1992 (11) TMI 2 - SC - Income Tax

Whether on true interpretation of section 274, as amended by the Taxation Laws (Amendment) Act, 1970, the Inspecting Assistant Commissioner to whom the case was referred prior to April 1, 1971, had jurisdiction to impose penalty - held that Inspecting Assistant Commissioner was correct in passing the penalty order

Issues Involved:
1. Imposition of penalty under section 271(1)(c) read with section 274(2) of the Income-tax Act, 1961.
2. Jurisdiction of the Inspecting Assistant Commissioner post-amendment of section 274(2) effective from April 1, 1971.
3. Applicability of the amended section 274(2) to pending references.

Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c) Read with Section 274(2) of the Income-tax Act, 1961:
The assessee, an individual, was penalized under section 271(1)(c) for the assessment years 1968-69 and 1969-70 for failing to disclose income from house property attributed to his minor children, which was ostensibly in the name of his wife but was actually owned by him. The income returned and assessed were significantly different, resulting in penalties of Rs. 24,000 and Rs. 12,500 for the respective years.

2. Jurisdiction of the Inspecting Assistant Commissioner Post-Amendment of Section 274(2) Effective from April 1, 1971:
Initially, section 274(2) required the Income-tax Officer to refer cases where the minimum penalty exceeded Rs. 1,000 to the Inspecting Assistant Commissioner. This provision was amended effective April 1, 1971, to change the threshold to cases where the concealed income exceeded Rs. 25,000. The Inspecting Assistant Commissioner imposed the penalties on February 15, 1973, after this amendment.

The core issue was whether the Inspecting Assistant Commissioner retained jurisdiction to impose penalties on references made before April 1, 1971, but decided after this date.

3. Applicability of the Amended Section 274(2) to Pending References:
The Tribunal and the Orissa High Court held that the Inspecting Assistant Commissioner lost jurisdiction to impose penalties post-amendment, as the concealed income did not exceed Rs. 25,000. The High Court opined that the amendment affected pending references, thus divesting the Inspecting Assistant Commissioner of jurisdiction.

However, the Supreme Court disagreed, emphasizing that the general principle is that changes in the forum do not affect pending actions unless explicitly stated. The amendment did not provide for the return of pending references, implying that the Inspecting Assistant Commissioner retained jurisdiction over cases referred before April 1, 1971.

The Supreme Court cited multiple High Court decisions supporting this view, including those from Gujarat, Patna, Punjab, Haryana, Bombay, Calcutta, and Madhya Pradesh High Courts. It contrasted these with the dissenting views of the Allahabad and Karnataka High Courts, which held that jurisdiction depends on the law prevailing at the time of penalty imposition.

The Supreme Court referenced cases like Manujendra Dutt v. Purnedu Prosad Roy Chowdhury and Mohd. Idris v. Sat Narain, which supported the continuity of jurisdiction in pending cases despite legislative changes.

Conclusion:
The Supreme Court concluded that the Inspecting Assistant Commissioner retained jurisdiction to impose penalties in cases referred before April 1, 1971, even if the penalties were imposed after this date. The advisory opinion of the Orissa High Court was deemed incorrect, and the appeals were allowed, setting aside the High Court's order. The court left the parties to bear their own costs due to the differing opinions among various High Courts.

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