1995 (10) TMI 14 - HC - Income Tax

Jurisdiction To Levy Penalty, Law Applicable To Assessment, Levy Of Penalty, Penalty Proceedings

Summary

Issues:
1. Jurisdiction of the Inspecting Assistant Commissioner to levy penalty under section 271(1)(c) after the amendment of the law.
2. Whether the Tribunal was correct in canceling the penalty on the question of jurisdiction.
3. Whether the Tribunal should be directed to dispose of the penalty appeal on the merits.

Detailed Analysis:
Issue 1: The primary issue in this case revolves around the jurisdiction of the Inspecting Assistant Commissioner to levy a penalty under section 271(1)(c) of the Income-tax Act, 1961, after the amendment of the law. The Tribunal held that the Inspecting Assistant Commissioner had no jurisdiction to levy penalty after April 1, 1976, due to the amended provisions of the Taxation Laws (Amendment) Act, 1975. However, the Department argued that the reference was validly made before the amendment came into force, thus giving the Inspecting Assistant Commissioner jurisdiction. The High Court, relying on precedents, held that the Inspecting Assistant Commissioner did have jurisdiction to pass an order levying penalty under section 271(1)(c) on March 30, 1977, despite the amendment. The court emphasized that the crucial factor was when the reference was initiated, and as it was before the amendment, the jurisdiction was valid.

Issue 2: The Tribunal had canceled the penalty based on the question of jurisdiction, which was found to be incorrect by the High Court. The Tribunal had considered the behavior of the assessee before the Department but concluded that the penalty could not be sustained on a legal ground. The High Court disagreed with the Tribunal's decision to cancel the penalty solely based on jurisdiction. It held that the penalty was exigible due to the behavior of the assessee, even though the Tribunal had canceled it on jurisdictional grounds.

Issue 3: The counsel for the assessee requested the High Court to direct the Tribunal to dispose of the penalty appeal on the merits since the High Court found the cancellation of the penalty on jurisdictional grounds to be incorrect. However, the High Court noted that the assessee had not filed any reference application against the levy of penalty on the merits. The High Court highlighted that the assessee could have preferred a cross-question in the reference application filed by the Department before the Tribunal but failed to do so. Consequently, the High Court declined to direct the Tribunal to reconsider the penalty appeal on the merits, and no costs were awarded in this regard.