Arijit Pasayat, C.J.
1. Pursuant to the directions given in O. P. No. 6144 of 1991, the following question has been referred for the opinion of this court by the Income-tax Appellate Tribunal, Cochin Bench (in short, 'the Tribunal'), under Section 256(2) of the Income-tax Act, 1961 (in short, 'the Act') ;
'Whether, on the facts and in the circumstances of the case, the order of imposition of penalty by the Inspecting Assistant Commissioner was invalid and without jurisdiction ?'
2. The factual position, so far as undisputed, is as follows : The assessee is an individual deriving income mainly from business in purchase and sale of 'copra'. The assessment for 1972-73 was completed on August 23, 1975, determining the total income of the assessee at Rs. 6,97,330. An addition on account of income from undisclosed sources was made, which, according to the Assessing Officer, represented unaccounted purchase of copra. The Assessing Officer initiated proceedings under Section 271(1)(c) of theAct. As the minimum penalty leviable exceeded Rs. 25,000, the Assessing Officer referred the case to the Inspecting Assistant Commissioner of Income-tax (in short 'the IAC') for disposal. The Inspecting Assistant Commissioner by order dated July 26, 1979, imposed penalty of Rs. 3,25,845. The assessee took the stand in appeal before the Tribunal that the order of penalty passed by the Inspecting Assistant Commissioner on July 26, 1979, was bad in law. In essence, the stand was that the order having been passed after the amendment made in the Act relating to jurisdiction with effect from April 1, 1976, the Inspecting Assistant Commissioner did not have jurisdiction to pass the order. The Tribunal noticed that the penalty was leviable in respect of the following amounts :
Rs. '1. Income from property in the name of wife6,3512. Unexplained credits in the name of five persons1,66,4563. Unexplained advance to Kalpaka Tourist Home P. Ltd.9,7804. Investment in unaccounted purchase of copra1,43,2583,25,845'.
3. It was concluded by the Tribunal that the property did not belong to the assessee, but it belonged to his wife and, therefore, there could be no concealment in respect of item No. 1. So far as the credit in the names of five persons is concerned, it noticed that only a sum of Rs. 1,00,000 out of Rs. 1,66,456 was ultimately added and, therefore, there was concealment in respect of only Rs. 1,00,000. Considering the third item, it was held that as the amount was in the nature of an advance, it did not represent any cash credit and hence penalty was not imposable. Referring to the fourth item, the Tribunal rejected the explanation of the assessee and held that penalty was imposable. After upholding the penalty in respect of some of the additions and deleting the penalty in respect of some others, the Tribunal held that the Inspecting Assistant Commissioner did not have jurisdiction to impose penalty. For this purpose, reliance was placed on a Full Bench decision of this court in CIT v. P. I. Issac : [1987]168ITR793(Ker) . The Revenue sought for a reference and as stated above, the question has been referred for the opinion of this court.
4. When the matter was taken up for hearing by the Division Bench, it was submitted by the Revenue that in view of the decisions of the apex court in CIT v. Dhadi Sahu : [1993]199ITR610(SC) and Varkey Chacko v. CIT : [1993]203ITR885(SC) , the decision in Issac's case : [1987]168ITR793(Ker) , was not correct. Reference was made by the assessee to a decision of this court in CIT v. Late S. M. Syed Mohamed : [1995]216ITR331(Ker) , to contend that the Revenue should establish that reference was in fact made on the date claimed to have been made, and whether there was a valid reference. The Division Bench felt that though the decision in Issac's case : [1987]168ITR793(Ker) , was not good law, yet in view of Syed Mohamed's case : [1995]216ITR331(Ker) , an important question of law arises for decision, which has to be dealt with by a larger Bench.
5. It is true that no litigant has any vested right in the matter of procedural law but, where the question is of change of forum, it ceases to be a question of procedure only. Forum of appeal or proceedings is a vested right as opposed to pure procedure to be followed before a particular forum. Right becomes vested when proceedings are initiated in the Tribunal or the court of first instance, and unless the Legislature has, by express words or by necessary implication, clearly so indicated, that vested right will continue in spite of change of jurisdiction of different Tribunals or forums. This view was expressed in Ramesh Singh v. Cinta Devi : [1996]2SCR1036 . Referring to the earlier decisions in Hoosein Kasam Dada (I.) Ltd. v. State of M. P. : 1983(13)ELT1277(SC) ; State of Bombay v. Supreme General Films Exchange Ltd. : [1960]3SCR640 and Vitthalbhai Naranbhai Patel v. CST : AIR1967SC344 , it was observed that unless the new Act expressly or by necessary implication makes the provision applicable retrospectively, the right to appeal will crystallise in the appellant on the institution of the application in the Tribunal of first instance and that a vested right of appeal would not be dislodged by enactment of the new Act.
6. In Issac's case : [1987]168ITR793(Ker) , it was observed that after the amendment to Section 274 by the Taxation Laws (Amendment) Act, 1975, by deletion of Sub-section (2) thereof, the Inspecting Assistant Commissioner, is divested of the jurisdiction of the Income-tax Officer under Section 271(1) of the Act. Prior to the deletion, the jurisdiction of the Inspecting Assistant Commissioner was only that of the Income-tax Officer. After the amendment that came into force on April 1, 1976, the authorities competent to impose penalty are those mentioned in Section 271(1) of the Act. It was held that the change of forum is a matter of procedure and the amendment Act is retrospective in regard also to matters pending before the Inspecting Assistant Commissioner. Relying on this decision, the Tribunal cancelled the penalty.
7. In CIT v. Smt. R. Sharadamma : [1996]219ITR671(SC) , the apex court held that once the Inspecting Assistant Commissioner was seized of the matter, he did not lose seisin thereof on account of deletion of Sub-section (2) of Section 274 by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976, and the Inspecting Assistant Commissioner did not lose the jurisdiction to continue with the proceedings pending before him on March 31, 1976. He was entitled to continue with those proceedings and pass appropriate orders according to law. The Full Bench of this court in Issac's case : [1987]168ITR793(Ker) , mainly followed the reasoning of the Division Bench of the Orissa High Court in CIT v. Dhadi Sahu : [1976]105ITR56(Orissa) , in support of their conclusion in preference to the view of the Division Bench of this court in the case of CIT v. Varkey Chacko : [1982]136ITR733(Ker) . On appeal, the decision of the Orissa High Court was reversed by the apex court in the case reported in CIT v. Dhadi Sahu : [1993]199ITR610(SC) and in view of that, the decision in Varkey Chacko's case : [1982]136ITR733(Ker) , was confirmed. The inevitable conclusion, therefore, is that the Tribunal was not justified in cancelling penalty.
8. The residual question is whether Syed Mohamed's case : [1995]216ITR331(Ker) , had application to the facts of the case. In that case, the primary question was whether the Full Bench decision in Issac's case : [1987]168ITR793(Ker) , was impliedly overruled by the apex court decision in CIT v. Dhadi Sahu : [1993]199ITR610(SC) . By a majority, the Full Bench declined to answer the question on the ground that the validity of reference was not an issue in the earlier Full Bench decision. But the majority took the stand that if the reference was valid, then the initiation was also valid. One of the learned judges of the Division Bench, which made the reference, was of the view that the Tribunal has proceeded on the basis that though the reference was made in the year 1975, still the Inspecting Assistant Commissioner has no jurisdiction. Therefore, there is no question of holding that the Inspecting Assistant Commissioner has no jurisdiction to pass the penalty order ; but agreed to the reference to the larger Bench.
9. Learned counsel for the Revenue submitted that there was no dispute, whatsoever, at any stage to the position that the references were made by the Inspecting Assistant Commissioner before March 31, 1976. On the contrary, all the forums proceeded on the basis that the same was the accepted position. Learned counsel for the assessee, on the other hand, submitted that the assessee did not have the benefit of knowing the view of the Full Bench before judgment was actually pronounced. But nevertheless there was indirect reference to that factual question. In the factual background, we do not think it necessary to consider the correctness of the view in Syed Mohamed's case : [1995]216ITR331(Ker) . A bare perusal of the orders passed by various authorities, including the Tribunal, makes it clear that the parties proceeded on the accepted position that reference was made to the Inspecting Assistant Commissioner prior to March 31, 1976. In fact, the Tribunal's conclusion, in para. 6 reads as follows :
'6. The High Court of Kerala in the case of CIT v. Issac (P. I.) : [1987]168ITR793(Ker) , delivered a Full Bench judgment on August 26, 1987, on the identical issue which is faced in the present appeal before us. In that case also, the matter was referred to the Inspecting Assistant Commissioner in 1975 and it was the Inspecting Assistant Commissioner who had jurisdiction to levy the penalty. The order of imposition of penalty was passed after April 1, 1976. The question that their Lordships of the High Court considered was whether in these circumstances it could be said that theInspecting Assistant Commissioner who had initiated the penalty proceedings prior to the amendment of law which was effective from April 1, 1976, could be said to have jurisdiction for levy of penalty even after April 1, 1976. Their Lordships were of the view that by virtue of the amendment made to Section 271(1)(c) with effect from April 1, 1976, the jurisdiction to levy penalty by an Inspecting Assistant Commissioner had been divested of and once it is divested, he could not have passed the order at all and in case he passes such an order, that order would be an illegal order and invalid in the eye of law. Accordingly, they quashed the order of imposition of penalty as null and void. Respectfully following their Lordships' view as above, we quash the penalty proceedings on the legal ground.'
10. This shows the accepted position before the Tribunal being that the Inspecting Assistant Commissioner had initiated proceedings prior to the amendment of law, which was prior to April 1, 1976. The significant portion in the quoted portion of the judgment is 'in that case also, the matter was referred to the Inspecting Assistant Commissioner in 1975 and it was the Inspecting Assistant Commissioner who had jurisdiction to levy the penalty'. We have underlined the sentence for the purpose of emphasis. Furthermore, the assessee's contention has been taken note of by the Tribunal in para. 3, which reads thus :
'3. The assessee submitted that even on legal grounds, the order of penalty passed by the Inspecting Assistant Commissioner on July 26, 1979, was bad in law and has to be quashed as the order came to be passed much after the amendment made on April 1, 1976. It was pleaded that even if initiation was earlier to April 1, 1976, the Inspecting Assistant Commissioner had no jurisdiction to pass the penalty order after April 1, 1976.'
11. The underlined portion clearly shows that the assessee had taken the stand that even after the initiation prior to April 1, 1976, the Inspecting Assistant Commissioner had no jurisdiction to pass the penalty order. That being the factual position, the assessee cannot now turn round and say that the penalty proceedings were not initiated by the Inspecting Assistant Commissioner before March 31, 1976. On the facts, therefore, such a plea is not available to be taken. It may be pointed out that the question raised does not arise out of the order of the Tribunal, and, in fact, no reference has been made to this court in relation to that question. It is impermissible to deal with a question under Section 256 of the Act, if it does not arise out of the order of the Tribunal. Out of the catena of decisions, only one, which is considered to be the leading one (CIT v. Scindia Steam Navigation Co, Ltd. : [1961]42ITR589(SC) ), needs reference on this aspect. The determinative tests as to when a question is said to arise out of the order of the Tribunal are (1) when a question is raised before the Tribunal and isdealt with by it, it is clearly one arising out of its Order ; (2) when a question of law is raised before the Tribunal, but it fails to deal with it, it must be deemed to have been dealt with it, and is, therefore, one arising out of its Order ; (3) when a question is not raised before the Tribunal, but it deals with by it, that will also be a question arising out of its Order ; (4) when a question is neither raised before the Tribunal, nor considered by it, it will not be a question arising out of its order, notwithstanding that it may arise on the finding given by it. The case at hand falls into the fourth category of enumeration as done above.
12. The question referred is answered in the negative, in favour of the Revenue and against the assessee.