1991 (5) TMI 12 - HC - Wealth-tax

Summary

Issues:
1. Jurisdiction of the Inspecting Assistant Commissioner to pass penalty orders under section 18(1)(c) of the Wealth-tax Act.
2. Impact of the amendment brought about by the Taxation Laws (Amendment) Act, 1975, on the jurisdiction of the Inspecting Assistant Commissioner.
3. Validity of penalty orders passed by the Inspecting Assistant Commissioner after losing jurisdiction.

Analysis:
The judgment pertains to a reference under section 27(1) of the Wealth-tax Act, 1957, regarding the jurisdiction of the Inspecting Assistant Commissioner to pass penalty orders under section 18(1)(c) of the Act. The issue arose in the context of penalty orders imposed for the assessment years 1969-70 and 1970-71. The Inspecting Assistant Commissioner passed composite penalty orders under section 18(1)(c)(iii) read with sub-section (3) of section 18. However, the Income-tax Appellate Tribunal, in response to the assessee's objection, held that the penalty orders were without jurisdiction due to an amendment in the Act's provisions. The Tribunal, relying on precedent, concluded that the Inspecting Assistant Commissioner lacked the authority to impose penalties post the amendment brought about by the Taxation Laws (Amendment) Act, 1975, effective from April 1, 1976.

The judgment draws parallels with a previous case, CIT v. On Sons, where a similar issue arose under the Income-tax Act, 1961. The court in that case emphasized that a deciding authority must not only have initial jurisdiction but also the power to decide the matter at the final order stage. Following this principle, the court held that the Inspecting Assistant Commissioner, after losing jurisdiction due to an amendment, was not competent to pass penalty orders. This reasoning was applied to the present case, emphasizing that the Inspecting Assistant Commissioner, post the amendment, lacked the authority to impose penalties under section 18(1)(c) of the Wealth-tax Act.

The judgment further cites the decision of the Orissa High Court in CWT v. K. Narayan Rao, which supported the view that the Inspecting Assistant Commissioner lost jurisdiction to pass penalty orders post the amendment by the Taxation Laws (Amendment) Act, 1975. The Orissa High Court case involved penalty proceedings initiated by the Wealth-tax Officer, where the Inspecting Assistant Commissioner was deemed to lack jurisdiction due to the amendment, leading to the cancellation of penalties.

In conclusion, the court answered the reference question affirmatively in favor of the assessee and against the Department, holding that the Inspecting Assistant Commissioner had no power to pass the penalty orders under section 18(1)(c) of the Wealth-tax Act post the amendment. The assessee was awarded costs amounting to Rs. 250.