Commissioner of Income Tax Vs. Chandu Lal and Sons - Court Judgment

Excerpt:
.....commissioner had jurisdiction to impose penalty under section 271(1)(c) after 1-4-1976 where penalty proceedings were initiated prior to 1-4-1976 and the same was pending before inspecting assistant commissioner when sub-section (2) of section 274 was deleted fell for consideration by kerala high court in the case of cit v. m. a. unneerikutty (1998) 149 itr (ker) 43 and after observing that in view of dadhi sahu's case there is no scope for holding that the inspecting assistant commissioner has no jurisdiction the case was, in new of an important question of law, referred to a larger bench. application : not to current assessment years. a. y. : 1973-74 income tax act 1961 s.271(1)(c) income tax act 1961 s.274(2) r. k. gulati & m.c. agarwal, jj. 19th november, 1997 assessment..........the returned income of rs. 25,902, the assessment was completed on an income of rs. 72,875. the penalty proceedings under s. 271(1)(c) of the act were also initiated and the matter in due course was referred to the concerned iac for adjudication of the penalty proceedings. the iac by his order dt. 23rd march, 1978, imposed a penalty of rs. 42,500 on the view that the case was covered under the provisions of the explanation attached to s. 271(1)(c), as it stood at the relevant time, inasmuch as the returned income was less than 80 per cent of the assessed income and further a case for penalty was also made out otherwise on merits. the assessee carried the matter in appeal before the tribunal. the tribunal did not go into the merits whether on facts a case for imposition of penalty was.....

Judgment:
ORDER

BY THE COURT:

At the instance of the CIT, Lucknow, the Tribunal, Delhi Bench 'E', under s. 256(2) of the IT Act, 1961 (for short 'the Act'), has referred the following question of law for the opinion of this Court.

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the IAC had after 31st March, 1976, no jurisdiction to make any penalty order under s. 271(1)(c), IT Act, in view of deletion of s. 274(2), IT Act, w.e.f. 1st April, 1976?'

2. We have heard learned counsel for the parties.

The dispute pertains to the asst. yr. 1973-74. Against the returned income of Rs. 25,902, the assessment was completed on an income of Rs. 72,875. The penalty proceedings under s. 271(1)(c) of the Act were also initiated and the matter in due course was referred to the concerned IAC for adjudication of the penalty proceedings. The IAC by his order dt. 23rd March, 1978, imposed a penalty of Rs. 42,500 on the view that the case was covered under the provisions of the Explanation attached to s. 271(1)(c), as it stood at the relevant time, inasmuch as the returned income was less than 80 per cent of the assessed income and further a case for penalty was also made out otherwise on merits. The assessee carried the matter in appeal before the Tribunal. The Tribunal did not go into the merits whether on facts a case for imposition of penalty was made or not, but it allowed the appeal on a preliminary issue that the IAC w.e.f. 1st April, 1976, had no jurisdiction to levy penalty under s. 271(1)(c) in view of the amendment brought about by the Taxation Laws (Amendment) Act, 1975, which became operative w.e.f. Ist April, 1976, inasmuch as s. 274(2) was deleted from the said date.

3. The question that falls for consideration is whether the IAC was competent to pass the penalty order under s. 271(1)(c) on or after 1st April, 1976, because of the Taxation Laws (Amendment) Act, 1975, which became operative. In CIT vs . Dhadi Sahu : [1993]199ITR610(SC) , the Supreme Court has taken the view that if the reference has been made to the IAC before 1st April, 1976, and remained pending thereafter before the IAC then it could not be returned without any final order on the ground of lack of jurisdiction. In other words, if the penalty proceedings had been referred to the IAC before the enforcement of the amendment Act, then he will continue to have jurisdiction to conclude the penalty proceedings.

4. In the instant case, there is no indication either in the statement of the case submitted by the Tribunal or in any other orders attached as annexures thereto to show as to when reference was made to the IAC. In those circumstances, the question cannot be answered in either way in absence of the date when the reference to the IAC was made. Therefore, we have no option but to send the case back to the Tribunal to record a clear finding as to when the reference was made to the IAC in this case. If the reference was made before 1st April, 1976, when the Taxation Laws (Amendment) Act, 1975, came into force, then the IAC will be competent to levy penalty even after 1st April, 1976.

With these observations, we remand the case to the Tribunal, who will record a clear finding as to when the reference was made to the IAC and then proceed in the light of the decision of the Supreme Court in Dhadi Sahu (supra) to pass a fresh order after giving an opportunity of being heard to both the parties and in accordance with law.

OPEN