1982 (4) TMI 13 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Inspecting Assistant Commissioner (IAC) to impose penalties under section 271(1)(c) of the Income-tax Act, 1961, post-amendment.
2. Validity of the penalty proceedings initiated by the Income Tax Officer (ITO) under section 271(1)(c).
3. Determination of the relevant date for assessing jurisdiction and imposition of penalties.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Inspecting Assistant Commissioner (IAC) to impose penalties under section 271(1)(c) of the Income-tax Act, 1961, post-amendment:
The crux of the issue is whether the IAC had jurisdiction to impose penalties after the amendment to section 274(2) of the Act by the Amending Act 42 of 1970, which came into force on 1st April 1971. The amendment specified that the ITO should refer the case to the IAC only if the income concealed exceeded Rs. 25,000. Since the concealed income in this case was less than Rs. 25,000, the Tribunal held that the IAC had no jurisdiction to impose the penalty. The court examined the relevant provisions of the Act and concluded that the jurisdiction of the IAC is derived from a valid reference made by the ITO. Since the reference was made on 1st March 1973, after the amendment, the IAC did not have the jurisdiction to impose the penalty.

2. Validity of the penalty proceedings initiated by the Income Tax Officer (ITO) under section 271(1)(c):
The ITO initiated penalty proceedings under section 271(1)(c) as the assessees had not declared their proportionate capital gain in their returns. The ITO referred the cases to the IAC on 1st March 1973, as the minimum penalty imposable exceeded Rs. 1,000. The IAC issued show-cause notices and eventually imposed penalties on the assessees. However, the Tribunal found that the IAC had no jurisdiction to impose penalties after the amendment to section 274(2), and thus the penalty proceedings were invalid. The court agreed with the Tribunal's decision, emphasizing that the IAC could only assume jurisdiction if the reference was validly made, which was not the case here.

3. Determination of the relevant date for assessing jurisdiction and imposition of penalties:
The court examined whether the relevant date for determining the IAC's jurisdiction was the date of the initiation of penalty proceedings or the date of the reference. The court concluded that the relevant date is the date of the reference. The court cited the Supreme Court decision in Brij Mohan v. CIT [1979] 120 ITR 1 (SC), which clarified that the law on the date of the wrongful act determines the penalty, but the authority to impose the penalty is determined by the law on the date of the reference. Since the reference in this case was made on 1st March 1973, after the amendment, the IAC did not have the jurisdiction to impose the penalty.

Conclusion:
In summary, the court held that the IAC did not have the jurisdiction to impose the penalty as the reference was made after the amendment to section 274(2) of the Act. The Tribunal's decision to cancel the penalties was upheld. The question of law was answered in the affirmative, in favor of the assessees, and they were entitled to costs.