1984 (10) TMI 103 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the levy of penalty under Section 271(1)(c).
2. Jurisdiction of the Inspecting Assistant Commissioner (IAC) to levy penalty after the amendment of law effective from 1st April, 1976.
3. Time-barred nature of the penalty order for the amount confirmed by the Tribunal.

Issue-wise Detailed Analysis:

1. Legality of the Levy of Penalty under Section 271(1)(c):
The appeal by the assessee challenges the imposition of a penalty amounting to Rs. 50,900 for the assessment year 1968-69 under Section 271(1)(c). The penalty was levied by the IAC on 7th June, 1982, following the reassessment completed by the ITO on 11th March, 1982. The reassessment was conducted as per the Tribunal's directions dated 29th November, 1975, which had confirmed an addition of Rs. 16,100 as undisclosed income and remanded the examination of loans totaling Rs. 34,800. The ITO, in his order dated 11th March, 1982, found these loans non-genuine and added them to the income of the assessee. The penalty proceedings were initiated separately on both occasions, and the IAC's penalty order included both the confirmed addition and the newly added income.

2. Jurisdiction of the IAC to Levy Penalty Post-Amendment:
The assessee's representative, Mr. Ranka, argued that the IAC lacked jurisdiction to levy the penalty post-1st April, 1976, due to the amendment in law. Section 274(2), which empowered the IAC to levy penalties exceeding Rs. 25,000, was deleted effective from 1st April, 1976. Therefore, any penalty imposed by the IAC after this date was without jurisdiction. This argument was supported by several High Court decisions, including CIT vs. Om Sons and Mohd. Oair & Co. vs. CIT, which held that procedural changes in law must be adhered to post-amendment. The Tribunal agreed with this view, stating that the IAC could not continue to exercise powers that were withdrawn by legislative amendment.

3. Time-barred Nature of the Penalty Order for the Amount Confirmed by the Tribunal:
The penalty order dated 7th June, 1982, included a sum of Rs. 16,100 confirmed by the Tribunal on 29th November, 1975. According to Section 275, the penalty must be levied within specific time limits: 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 Tribunal's order was received by the CIT, whichever is later. The Tribunal's order was received by the CIT in December 1975, making the deadline for penalty imposition 30th June, 1976. Since the penalty was levied almost six years later, it was clearly barred by time and invalid.

Conclusion:
The Tribunal concluded that the penalty order dated 7th June, 1982, was invalid on two grounds: it was time-barred for the amount of Rs. 16,100 confirmed by the Tribunal and was without jurisdiction for the amount of Rs. 34,800 added by the ITO post-amendment. The Tribunal quashed the penalty order of Rs. 50,900 imposed by the IAC, allowing the assessee's appeal in full.