1996 (4) TMI 3 - SC - Income Tax

Jurisdiction to levy Penalty - deletion of sub-section (2) of section 274 by the taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976. - proceedings pending before Inspecting Assistant Commissioner on March 31, 1976 - Inspecting Assistant Commissioner to whom the case was referred prior to April 1, 1971, had jurisdiction to impose penalty

Summary

Issues:
1. Interpretation of section 271(1)(c) of the Income-tax Act, 1961 regarding the jurisdiction of the Inspecting Assistant Commissioner to levy penalties.
2. Impact of the amendment to section 274(2) of the Income-tax Act, 1961 on penalty proceedings.
3. Determination of whether the Inspecting Assistant Commissioner retained jurisdiction to impose penalties post the amendment.

Analysis:

The Supreme Court heard an appeal against the Karnataka High Court's decision regarding the jurisdiction of the Inspecting Assistant Commissioner to levy penalties under section 271(1)(c) of the Income-tax Act, 1961. The High Court's decision was based on the view that the Inspecting Assistant Commissioner lost jurisdiction due to the omission of sub-section (2) of section 274 by the Taxation Laws (Amendment) Act, 1975. However, the Supreme Court disagreed with this view, citing the decision in CIT v. Dhadi Sahu [1993] 199 ITR 610, which emphasized the principle that a change in the law does not affect pending actions unless expressly stated. The court highlighted that the amendment did not require pending cases to be returned without a final order if the income amount did not exceed the specified limit.

In a similar case discussed in Dhadi Sahu's case, the Tribunal accepted the argument that the Inspecting Assistant Commissioner lost jurisdiction post the amendment to section 274(2). The matter was referred to the Orissa High Court, which ruled in favor of the assessee. However, the Supreme Court clarified that once a valid reference was made to the Inspecting Assistant Commissioner, the jurisdiction was not lost due to subsequent amendments. The court emphasized that a change in the forum does not impact vested rights, especially when proceedings are already initiated before a specific tribunal or court.

The Supreme Court compared the views of different High Courts on this matter, noting that the Gujarat, Patna, Punjab and Haryana, Bombay, Calcutta, and Madhya Pradesh High Courts shared the same perspective as the Supreme Court, while the Allahabad and Karnataka High Courts held a contrary view. The court disapproved of the contrary opinions and approved the consistent view taken by other High Courts. The court also referenced the General Clauses Act to support the principle that the Inspecting Assistant Commissioner retained jurisdiction to continue with the proceedings despite the amendment to section 274(2).

In conclusion, the Supreme Court allowed the appeal, ruling in favor of the Revenue and against the assessee. The court held that the Inspecting Assistant Commissioner did not lose jurisdiction to impose penalties after the amendment to section 274(2), and he was entitled to continue the proceedings and make decisions according to the law.