1987 (8) TMI 72 - HC - Income Tax

Summary

Issues: Jurisdiction of Inspecting Assistant Commissioner to levy penalty under section 271(1)(c) of the Income-tax Act, 1961.

The judgment pertains to a reference under section 256(1) of the Income-tax Act, 1961, to determine if the Tribunal was justified in canceling the penalty levied under section 271(1)(c) by the Inspecting Assistant Commissioner. The case involves the assessment year 1973-74, where the Income-tax Officer included an amount in the returned income and initiated penalty proceedings. The Inspecting Assistant Commissioner imposed the penalty on March 23, 1978, after a show-cause notice on March 1, 1978. The assessee argued that the amendment deleting sub-section (2) of section 274 in the Income-tax Act divested the Inspecting Assistant Commissioner of jurisdiction to levy the penalty post-April 1, 1976. The Tribunal accepted this contention, prompting the Revenue to seek a reference.

The judgment refers to the impact of deleting sub-section (2) of section 274 from April 1, 1976, as discussed in CIT v. Shri Ram Prakash, Saraf [1986] 160 ITR 860 (MP). It establishes that the date of reference to the Inspecting Assistant Commissioner by the Income-tax Officer is crucial, not the initiation date of penalty proceedings. Only references made before April 1, 1976, are valid. The Tribunal's decision was based on the initiation date of penalty proceedings, not the reference date, necessitating a fresh decision by the Tribunal.

The High Court emphasizes that the Tribunal erred in determining the Inspecting Assistant Commissioner's jurisdiction based solely on the penalty imposition date. The correct approach is to consider the date of reference by the Income-tax Officer to the Inspecting Assistant Commissioner. The Tribunal is directed to reevaluate the matter in line with this principle. The judgment concludes by stating that the Tribunal must reconsider the issue with regard to the date of reference, highlighting its importance in determining the Inspecting Assistant Commissioner's jurisdiction to levy the penalty.

In summary, the judgment clarifies the significance of the date of reference by the Income-tax Officer to the Inspecting Assistant Commissioner in determining the latter's jurisdiction to impose a penalty under section 271(1)(c) of the Income-tax Act, 1961. It underscores that references made after April 1, 1976, are invalid, and the Tribunal must reconsider the matter considering this crucial factor.