1985 (8) TMI 51 - HC - Income Tax

Summary

Issues:
1. Jurisdiction of the Inspecting Assistant Commissioner to impose penalty under section 271(1)(c) read with section 274(2) of the Income-tax Act, 1961.
2. Validity of the penalty order passed by the Inspecting Assistant Commissioner.

Analysis:

Issue 1: Jurisdiction of the Inspecting Assistant Commissioner
The case involved a reference under section 256(1) of the Income-tax Act, 1961, to decide whether the Tribunal was correct in holding that the Inspecting Assistant Commissioner acted without jurisdiction in passing the penalty order under section 271(1)(c) read with section 274(2) of the Act. The dispute arose from a search conducted in the assessee's premises in 1974, leading to the Income-tax Officer initiating penalty proceedings against the assessee for concealing income. The Inspecting Assistant Commissioner imposed a penalty of Rs. 80,000 under section 271(1)(c) read with section 274(2) in 1978. The Tribunal accepted the assessee's contention that the Inspecting Assistant Commissioner lacked jurisdiction post-amendments from April 1, 1976. The court analyzed the relevant provisions and concluded that the Income-tax Officer's reference to the Inspecting Assistant Commissioner after the 1976 amendments was unnecessary. The court emphasized that the law applicable was post-amendment, where the Income-tax Officer was empowered to impose penalties with the Inspecting Assistant Commissioner's approval for income concealment exceeding Rs. 25,000.

Issue 2: Validity of the Penalty Order
The court referred to previous decisions, including CIT v. A. N. Tiwari, to support its conclusion that the date of making the reference, not the initiation of penalty proceedings, was crucial in determining the validity of the Inspecting Assistant Commissioner's jurisdiction. Citing Addl. CIT v. Nand Kishore and CIT v. Fakirchand Dayaram, the court upheld the Tribunal's decision, ruling in favor of the assessee. The court held that the Inspecting Assistant Commissioner lacked jurisdiction to impose the penalty under section 271(1)(c) read with section 274(2) of the Income-tax Act, 1961, based on the post-amendment provisions. Consequently, the court answered the reference in favor of the assessee and against the Revenue, stating that the Tribunal was justified in its decision regarding the Inspecting Assistant Commissioner's jurisdiction. As a result, the court did not address the first question posed in the reference, and each party was ordered to bear their own costs.