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Jurisdiction of Inspecting Assistant Commissioner to levy penalty under section 271(1)(c) of the Income-tax Act, 1961 based on the timing of the reference made by the Income-tax Officer. Analysis: The High Court of Rajasthan addressed a reference under section 256(1) of the Income-tax Act, 1961, regarding the jurisdiction of the Inspecting Assistant Commissioner to impose a penalty on the assessee under section 271(1)(c) of the Act. The case pertained to the assessment year 1972-73, where the Income-tax Officer added a sum to the assessee's income from undisclosed sources, leading to penalty proceedings being initiated. The Income-tax Officer referred the matter to the Inspecting Assistant Commissioner before the deletion of sub-section (2) of section 274 of the Act on April 1, 1976. Subsequently, the Inspecting Assistant Commissioner imposed a penalty on the assessee, which was challenged before the Tribunal. The Tribunal held that the Inspecting Assistant Commissioner lacked jurisdiction to levy the penalty, as sub-section (2) of section 274 had been deleted before the penalty order was passed. However, the High Court relied on precedents, including CIT v. Shri Ram Prakash Saraf, to establish that the determining factor for jurisdiction lies in the date of reference made by the Income-tax Officer to the Inspecting Assistant Commissioner, not the initiation of penalty proceedings. The Court emphasized that references pending before the Inspecting Assistant Commissioner before April 1, 1976, were valid, granting the Commissioner jurisdiction to decide on penalties. In light of the above, the High Court ruled in favor of the Revenue, overturning the Tribunal's decision on jurisdiction. The Court directed the Tribunal to reconsider the matter on its merits, as it had not done so previously. The judgment clarified the significance of the date of reference in determining the Inspecting Assistant Commissioner's jurisdiction to levy penalties under the Income-tax Act, 1961.
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