Commissioner of Income Tax vs Chhotelal Shankerlal

On an application u/s 256(1) of the income tax Act, 1961 (''the Act'') the Tribunal has referred the following questions for our opinion : Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty order passed u/s 271(1)(c) of the income tax Act, 1961 holding that the Inspecting Assistant Commissioner had no jurisdiction to levy the said penalty on 30-3-1979?

The assessment was completed u/s 143(3) of the Act. The relevant assessment year is 1973-74. While completing the assessment u/s 143(3) of the Act, an addition of Rs. 30,000 was made. In appeal the addition was reduced by the IAC to Rs. 11,860. Thereafter, the penalty proceedings were initiated u/s 271(1)(c) of the Act and on reference the penalty has been levied by the IAC. That order was challenged and at the stage of the Tribunal, the Tribunal has taken the view that as the penalty order has been passed after amendment in section 274(2) of the Act, the IAC has no jurisdiction after 1-4-1976.

Whether the IAC has the jurisdiction to impose penalty u/s 271(1)(c) after 1-4-1976 when the penalty proceedings were initiated before that date. This question was referred to this Court.

The reference was listed for hearing on 2-3 occasions but none appeared for the assessee.

Heard the learned counsel for the revenue, Mr. Singhi. The learned counsel submits that the issue in question is covered by the decisions of this Court in the cases of COMMISSIONER OF Income Tax Vs. BHIKAMDASS BASTIRAM., and COMMISSIONER OF Income Tax Vs. (BOM)BAY MOTOR., . In both these decisions, the view has been taken by this Court that jurisdiction to levy the penalty by the IAC is not affected by the amendment of section 274, which has come in force from 1-4-1976, if the penalty proceedings are initiated before 1-4-1976.

The learned counsel also submits that the penalty proceedings were initiated before 1976 and that argument has been advanced by the departmental representative before the Tribunal, which is referred to in para 6 of the order of the Tribunal.

When the penalty proceedings are initiated before 1-4-1976, in our view, the issue is squarely covered by the decision of the Court in the cases referred above. In the result, we answer the question referred in negative, i.e., in favour of the revenue and against the assessee. The reference so made shall stand disposed of accordingly.