1993 (8) TMI 1 - SC - Income Tax

Return was filed before amendment of section 274(2) but assessment was made after amendment - Whether Tribunal is right in law in holding that the ITO had no jurisdiction to levy the penalty and that he should have referred the case to the Inspecting Assistant Commissioner for imposition of penalty

Summary

Issues:
1. Jurisdiction of the Income-tax Officer to levy penalty under the Income-tax Act, 1961 before and after the amendment of section 274(2).
2. Applicability of the law in force at the time of initiation of penalty proceedings.
3. Interpretation of the provisions of section 271(1)(c) and section 274(2) in the context of concealment of income.

Detailed Analysis:
1. The main issue in this case revolves around the jurisdiction of the Income-tax Officer to levy a penalty under the Income-tax Act, 1961, specifically focusing on the amendment of section 274(2). Prior to the amendment, the Income-tax Officer was required to refer cases to the Inspecting Assistant Commissioner if the minimum penalty imposable exceeded Rs. 1,000. However, post-amendment, the referral was mandatory only if the amount of income concealed exceeded Rs. 25,000. The case involved penalty proceedings initiated against the assessee for concealment of income below Rs. 25,000, leading to a dispute regarding the authority of the Income-tax Officer to impose the penalty.

2. The High Court analyzed the applicability of the law in force at the time of initiation of penalty proceedings. It was held that the competence or jurisdiction of the authority to initiate penalty proceedings should be governed by the law in force on the date of initiation of such proceedings. The court emphasized that the law applicable to penalty proceedings is determined by the provisions in force when the offending return was filed. The judgment referred to previous cases to support this interpretation, highlighting the importance of the timing of the assessment order in relation to the imposition of penalties.

3. The interpretation of section 271(1)(c) and section 274(2) was crucial in determining the authority to impose penalties for concealment of income. The court considered the satisfaction of the income-tax authorities regarding the commission of a default by the assessee as a key factor triggering penalty provisions. It was clarified that the penalty could only be imposed after the completion of the assessment, emphasizing the significance of the date of completion of assessment for penalty purposes. The court also referred to specific cases to illustrate the application of the law based on the timing of the initiation of penalty proceedings and the jurisdiction of the assessing authorities.

In conclusion, the Supreme Court upheld the decision of the High Court, affirming that the Income-tax Officer had the authority to impose the penalty under the amended provisions of section 274(2) when the concealment of income was established, even if the concealed amount was below Rs. 25,000. The judgment emphasized the importance of aligning the imposition of penalties with the law in force at the time of initiating penalty proceedings, ensuring that penalties are imposed in accordance with the relevant statutory provisions.