1979 (9) TMI 91 - AT - Income Tax

Summary

Issues Involved:

1. Jurisdiction of the Inspecting Assistant Commissioner (IAC) to impose penalty after the amendment of Section 274(2) of the Income Tax Act, 1961.
2. Difference between substantive law and procedural law.
3. Retrospective application of amendments in procedural law.

Issue-wise Detailed Analysis:

1. Jurisdiction of the IAC:

The primary issue was whether the IAC had jurisdiction to impose a penalty after the amendment of Section 274(2) of the Income Tax Act, 1961. The assessee argued that after the omission of Section 274(2) effective from 1st April 1976, the IAC ceased to be a competent authority, and the Income Tax Officer (ITO) should have conducted and concluded the penalty proceedings. The Revenue contended that the IAC's jurisdiction should be determined based on the date when the return was filed, which was 18th July 1973, arguing that the law in force at that time empowered the IAC to conduct the penalty proceedings.

2. Difference Between Substantive Law and Procedural Law:

The Tribunal distinguished between substantive law and procedural law. Substantive law pertains to the rights and duties of individuals, while procedural law governs the process of litigation. Jurisdiction, being a part of procedural law, is determined by the procedural rules in place when the legal remedy is sought. The Tribunal cited the case of Bhikham vs. Natha, where the Allahabad High Court held that amendments in procedural law, including jurisdiction, have immediate effect.

3. Retrospective Application of Amendments in Procedural Law:

The Tribunal relied on the Supreme Court's decision in Nani Gopal Mitra vs. State of Bihar, which established that amendments in procedural law operate retrospectively unless proceedings under the old law are already concluded. The Tribunal concluded that since the penalty proceedings were not concluded by 1st April 1976, the IAC ceased to be a competent authority, and the ITO was the appropriate authority to conduct and conclude the penalty proceedings.

Conclusion:

The Tribunal quashed the impugned order of the IAC, holding that the IAC lost jurisdiction after 1st April 1976 due to the amendment in Section 274(2). Consequently, the penalty imposed by the IAC was canceled. The Tribunal did not delve into the merits of the case, as the jurisdictional issue itself was sufficient to decide the appeal in favor of the assessee. The appeal was allowed.