1979 (8) TMI 62 - HC - Income Tax

Summary

Issues Involved:
1. Competence of the Inspecting Assistant Commissioner (IAC) to pass the penalty order.
2. Retrospective or prospective application of the amendment to Section 274(2) of the Income-tax Act, 1961.

Summary:

1. Competence of the IAC to Pass the Penalty Order:
The primary issue was whether the Inspecting Assistant Commissioner of Income-tax (IAC) was legally competent to pass the penalty order. The Tribunal initially held that the IAC had the jurisdiction to impose the penalty under s. 271(1)(c) of the Income-tax Act, 1961, as the penalty proceedings were initiated before the amendment. The Tribunal later accepted the assessee's contention that the IAC lacked jurisdiction due to the amendment of s. 274(2) by the Taxation Laws (Amendment) Act, 1970, which came into force on April 1, 1971, and canceled the penalty.

2. Retrospective or Prospective Application of the Amendment:
The court examined whether the amendment to s. 274(2) was retrospective or prospective. It was argued that procedural laws generally have retrospective effect unless they affect vested rights. The court noted that the jurisdiction of a Tribunal is a vested right and should be determined by the law in force at the time of the institution of the proceedings. The court concluded that the amendment to s. 274(2) was prospective, as there was no indication in the statute to suggest otherwise. Consequently, the IAC retained jurisdiction to impose the penalty, as the proceedings were initiated before the amendment.

Conclusion:
The court answered the question in the negative, holding that the IAC was legally competent to pass the penalty order. The amendment to s. 274(2) was deemed prospective, preserving the IAC's jurisdiction. The judgment was in favor of the revenue, with no order as to costs.