1982 (2) TMI 18 - HC - Income Tax

Summary

Issues:
1. Jurisdiction of the IAC to impose penalty after the amendment in s. 274(2) of the Income Tax Act.
2. Timeliness of the petition challenging the orders of the IAC and the Income-tax Appellate Tribunal.

Analysis:

1. Jurisdiction of the IAC:
The case revolved around the jurisdiction of the Inspecting Assistant Commissioner (IAC) to impose a penalty after the amendment in s. 274(2) of the Income Tax Act. The petitioner argued that the IAC had lost jurisdiction to impose any penalty after the amendment came into effect on April 1, 1976. The court referred to a previous ruling in CIT v. Om Sons [1979] 116 ITR 215 (All), emphasizing that a court or tribunal must not only possess jurisdiction initially but also have the power to decide the matter when the final order is passed. The court concluded that the IAC had lost jurisdiction to impose the penalty after the amendment, rendering the penalty imposed invalid.

2. Timeliness of the Petition:
The Department contended that the petition was belated, as the IAC's order was passed in January 1977, and the Tribunal's order in September 1978. However, the petitioner provided a plausible explanation for the delay, stating that incorrect legal advice led to the appeal being filed with the Tribunal instead of approaching the court directly. The court acknowledged the petitioner's bona fide mistaken legal advice and allowed the petition, noting that the petitioner should not be penalized for the delay due to the wrong procedure adopted. Additionally, the court highlighted that the order of the IAC being wholly without jurisdiction provided the petitioner with the right to challenge it whenever enforced, justifying the timeliness of the petition.

In conclusion, the court upheld the petitioner's challenge, quashing the orders of the IAC and the Income-tax Appellate Tribunal. The court ruled in favor of the petitioner, emphasizing the loss of jurisdiction by the IAC post-amendment and considering the reasonable explanation for the delayed petition filing. The parties were directed to bear their own costs, and the petitioner's petition was allowed.