1996 (1) TMI 28 - HC - Income Tax

Summary

Issues:
Jurisdiction to levy penalty under section 271(1)(c) of the Income-tax Act, 1961.

Analysis:
The case involved a dispute regarding the jurisdiction to levy a penalty under section 271(1)(c) of the Income-tax Act, 1961. The assessee, engaged in the purchase and sale of standard gold jewellery and silver articles, filed a return disclosing an income of Rs. 2,105 for the assessment year 1970-71. The Income-tax Officer determined the total income at Rs. 25,510, including additions for deficiency in gross profit and cash balance, and initiated penalty proceedings. The assessee contended that the Income-tax Officer had no jurisdiction to levy the penalty and that only the Inspecting Assistant Commissioner could do so, based on the amended provisions of section 274(2) introduced in 1971. The Appellate Assistant Commissioner rejected this argument, considering the amendment as procedural and upheld the Income-tax Officer's jurisdiction.

The assessee then appealed to the Tribunal, relying on a decision of the Madras High Court and contending that the Income-tax Officer lacked jurisdiction to levy the penalty. The Tribunal, following a decision of the Orissa High Court, held in favor of the assessee, stating that the Income-tax Officer did not have the authority to impose the penalty. However, the High Court disagreed with the Tribunal's decision, citing a Supreme Court ruling that emphasized the authority to impose a penalty based on the law applicable at the time of the offense. The High Court held that the Income-tax Officer had the jurisdiction to levy the penalty under section 271(1)(c) and directed the Tribunal to dispose of the appeal on its merits.

The High Court's decision was based on the principle that the authority to impose a penalty should be determined based on the law in effect at the time of the offense. The court emphasized that the Income-tax Officer had the jurisdiction to levy the penalty under section 271(1)(c) of the Income-tax Act, 1961. The court directed the Tribunal to reconsider the appeal on its merits after providing the assessee with an opportunity to be heard. Consequently, the question of jurisdiction was answered in the negative, favoring the Department, and no costs were awarded in the case.