1981 (9) TMI 186 - AT - Income Tax

Summary

Issues:
1. Jurisdiction of the Appellate Assistant Commissioner (AAC) to dispose of the appeal against the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961.
2. Corrective measures to be taken due to the void and without jurisdiction order passed by the AAC.

Detailed Analysis:

1. The primary issue in this case was whether the AAC had the legal authority to decide on the appeal filed against the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961. The revenue contended that the AAC erred in cancelling the penalty and that the jurisdiction over the order vested with the Commissioner (Appeals) as per section 246(2)(g) of the Act. The assessee argued that the word "may" in sections 246(1) and (2) provided the option to choose either the AAC or the Commissioner (Appeals) for appeals. However, the tribunal held that the amendment to section 246 introduced sub-section (2), which specified that appeals against penalties imposed with the IAC's approval should go to the Commissioner (Appeals) only. The tribunal concluded that the AAC did not have jurisdiction to proceed with the appeal, rendering the order passed by the AAC void in law.

2. Following the determination of the void order by the AAC, the tribunal considered the corrective measures to be taken. Citing legal precedents, including the Supreme Court's ruling in CIT v. Bhikaji Dadabhai & Co., it was established that even if the ITO's order was erroneous, the AAC had the jurisdiction to review it. However, in this case, the AAC's jurisdiction to decide the appeal was found to be lacking. The tribunal referred to the Supreme Court's judgment in Kapurchand Shrimal v. CIT, emphasizing the duty of the appellate authority to correct errors and issue appropriate directions. Consequently, the tribunal directed that the appeal filed by the assessee before the AAC be forwarded to the concerned Commissioner (Appeals) for proper disposal in accordance with the law. This decision was made in the interest of justice, considering that the assessee was misled by the ITO's advice to file the appeal before the AAC, leading to the erroneous disposal of the appeal.

In conclusion, the tribunal held that the AAC's order was void due to lack of jurisdiction and directed corrective action to forward the appeal to the appropriate authority for proper disposal.