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Issues Involved:
1. Applicable Law for Penalty Imposition 2. Jurisdiction of the Inspecting Assistant Commissioner Issue-wise Detailed Analysis: 1. Applicable Law for Penalty Imposition: The primary issue was whether the penalty provisions applicable are those in force on the date the return was filed or those in force on the first day of the assessment year. The Tribunal held that the relevant law for imposing a penalty is the one in force on the date the return was filed. This was contested by the assessee, who argued that the law applicable should be the one in force during the assessment years 1966-67 and 1967-68, not the amended law effective from April 1, 1968. The Tribunal's decision was based on the precedent set by the Supreme Court in Brij Mohan v. CIT [1979] 120 ITR 1, which stated that the law in relation to the quantum of penalty is the law existing on the date of concealment of income, i.e., the date of filing the return. Therefore, the Tribunal's application of the law as it stood on April 10, 1969, was justified. 2. Jurisdiction of the Inspecting Assistant Commissioner: The second issue was whether the Inspecting Assistant Commissioner had the jurisdiction to impose penalties on February 22, 1972, given the amendments to section 274(2) of the Income-tax Act by the Taxation Laws (Amendment) Act, 1970, effective from April 1, 1971. The assessee argued that the Inspecting Assistant Commissioner had lost jurisdiction to impose penalties due to the amendment, which enlarged the jurisdiction of the Income-tax Officer to impose penalties where the concealed income did not exceed Rs. 25,000. The Tribunal initially rejected this argument, stating that the jurisdiction should be determined based on the law in force when the penalty proceedings were initiated. However, the court noted that question No. 1 framed by the Tribunal was not adequately worded to address the broader issue of jurisdiction. The court reframed the question to consider whether the Inspecting Assistant Commissioner had jurisdiction on the date of passing the orders, February 22, 1972, under the amended section 274(2). The court acknowledged the divergence of judicial opinion on this matter, with various High Courts holding different views on whether jurisdiction should be based on the date of filing the return, the date of initiation of penalty proceedings, or the date of referral to the Inspecting Assistant Commissioner. Ultimately, the court concluded that the jurisdiction of the Inspecting Assistant Commissioner should be determined based on the law in force on the date of passing the penalty orders. Since the amendment effective from April 1, 1971, had curtailed the jurisdiction of the Inspecting Assistant Commissioner in cases where the concealed income did not exceed Rs. 25,000, the Inspecting Assistant Commissioner lacked jurisdiction to impose penalties on February 22, 1972. Therefore, the court answered the reframed question in favor of the assessee, indicating that the penalties imposed by the Inspecting Assistant Commissioner were invalid due to lack of jurisdiction.
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