Thanikkachalam, J.
1. In pursuance of the direction given by this Court, the Tribunal referred the following question for the opinion of this Court, under s. 256(2) of the IT Act, 1961 :
'Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the ITO had no jurisdiction to levy penalty under s. 271(1)(c) in this case, for the asst. yr. 1965-66 ?'
2. For the asst. yr. 1965-66, the assessee filed a return on 8th December, 1969, and the assessment was completed on 20th March, 1970. Penalty proceedings for concealment of income in that return were initiated. But the original assessment completed on 20th March, 1970, was set aside by the AAC on appeal. Then it was redone on 13th November, 1972. Penalty proceedings were again initiated and a minimum penalty of Rs. 21,831 was levied by the ITO. There was also a search in the premises of the assessee on 18th October, 1973, when fixed deposit receipt for Rs. 10,000 was recovered. The deposit relates to the accounting year relevant to this assessment year, but being when discovered in 1973 only a renewal from time to time. As the source for this deposit was not satisfactorily explained, that Rs. 10,000 was added as income from other sources by reassessment, dt. 22nd July, 1974. Then penalty proceedings for concealment of this sum were initiated under s. 271(1)(c) of the Act. The ITO himself levied the penalty. The assessee appealed to the AAC against the levy of penalty by the ITO and the AAC cancelled the penalty, on the principal reasoning that the Supreme Court judgment in CIT & Anr. vs . Anwar Ali : [1970]76ITR696(SC) , about income nature applies to the facts of this case.
Aggrieved, the Department filed appeal before the Tribunal and the same was dismissed. The Tribunal found that the concealment was in the original return and not in the revised return and, therefore, the law as on the date of filing the return should have been applied. Under the law, as on the date of filing the original return, the ITO had no jurisdiction to levy the penalty, as the minimum penalty leviable was about Rs. 10,000 and this should have been referred to the IAC for levy of penalty. Thus the penalty was cancelled by the Tribunal on the ground of jurisdiction and it did not express any opinion on the merits of the case of levy of penalty.
Before us, learned standing counsel for the Department submitted that the penalty proceedings under s. 271(1)(c) were initiated after the reassessment was completed on 22nd July, 1974. Therefore, as per the law applicable as on that date as per the provisions of s. 274(2) of the Act, the ITO would have jurisdiction to levy penalty if the quantum of penalty is less than Rs. 25,000.
In the present case, the penalty levied was only Rs. 10,000. Therefore, the penalty levied by the ITO is in order and the Tribunal was not correct in stating that the penalty ought to have been levied by the IAC, since the levy of penalty of Rs. 10,000 was above Rs. 1,000 as per the law as it stood earlier to the amended provision of s. 274(2) by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1st April, 1971. It was, therefore, submitted that the Tribunal was not correct in cancelling the penalty on the question of jurisdiction.
3. We have also heard learned counsel appearing for the assessee, who supported the order passed by the Tribunal.
4. The fact remains that the reassessment was completed on 22nd July, 1974. Thereafter the penalty proceedings were initiated under s. 271(1)(c) of the Act. The penalty was levied at Rs. 10,000. Sec. 274(2) of the IT Act, 1961, was amended by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1st April, 1971. As per the amended provision, the ITO can levy penalty up to Rs. 25,000. In the present case, the penalty levied was Rs. 10,000. Therefore, the ITO was perfectly justified in levying the penalty of Rs. 10,000 in the present case.
5. In Varkey Chacko vs . CIT : [1993]203ITR885(SC) , the Supreme Court, while considering the provisions of s. 271(1)(c) and s. 274(2) [before and after amendment by the Taxation Laws (Amendment) Act, 1970], held as under :
'Penalty for concealment of particulars of income or for furnishing inaccurate particulars of income can be imposed only when the assessing authority is satisfied that there has been such concealment or furnishing of inaccurate particulars. Proceedings for the imposition of penalty can, therefore, be initiated only after an assessment order has been made which finds such concealment or furnishing of inaccurate particulars. Who, at this point of time, has the authority to impose the penalty is what is relevant. Whoever this authority may be, he is obliged to impose such penalty as was permissible under the law in that behalf on the date on which the offence of concealment was committed, that is to say, on the date of the offending return. The two aspects must be firmly borne in mind, namely, who may impose the penalty and in what measure.'
6. A similar view was also taken by the Supreme Court in the decision in CIT vs . Dhadi Sahu : [1993]199ITR610(SC) .
7. In view of the amended provision, in the present case, the ITO was justified in levying penalty of Rs. 10,000. Therefore, the Tribunal was not correct in stating that the law as it stood on the date when the original return was filed alone would be applicable in levying penalty under s. 271(1)(c). However, it remains to be seen that the Tribunal has not dealt with the appeal on the merits. Therefore, when passing the consequential order, it is open to the assessee to contest the appeal on the merits. Accordingly, we answer the question referred to us in the negative and in favour of the Department. No costs.