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Issues involved: Jurisdiction of Appellate Tribunal to adjudicate on penalty under section 271(1)(c) of Income-tax Act, 1961 and reduction of penalty quantum while rectifying mistake of law.
Summary: The case involved an assessee who was a proprietor of a Tamil magazine and a press, assessed for the year 1959-60 with a penalty of Rs. 5,000 under section 271(1)(c) of the Income-tax Act, 1961, which was later reduced to Rs. 3,000 by the AAC. The Tribunal, following certain decisions, held that penalty could not be levied under the Act of 1961 and cancelled the penalty. However, a subsequent application by the ITO highlighted a mistake apparent from the record, leading to a rectification order reducing the penalty to 30% of the tax sought to be evaded, amounting to approximately Rs. 1,464. The Tribunal's reduction of penalty without providing reasons was challenged for being beyond its jurisdiction. The Tribunal's power under section 254(2) is limited to rectifying mistakes apparent from the record and not for reviewing its own order. The Tribunal's consideration of penalty quantum and subsequent reduction was deemed to be without jurisdiction as it amounted to a review, which is not within its statutory powers. The Tribunal's rectification should have been limited to the specific error pointed out by the ITO regarding the legality of penalty levy under the new Act. Interference with penalty quantum goes beyond rectification and constitutes a reconsideration of the appeal, which the Tribunal is not authorized to do. Therefore, the Tribunal's decision to reduce the penalty was held to be without jurisdiction, and the questions were answered in the negative in favor of the revenue. The judgment emphasized that the Tribunal's power is to rectify specific errors, not to review its own orders, and any interference with penalty quantum goes beyond its statutory authority.
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