1984 (3) TMI 53 - HC - Income Tax

Summary

Issues:
Jurisdiction of the IAC to impose penalty under amended provisions of law effective from April 1, 1976.

Analysis:
For the assessment year 1971-72, the ITO found that the assessee had concealed an income of Rs. 40,000 and referred the case to the IAC, Ludhiana Range, for imposing a penalty as the concealed income exceeded Rs. 25,000. The IAC imposed a penalty of Rs. 20,000 on the assessee. The assessee contended that the ITO had the jurisdiction to impose an unlimited penalty from April 1, 1976, rendering the IAC's order without jurisdiction. The Tribunal referred the question of the IAC's competency in law to impose the penalty under the amended provisions effective from April 1, 1976. A Division Bench considered a similar issue in a previous case and held that penalty proceedings are initiated by the ITO, and the question of jurisdiction arises at that point. The court disagreed with the view that penalty proceedings are initiated only when a reference is made under s. 274(2) of the Act, stating that the initiation occurs when the ITO passes an order for penalty proceedings. The court emphasized that the jurisdiction of the authority to pass the penalty order must be determined according to the prevailing provisions of law unless the amendment is retrospective. The court upheld this view and answered the question against the assessee and in favor of the Revenue.

This judgment clarifies that the initiation of penalty proceedings occurs when the ITO passes an order for penalty, and the jurisdiction of the authority to pass the penalty order must be determined based on the prevailing provisions of law. The court emphasized that the amendment to the law must be retrospective to affect the jurisdiction of the authority. The decision reinforces the principle that the moment penalty proceedings are initiated, the question of jurisdiction arises, and the authority's jurisdiction must align with the prevailing legal provisions unless there is a retrospective amendment. The court's analysis highlights the importance of understanding the procedural and jurisdictional aspects of penalty imposition in income tax cases and emphasizes adherence to the prevailing legal framework in determining jurisdiction.