1977 (5) TMI 27 - AT - Income Tax

Issues Involved:

1. Jurisdiction of the IAC to levy penalty after the amendment of the IT Act, 1961.
2. Limitation period for passing the penalty order.
3. Quantum of penalty and its calculation based on the concealment of income.

Issue-wise Detailed Analysis:

1. Jurisdiction of the IAC to Levy Penalty:

The assessee contended that after the amendment of the IT Act, 1961, effective from April 1, 1976, by the deletion of Section 274(2), the Inspecting Assistant Commissioner (IAC) had no jurisdiction to levy penalties. The argument was based on the principle that procedural amendments are retrospective unless stated otherwise. The assessee relied on several legal authorities, including Halsbury's Laws of England, the Supreme Court ruling in CIT vs. Vadilal Lallubhai, and Maxwell on the Interpretation of Statutes, to argue that procedural laws are retrospective and affect pending proceedings. The Departmental Representative argued that the amendment was not retrospective and cited CBDT Instruction No. 1037, stating that the IAC retained jurisdiction for assessments made before April 1, 1976.

The Tribunal considered various rulings, including those from the Supreme Court and High Courts, to determine whether Section 274 was procedural or affected substantive rights. It concluded that the amendment of Section 274 by deleting sub-clause (2) did not state it was retrospective or intended to affect pending proceedings. Therefore, the IAC retained jurisdiction over penalty proceedings pending before him on April 1, 1976.

2. Limitation Period for Passing the Penalty Order:

The assessee argued that the penalty order was barred by limitation as it was passed more than two years after the assessments were made. However, the Tribunal noted that Section 275 was amended effective April 1, 1971, extending the limitation period. The amended Section 275 provided that no penalty order shall be passed after the expiration of two years from the end of the financial year in which the proceedings were completed or six months from the end of the month in which the order of the AAC or Tribunal was received by the CIT, whichever was later.

The Tribunal held that the amended Section 275 applied to the pending penalty proceedings, and the penalty order passed by the IAC was within the limitation period. The Tribunal relied on the Orissa High Court ruling in CIT vs. Soubhagya Manjari Devi, which held that the amended Section 275 applied to penalty proceedings pending for disposal on the date of the amendment.

3. Quantum of Penalty and Its Calculation:

The assessee did not dispute the fact of concealment of income but argued that the IAC had no jurisdiction to levy penalty for an amount higher than that found by the Income Tax Officer (ITO). The assessee contended that the IAC could not consider the enhancements made by the Appellate Assistant Commissioner (AAC) as the AAC had not initiated penalty proceedings for the enhanced amounts. The Tribunal referred to various rulings, including those from the Punjab & Haryana High Court and Allahabad High Court, to support the assessee's contention.

The Tribunal concluded that the IAC's jurisdiction was limited to the concealment discovered by the ITO, and the IAC could not consider the enhanced amounts found by the AAC. The Tribunal upheld the minimum penalty based on the concealed income discovered by the ITO, rounding off the figures to Rs. 67,300 for the assessment year 1969-70 and Rs. 70,500 for the assessment year 1970-71.

Conclusion:

The appeals were partly allowed, with the Tribunal upholding the penalties at reduced amounts based on the concealed income discovered by the ITO. The Tribunal held that the IAC had jurisdiction over the pending penalty proceedings and that the penalty orders were within the limitation period as per the amended Section 275.

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