1984 (1) TMI 7 - HC - Income Tax

Summary

Issues:
Jurisdiction of the Inspecting Assistant Commissioner to impose a penalty under section 271(1)(c) of the Income-tax Act, 1961 after the deletion of section 274(2) by the Taxation Laws (Amendment) Act, 1975.

Analysis:
The case involved a reference under section 256(1) of the Income-tax Act, 1961, where the Tribunal referred the question of whether the order of the Inspecting Assistant Commissioner imposing a penalty under section 271(1)(c) was valid. The assessee, an individual, had concealment of income in the assessment year 1973-74, leading to penalty proceedings initiated by the Income-tax Officer. The matter was referred to the Inspecting Assistant Commissioner, who imposed a penalty of Rs. 30,000. The assessee appealed, arguing that the Inspecting Assistant Commissioner had no jurisdiction to impose the penalty after the deletion of section 274(2) by the Taxation Laws (Amendment) Act, 1975.

Upon review, the Tribunal upheld a penalty of Rs. 6,000 only, rejecting the jurisdictional argument. The case was then referred to the High Court, which directed the Tribunal to provide additional information on the date of the referral to the Inspecting Assistant Commissioner. It was revealed that the referral was made on January 4, 1978, after the deletion of section 274(2) on April 1, 1976. The High Court considered a similar provision under the Wealth-tax Act and held that the jurisdiction of the Inspecting Assistant Commissioner arises upon a valid reference. Since the reference in this case was made after the deletion of the relevant provision, the High Court concluded that the Inspecting Assistant Commissioner lacked jurisdiction to impose the penalty.

Therefore, the High Court held that the Inspecting Assistant Commissioner had no jurisdiction to impose the penalty under section 271(1)(c) due to the invalid reference made after the deletion of section 274(2). The court ruled in favor of the assessee, holding the penalty order as bad in law. The parties were directed to bear their own costs in this reference.