1980 (3) TMI 115 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Inspecting Assistant Commissioner (IAC) to levy penalty.
2. Alleged concealment of income by the assessee.
3. Validity of the returns filed on 12-9-1974.

Analysis of the Judgment:

1. Jurisdiction of the IAC to Levy Penalty:
The main contention was whether the IAC had jurisdiction to levy penalties after the deletion of section 274(2) of the Income-tax Act, 1961, with effect from 1-4-1976. The assessee argued that the deletion was procedural and had retrospective effect, thereby terminating the IAC's jurisdiction. The department contended that the deletion did not affect the IAC's jurisdiction over cases referred before the deletion.

The Tribunal referred to various High Court decisions and concluded that section 274(2) was procedural law. Consequently, its deletion terminated the IAC's jurisdiction, even for cases referred before the deletion. The Tribunal held that the IAC had no jurisdiction to levy penalties in this case.

2. Alleged Concealment of Income:
The assessee admitted to maintaining two sets of accounts, one reflecting the true state of affairs and the other being fake. The returns filed on 12-9-1974 were based on the fake accounts. The Tribunal found that the assessee deliberately filed returns based on fake accounts, indicating concealment of income. Thus, the penalty was exigible.

3. Validity of the Returns Filed on 12-9-1974:
The assessee argued that the returns filed on 12-9-1974 for the assessment years 1972-73 and 1973-74 were in obsolete forms and should be considered non est. The Tribunal referred to the decision of the Madras High Court in CIT v. Royal Textiles, which held that returns filed in the wrong form were not invalid. The Tribunal preferred this view over contrary decisions by the Allahabad and Calcutta High Courts.

The Tribunal concluded that the returns filed on 12-9-1974 were valid and could form the basis for levying penalties.

Conclusion:
The Tribunal held that the IAC had no jurisdiction to levy penalties due to the deletion of section 274(2) with effect from 1-4-1976. Despite finding that the assessee had concealed income and that the returns filed on 12-9-1974 were valid, the penalties imposed by the IAC were canceled. The appeals were allowed.