1985 (5) TMI 7 - HC - Income Tax

Summary

Issues:
Jurisdiction of Inspecting Assistant Commissioner to levy penalties under amended provisions of sections 274 and 275 of the Income-tax Act, 1961.

Detailed Analysis:

The judgment involves a reference under section 256(1) of the Income-tax Act, 1961, regarding the jurisdiction of the Inspecting Assistant Commissioner to impose penalties. The specific question referred was whether the Tribunal was correct in holding that the Inspecting Assistant Commissioner lacked jurisdiction to levy penalties in light of the amended provisions of sections 274 and 275 of the Act effective from April 1, 1971. The case pertained to an individual assessee, a contractor executing contracts in the Division of Koshi Project, for the assessment years 1967-68 and 1968-69. The original assessments were completed in 1970, but later it was discovered that certain payments were not disclosed by the assessee, leading to penalty proceedings under section 271(1)(c) initiated by the Income-tax Officer.

The Income-tax Officer referred the penalty matter to the Inspecting Assistant Commissioner on March 31, 1971, before the amendment of section 274(2) of the Act, which increased the jurisdiction of the Income-tax Officer to impose penalties up to Rs. 25,000. The Inspecting Assistant Commissioner was then authorized to impose penalties only above Rs. 25,000. Subsequently, penalties were imposed by the Inspecting Assistant Commissioner after the quantum appeal was disposed of by the Appellate Assistant Commissioner. The Tribunal, however, deleted the penalties, stating that the Inspecting Assistant Commissioner lacked jurisdiction to impose penalties below Rs. 25,000. The Revenue appealed, leading to the reference to the High Court.

The High Court referred to previous judgments on similar issues and concluded that once jurisdiction was conferred, it could not be divested in the absence of a specific provision to the contrary. The Court relied on earlier decisions to uphold that the Inspecting Assistant Commissioner retained the power to impose penalties below Rs. 25,000. The Court rejected the argument for a larger Bench consideration due to consistent views in previous cases. The judgment emphasized that the Inspecting Assistant Commissioner had the authority to levy penalties despite the amended provisions of section 274 of the Act.

In conclusion, the High Court ruled in favor of the Revenue, stating that the Inspecting Assistant Commissioner had the jurisdiction to impose penalties as per the provisions of the Act. The Tribunal's decision was deemed incorrect, and the reference was answered in favor of the Revenue. No costs were awarded in the case.