NARASIMHAM C.J. - This is a reference under section 66(2) of the Indian Income-tax Act, 1922, made by the Income-tax Tribunal, Patna, referring the following question for the opinion of this court :
'Whether on the facts and circumstances of the case the penalty order passed by the Income-tax Officer under section 28(1)(c) of the Income-tax Act, 1922, on January 31,1958, in respect of the assessment year 1946-47 was bad in law ?'
The material facts found by the Tribunal are as follows : The assessment proceedings were completed on October 31,1950. Thereupon, a notice under section 28(3) of the Act was issued to the assessee to show cause why penalty may not be levied for the concealment of some income.
'A fresh notice was again issued to him on April 1,1955, and the matter was posted for hearing on April 13,1955. It was again adjourned to April 25,1955, on which date the Income-tax Officer merely directed that orders will be passed on receipts of the records. Nothing was done for nearly two years and on January 28,1957, the officer fixed the case for hearing on September 11,1957. and after obtaining the explanation from the assessment levied penalty on January 31,1958. It should be further noted that the assessee did not file any appeal against the order of assessment dated October, 31,1950, which became therefore final long before the penalty proceedings were disposed of.
The learned tribunal held that there was unconscionable delay in passing order on the penalty proceedings. It relied on some observations in Mohd. Atiq v. Income-tax officer and thought that mere unconscionable delay in completing the penalty proceedings may render the penalty order bad, though the tribunal was also conscious of the fact that no special time limit was prescribed in the Act for passing an order of penalty, Ultimately, the Tribunal passed the following order :
'There being no special circumstances for the considerable delay which has taken place in completing the order of penalty we would hold that the penalty order is bad in law and vacate the same.'
The learned Tribunal has clearly misconstrued the judgment of the Allahabad High Court in Mohd. Atiq v. Income-tax Officer. There the learned judge while rightly pointing out that there is no period of limitation for imposing the order of penalty observed that as penalty proceedings were in the nature of criminal or quasi criminal proceedings such proceedings should be taken within a reasonable time and the delay of 14 years (which was found to have taken place in that case) was not only unreasonable but fantastic. But the learned judge did not say that merely on the ground of unreasonable delay the order of penalty would be bad. On the other hand he examined the facts of the case and came to the following conclusion :
'I am not satisfied that in this case the income-tax department proved it beyond doubt that a default had necessarily been committed by the petitioner in regard to the filling of a return. For these reasons I am of the view that the impugned order of penalty is bad and must be set aside.'
From the aforesaid passage it will be clear that the learned judge held the order of penalty to be bad because the department had not established beyond reasonable doubt that there was a default committed by the assessee in filing returns. He has nowhere stated that the order was bad solely because of the unconscionable delay..
It is well settled that a rule of limitation must be expressly provided in a statute and cannot be inferred merely on account of unreasonable delay. Once it is conceded that in the Indian Income-tax, 1922(which provides for special rules of limitations for the various proceedings under that Act) there is no express provision prescribing the period within which an over of penalty should be passed, no such order can be held to be bad in law merely because of the inordinate delay. Mr. D. Mohanty for the department rightly invited my attention to an earlier decision of the Lahore High Court in Vir Bhan Bansi Lal v. Commissioner of Income-tax [1938] 6 I.T.R. 616, where the learned judge held on a construction of section 28 of the Act that no period of limitation can be even impliedly inferred from the other provisions contained in that section.
But as the Tribunal is the final appellate authority over orders passed by an Income-tax Officer, it had undoubtedly jurisdiction to set aside the order of penalty, if after taking all the facts and circumstances of the case into consideration, it was of the view that the penalty should not have been imposed. The question is mainly one of propriety and not of law, and as the final court of appeal the Tribunal could exercise all the powers which the original taxing authority had. But this reference was necessitated because the order of penalty was set aside solely on the ground that it was bad in law, and for the reasons already given above this view of the Tribunal was based on a misconception.
The question is accordingly answered in the negative, but there will be no order for costs.
MISRA J. - I agree.
Question answered in the negative.