assessment
year
1947-48-Appellate
Assistant
Commissioner
deleted
the
penalty on the ground of 20 years
inordinate delay-held-proper.

Held: Para 10

Applying the principles laid down in the
aforesaid cases to the facts of the
present case, we find that by no stretch
of imagination long period of 20 years
can be said to be a reasonable time for
imposing penalty. The explanation given
by the Department for the inordinate
delay did not amount to reasonable
cause. In this view of the matter, we are
considered opinion that the Tribunal has
not committed any error in cancelling
the penalty imposed under Section 28
(1)(c) of the Act.
Case law discussed:
(1962) 46 ITR 452
(1870) 76 ITR 653
(1967) 65 ITR 491
(1970) 75 ITR 698

## Text

2 All] The Commissioner of Income Tax V. Shri Padampat Singhania
597
REVISIONAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD DECEMBER 1, 2004

BEFORE
THE HON'BLE R.K. AGRAWAL, J.
THE HON'BLE PRAKASH KRISHNA, J.

I.T.R. No.55 of 1988

The
Commissioner
of
Income
Tax(Central), Kanpur

...Applicant
Versus
Shri Padampat Singhania (HUF,) Kanpur

 ...Respondent

Counsel for the Applicant:
Sri Shambhoo Chopra
S.C.

Counsel for the Respondent:
Sri V.K. Upadhyay

Income Tax Act-1922-Section-28 (1)(C)-
Imposition of penalty of Rs.50,000/- by
order dated 7.12.76 on reference of
assessment
year
1947-48-Appellate
Assistant
Commissioner
deleted
the
penalty on the ground of 20 years
inordinate delay-held-proper.

Held: Para 10

Applying the principles laid down in the
aforesaid cases to the facts of the
present case, we find that by no stretch
of imagination long period of 20 years
can be said to be a reasonable time for
imposing penalty. The explanation given
by the Department for the inordinate
delay did not amount to reasonable
cause. In this view of the matter, we are
considered opinion that the Tribunal has
not committed any error in cancelling
the penalty imposed under Section 28
(1)(c) of the Act.
Case law discussed:
(1962) 46 ITR 452
(1870) 76 ITR 653
(1967) 65 ITR 491
(1970) 75 ITR 698
(Delivered by Hon'ble R.K. Agrawal, J.)

1. The Income Tax Appellate
Tribunal, Allahabad has referred the
following questions of law under Section
256(2) of the Income Tax Act, 1961,
hereinafter referred to as the Act, for
opinion to this Court.

"(1) Whether on the facts and in the
circumstances
of
the
case,
the
penalty under section 28(1)(c) has
rightly
been
cancelled
by
the
Tribunal?

(2) Whether on the facts and in the
circumstances
of
the
case,
the
Tribunal is justified in ignoring the
reasonable cause for inordinate delay
in imposing penalty under section 28
(1)(c) and in holding that the case of
the assessee falls within the purview
of the decisions of the Hon'ble High
Court in the case of Ram Kishan
Baldeo Prasad Vs. CIT(65 I.T.R.-
491) and in the case of Bisheshwar
Lal Vs. ITO(75 ITR-698)?"

Briefly stated the facts giving rise to
the present Reference are as follows:-

2. The reference relates to the
Assessment Year 1947-48. The Income
Tax Officer completed the assessment for
the aforementioned assessment year under
Section 23(3)/34 of the Indian Income
Tax Act, 1922, hereinafter referred to as
the Act of 1922 on 28th March, 1956. The
status of the respondent was taken as
HUF. The addition of Rs.1,20,000/- was
added to the total income. The Income
Tax Officer initiated the proceedings
under Section 28(1)(c) under the Act of
1922. He imposed a sum of Rs.50,000/- as
penalty vide order dated 7.12.1976.
598 INDIAN LAW REPORTS ALLAHABAD SERIES [2006
Feeling
aggrieved
the
respondent
preferred an appeal before the Appellate
Assistant Commissioner, who deleted the
penalty on the ground that there was an
inordinate delay in the imposition of
penalty inasmuch as the assessment was
made on 28th March, 1956 while the
penalty was imposed on 7.12.1976. The
Revenue feeling aggrieved preferred an
appeal before the Income Tax Appellate
Tribunal, Allahabad. The two members
differed in their views. The Accountant
Member was of the view that the order
cancelling the order passed by the
Appellate Assistant Commissioner has to
be restored whereas the Judicial Member
disagreeing with the conclusion of the
Accountant
Member
held
that
the
proceedings have been unduly delayed by
the Income Tax Officer for about 20 years
and, therefore, the respondent-assessee
was entitled to claim cancellation of the
penalty imposed. As there was difference
of opinion, the matter was referred to the
third Member. The third Member dealt
with the different aspects of the matter
and agreed with the view expressed by the
Judicial Member to the effect that for the
inordinate delay there was no explanation
and, therefore, the penalty has rightly
been cancelled. The Tribunal has passed
the order in conformity with the opinion
expressed by the third Member and had
upheld the order passed by the Appellate
Assistant Commissioner cancelling the
penalty.

3. We have heard Sri Shambhoo
Chopra,
learned
Standing
Counsel
appearing for the Revenue and Sri V.K.
Upadhyay, learned counsel appearing for
the respondent.

4. The learned counsel for the
Revenue
submitted
that
there
was
sufficient explanation for the inordinate
delay in imposition of penalty and,
therefore, it could not have been cancelled
only on the ground of the order having
been passed after more than 20 years.
According to him, this was a case where
the total income itself and the tax thereon
was the subject matter of multifarious
proceeding by way of appeal to the
Appellate Assistant Commissioner, to the
Appellate Tribunal, revision before the
Commissioner and various rectifications
arising out of the appellate orders in the
case of the company of which the
respondent was a shareholder and change
in the total income and consequently the
respondent's share therefrom the various
firms of which the respondent was a
partner as a result of the appellate orders
in the case of the company and firms. He
further submitted that penalty under
Section 28 (1)(c) of the Act of 1922
depended on the amount of income tax
and super tax which would have been
avoided if the income as returned had
been accepted as the correct income and
this figure could not be determined till the
total income and the tax thereon was
finally worked out. He further submitted
that the last order was passed on 2nd
February,
1975
and
in
these
circumstances, if the penalty was imposed
on 7th December, 1976, the delay in the
imposition of the penalty cannot be said
to be without reasonable cause. He,
therefore, submitted that no adverse
inference can be drawn on account of the
mere so called inordinate delay in the
imposition of the penalty.

5. Learned counsel appearing for the
respondent, however, submitted that the
assessment order having been passed on
28th March, 1956 and the penalty order
having been passed on 7th December,
2 All] The Commissioner of Income Tax V. Shri Padampat Singhania
599
1976, there was an inordinate delay of
more than 20 years and, therefore, the
Tribunal has rightly upheld the order
passed
by
the
Appellate
Assistant
Commissioner cancelling the penalty. He
submitted that reliance placed by the
learned counsel for the Revenue on the
various proceedings, which did not relate
to the respondent, would not come to his
rescue for explaining the delay. He
further submitted that the Tribunal had
not committed any illegality.

6. Having heard the learned counsel
for the parties we find that the facts are
not in dispute. The assessment order for
the
Assessment
Year
1947-48
was
admittedly passed on 31st March, 1956
and the penalty proceeding was also
initiated
during
the
course
of
the
assessment proceedings. However, the
penalty was imposed vide order dated
7.12.1976 i.e. after more than 20 years. It
is not clear from the record as to whether
any proceeding in respect of the present
respondent was continued upto the year
1976 or not. Even though no period of
limitation for imposing the penalty under
the Act of 1922 had been provided but
action for imposing penalty is to be within
a reasonable time. The imposition of
penalty after more than 20 years cannot
be said to be justified. This Court in the
case of Mohd. Atiq v. Income-Tax
Officer, District II(V), Kanpur, (1962) 46
ITR 452 has held that even though no
period of limitation is prescribed for
imposing penalty, proceedings for levy of
penalty must be taken within a reasonable
time. Where proceedings for levy of
penalty for non-compliance with notices
issued under sub-sections (2) and (4) of
Section 22 of the Act of 1922 were taken
after the expiry of about fourteen years,
this Court has held that there was
unreasonable delay in commencing the
proceedings
and
consequently
the
proceedings were quashed. Similar view
has been taken by this Court in the case of
Income-Tax
Officer,
Gonda
v.
Bisheshwar Lal, (1970) 76 ITR 653.

7. In the case of Bharat Steel Tubes
Ltd. & Anr. v. The State of Haryana &
Anr., JT 1988(2) S.C.320 the Apex Court
has held that in absence of any prescribed
period of limitation, the assessment has to
be completed within a reasonable period.
What such reasonable period would be,
would depend upon facts of each case.

8. In the Case of Ram Kishan
Baldeo Prasad v. Commissioner of
Income-tax, U.P., (1967) 65 ITR 491,
this court has held that even though no
period of limitation has been prescribed
for imposing a penalty, and a penalty in
respect of the assessment year 1945-46
could have been imposed in August,
1957, propriety required the changed
circumstances
to
be
taken
into
consideration and the responsibility for
the inordinate delay should be considered
and fastened before levying the penalty or
upholding it. This Court had also referred
the decision in the case of Mohd. Atiq
(supra) and had held that where there is
no prescribed period of limitation, the
delay can only be factor, albeit a very
relevant
factor,
to
be
taken
into
consideration in determining the propriety
of the order and where the assessee is not
to blame for the inordinate delay in
completing penalty proceedings and the
sword of Damocles has been kept hanging
over his head for many a year without any
rhyme or reason., it will certainly be a
factor, amongst others, for the Tribunal to
consider whether the order passed by the
Income-tax Officer was a proper one.
600 INDIAN LAW REPORTS ALLAHABAD SERIES [2006
9. In the case of Bisheshwar Lal v.
Income Tax Officer, Gonda, (1970) 75
ITR 698, this Court had quashed the
penalty notices which were issued to the
petitioner between 1949 and 1961 in
respect of the assessment years 1944-45,
1945-46, 1946-47 and 1948-49 were kept
pending till 1963 holding that as the
department did not explain why the
proceedings could not be completed
during the interval of 14 years, the
proceedings were vexatious and amounted
to an abuse of the powers conferred on the
Income-tax Officer under Section 28
(1)(c) of the Act of 1922.

10. Applying the principles laid
down in the aforesaid cases to the facts of
the present case, we find that by no
stretch of imagination long period of 20
years can be said to be a reasonable time
for imposing penalty. The explanation
given
by
the
Department
for
the
inordinate delay did not amount to
reasonable cause. In this view of the
matter, we are considered opinion that the
Tribunal has not committed any error in
cancelling the penalty imposed under
Section 28 (1)(c) of the Act.

11. In view of the forgoing
discussion, we answer both the questions
referred to us in the affirmative i.e. In
favour of the assessee and against the
Revenue. However, there shall be no
order as to costs.
---------
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 01.02.2006

BEFORE
THE HON'BLE VINEET SARAN, J.

Civil Misc. Writ Petition No. 36498 of 2003

Narendra Singh and others ...Petitioners
Versus
State of U.P.and others ...Respondents

Counsel for the Petitioners:
Sri Sunil Kumar Srivastava
Sri Vishnu Priya

Counsel for the Respondents:
S.C.

Indian Stamp Act-Section 37/47A-Stamp
duty at the time of execution of sale
deed-petitioner
supplied
stamp
duty
much and more than what actually
required-demand of additional amount
alongwith penalty of Rs.10000/- on
assumption that in future the building
shall be used for commercial purposeheld-not justified in changing more
stamp duty that what has been already
given.

Held: Para 5

Merely on surmises that the said land
may be used for commercial purposes,
the value of the transaction has been
enhanced and deficiency of stamp duty
has been assessed, on which penalty has
also been directed to be paid. In the
absence of any proof of the petitioner
having paid a higher amount than that
shown in the sale deed or that as per the
circle rate for residential plot, the
respondents are not justified in charging
more stamp duty than that what has
already been paid.