1980 (4) TMI 51 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Inspecting Assistant Commissioner (IAC) to levy penalty after the amendment.
2. Whether the penalty order dated September 22, 1976, was barred by limitation.
3. Validity of the penalty amount upheld by the Tribunal.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Inspecting Assistant Commissioner (IAC) to Levy Penalty:

The primary issue was whether the IAC had jurisdiction to levy the penalty after the amendments brought by the Taxation Laws (Amendment) Act, 1975, effective from April 1, 1976. The Tribunal had concluded that the IAC retained jurisdiction for proceedings referred and pending before April 1, 1976. The assessee contended that with the omission of Section 274(2), the IAC was divested of such jurisdiction, and the proceedings should be before the Income-tax Officer (ITO). The court examined the applicability of Section 6 of the General Clauses Act, which provides for the continuance of legal proceedings instituted under a repealed law unless a different intention appears in the repealing Act.

The court referred to the Supreme Court's decision in Rayala Corporation (P.) Ltd. v. Director of Enforcement, which held that Section 6 of the General Clauses Act does not apply to omissions, only to repeals. Consequently, the court concluded that since Section 274(2) was omitted and not repealed, Section 6 of the General Clauses Act could not be invoked. Additionally, the court found that the legislative amendments, including the omission of Section 154(1)(bb) and the addition of a proviso to Section 271(1)(iii), indicated a clear intention to destroy the IAC's power to levy penalties after April 1, 1976. Thus, the IAC had no authority to pass orders imposing penalties on or after this date.

2. Whether the Penalty Order Dated September 22, 1976, Was Barred by Limitation:

The second issue was whether the penalty order dated September 22, 1976, was barred by limitation. The assessee did not dispute that this question was covered by the decision of this court in CIT v. M. Nagappa, which held that such orders were not barred by limitation. Consequently, the court answered this question in the affirmative, confirming that the penalty order was not barred by limitation.

3. Validity of the Penalty Amount Upheld by the Tribunal:

The third issue concerned the validity of the penalty amount upheld by the Tribunal. The Tribunal had upheld the penalty amount, considering the concealment found by both the ITO and the Appellate Assistant Commissioner (AAC). However, given the court's conclusion that the IAC had no jurisdiction to levy the penalty after April 1, 1976, this issue became academic. Therefore, the court did not find it necessary to address the validity of the penalty amount.

Conclusion:

The court concluded that the IAC had no authority to pass orders imposing penalties under Section 271(1)(c) of the Act on or after April 1, 1976. The answers to the referred questions were as follows:
1. The first question was answered in the negative, favoring the assessee, indicating that the IAC had no jurisdiction to levy the impugned penalty.
2. The second question was answered in the affirmative, confirming that the penalty order dated September 22, 1976, was not barred by limitation.
3. The third question was deemed unnecessary to answer as it became academic in light of the answer to the first question.