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Issues:
- Jurisdiction of the Inspecting Assistant Commissioner to levy penalty under section 271(1)(c)/274(2) of the Income-tax Act, 1961. - Applicability of the law prevailing on the date of filing the original return for determining the quantum of penalty. - Interpretation of provisions regarding the minimum penalty imposable in penalty proceedings. Analysis: The judgment pertains to income-tax references for the assessment years 1957-58 and 1958-59, involving a common question regarding the jurisdiction to levy penalties under section 271(1)(c)/274(2) of the Income-tax Act, 1961. The case involves reassessment proceedings initiated by the Income Tax Officer (ITO) under section 147(a) due to alleged non-disclosure of material facts by the assessee. The ITO completed the assessments on December 31, 1968, for both years, including an admitted addition to the income. Subsequently, penalty proceedings were initiated, and the Inspecting Assistant Commissioner (IAC) imposed penalties equal to the concealed income for each year. The dispute arose when the Income-tax Appellate Tribunal set aside the penalties for the assessment years 1957-58 and 1958-59, stating that the minimum penalties imposable were less than Rs. 1,000 for each year, falling within the jurisdiction of the ITO. The Tribunal's decision was challenged by the Commissioner, leading to the current legal proceedings. The core argument presented was whether the penalties imposed by the IAC were within jurisdiction, considering the provisions of the Income-tax Act in force at the relevant times. The applicant contended that the minimum penalty imposable exceeded Rs. 1,000, mandating the reference to the IAC. However, the court disagreed, emphasizing that the applicable law for determining penalties is that prevailing on the date of filing the original return. The court cited precedents and clarified that the penalty quantum should align with the law at the time of the original return, not subsequent filings or assessment completions. Furthermore, the court addressed the procedural aspect raised by the Department, highlighting that the ITO's decision should align with the correct legal position prevailing at the time of reference to the IAC. The court emphasized that the validity of the reference hinges on the minimum penalty imposable, which, in this case, was below Rs. 1,000 based on the relevant statutory provisions. Ultimately, the court upheld the Tribunal's decision, ruling that the penalties levied by the IAC were without jurisdiction. The judgment favored the assessee, affirming that the minimum penalty imposable was below Rs. 1,000, thus falling within the ITO's jurisdiction. The court answered the referred question in favor of the assessee, citing the proper interpretation of the statutory provisions prevailing at the time of the penalty proceedings.
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