1976 (8) TMI 16 - HC - Income Tax

Change Of Law, High Court, IAC To Impose Penalty, Law Applicable, Penalty Proceedings, Reference Proceedings

Summary

Issues Involved:
1. Quantum of penalty to be levied as per amended provisions of section 271(1)(iii).
2. Jurisdiction of the Inspecting Assistant Commissioner to impose penalty.

Detailed Analysis:

Issue 1: Quantum of Penalty to be Levied
The first issue concerns whether the quantum of penalty should be as per the amended provisions of section 271(1)(iii) effective from April 1, 1968. The court referred to the Division Bench decisions in Addl. Commissioner of Income-tax v. Medisetty Ramarao [1977] 108 ITR 318 (AP) and Commissioner of Wealth-tax v. R. D. Chand [1977] 108 ITR 787 (AP). The court held that for purposes of section 271(1)(c)(iii), the relevant date is the date of filing the returns in which the concealment occurred, not the date of assessment completion. The court noted that the return was filed on November 28, 1968, showing lesser income from private practice. Hence, the law in force on November 28, 1968, governs the imposition of penalty. The Tribunal erred in calculating the penalty based on provisions before the amendment effective April 1, 1968. Consequently, the quantum of penalty should be as per the amended provisions of section 271(1)(c) effective from April 1, 1968. Question No. 1 was answered in the affirmative, in favor of the revenue and against the assessee.

Issue 2: Jurisdiction of the Inspecting Assistant Commissioner
The second issue concerns whether the Inspecting Assistant Commissioner had jurisdiction to impose the penalty. The assessee contended that the penalty order dated March 20, 1973, was barred by limitation, as the period of limitation was two years from the assessment order date, i.e., December 21, 1970. The court clarified that the referred question is about the jurisdiction, not the limitation. The court noted that limitation is not merely another aspect of jurisdiction. The Supreme Court's observations in Mahindra Land and Building Corporations Ltd. v. Bhutnath Banerjee, AIR 1964 SC 1336, and M. L. Sethi v. R. P. Kapur, AIR 1972 SC 2379, were discussed, emphasizing that limitation is not a jurisdictional error under section 115 of the Civil Procedure Code.

The court observed that the assessee did not challenge the referred question's correctness, which only addressed the jurisdiction issue. The court held that the Inspecting Assistant Commissioner had jurisdiction when the matter was referred to him, as the minimum penalty was over Rs. 1,000. The amendment effective April 1, 1971, raising the minimum penalty to Rs. 25,000 did not affect his jurisdiction. Section 6(d) of the General Clauses Act, 1897, was cited to support the continuation of proceedings despite the amendment. Therefore, Question No. 2 was answered in the affirmative, in favor of the revenue and against the assessee.

Conclusion:
Both questions referred to the court were answered in favor of the revenue and against the assessee. The quantum of penalty should be as per the amended provisions effective April 1, 1968, and the Inspecting Assistant Commissioner had jurisdiction to impose the penalty. The assessee was ordered to pay the costs of the reference to the Commissioner, with an advocate's fee of Rs. 250.