1988 (12) TMI 81 - HC - Income Tax

Summary

Issues: Imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961 after the deletion of section 274(2) of the Act by the Taxation Laws (Amendment) Act, 1975.

Analysis:

The judgment delivered by S. S. Sodhi J. pertains to the imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961, after the deletion of section 274(2) of the Act by the Taxation Laws (Amendment) Act, 1975. The case involved an assessment finalization by the Income-tax Officer on April 15, 1974, for the year 1963-64, with a subsequent reference made on January 31, 1978, to the Inspecting Assistant Commissioner for penalty imposition due to concealed income exceeding Rs. 25,000. The Inspecting Assistant Commissioner levied a penalty of Rs. 42,339 under section 271(1)(c) of the Act, which was later deleted by the Tribunal on the grounds of jurisdictional issues post the amendment in 1975. The questions of law referred to the court revolved around the Tribunal's cancellation of the penalty order and the initiation of penalty proceedings by the Income-tax Officer before the amendment came into effect.

The court relied on the decision of the Full Bench in CIT v. Mohinder Lal [1987] 168 ITR 101 to address the issues at hand. In the Mohinder Lal case, it was established that the Inspecting Assistant Commissioner's jurisdiction was not divested by the amendment with effect from April 1, 1976. The court emphasized that the reference to the Inspecting Assistant Commissioner and his assumption of jurisdiction were deemed to have occurred when the Income-tax Officer completed the assessment and identified concealed income exceeding Rs. 25,000. Therefore, the initiation of penalty proceedings before the amendment was considered valid, and the Inspecting Assistant Commissioner was deemed competent to levy the penalty.

During the proceedings, Mr. B. S. Gupta, representing the assessee, argued for a reconsideration of the Full Bench decision in light of a contrary view taken by the High Court of Kerala in CIT v. P. I. Issac [1987] 168 ITR 793. However, the court declined to reconsider and chose to follow its own Full Bench judgment in Mohinder Lal's case. Consequently, the reference was answered in the negative, favoring the Revenue and against the assessee. No costs were awarded in this matter.