1980 (7) TMI 7 - HC - Income Tax

Summary

Issues:
1. Jurisdiction of the Income-tax Appellate Tribunal to proceed with penalty proceedings under section 274(2) of the Income-tax Act, 1961, post the amendment effective from April 1, 1971.
2. Validity of the amendment in section 274(2) extending the time-limit for finalization of penalty proceedings.

Analysis:

Issue 1: Jurisdiction of the Income-tax Appellate Tribunal
The case involved a reference under section 256(1) of the Income-tax Act, 1961, regarding the jurisdiction of the Income-tax Appellate Tribunal (ITAT) to proceed with penalty proceedings post the amendment of section 274(2) effective from April 1, 1971. The ITAT had referred two questions of law to the High Court for its opinion. The first question pertained to whether the amendment of section 274(2) had the effect of depriving the Income-tax Appellate Commissioner (IAC) of jurisdiction to proceed with penalty proceedings for the assessment years in question where the income determined was less than twenty-five thousand rupees. The High Court, based on previous decisions, held that the amendment did not take away the IAC's jurisdiction to impose penalties even in cases where the income concealed did not exceed the specified amount. The court referred to the decision in CIT v. A. N. Tiwari and concluded that the IAC retained jurisdiction in pending references even after the amendment. Therefore, the High Court answered the first question in the negative, against the assessee.

Issue 2: Validity of the Amendment in Section 274(2)
The second question referred to the High Court was whether the amendment made in section 274(2) from April 1, 1971, extended the time-limit for finalization of penalty proceedings. The Tribunal had held in favor of the assessee on this issue. However, the High Court, citing the decision in CIT v. Fakirchand Dayaram, determined that the amendment indeed extended the period of limitation for finalization of penalty proceedings. Therefore, the High Court answered the second question in the affirmative, in favor of the Department.

In conclusion, the High Court held that the amendment in section 274(2) did not strip the IAC of jurisdiction to proceed with penalty proceedings and that the amendment extended the time-limit for finalization of penalty proceedings. As a result, the court's answers to the questions were against the assessee on the first issue and in favor of the Department on the second issue. The parties were directed to bear their own costs in this reference.