COMMISSIONER OF INCOME-TAX VS STAR OIL MILLS
1999 P T D 2836
[228 I T R 26]
[Madras High Court (India)]
Before K.A. Swami, C. J. and A.R. Lakshmanan, J
COMMISSIONER OF INCOME-TAX
Versus
STAR OIL MILLS
Tax Case No. 149 of 1982 (Reference No 63 of 1982), decided on 18/06/1996.
Income-tax---
----Penalty---Concealment of income---Law applicable---Jurisdiction to impose penalty ---I.A.C.---Effect of deletion of S.274(2) with effect from 1-4-1976---Cases pending before I.A.C. on March 31, 1976---I.A.C. has jurisdiction lo continue with cases and pass appropriate orders---Indian Income Tax Act, 1961, ' Ss.271(1)(c) & 274.
In the case of imposition of penalty where a reference to' the Inspecting Assistant Commissioner had been made in accordance with the law in force on the date of , reference and the Inspecting Assistant Commissioner was, thus, seized of the matter, he would not lose seisin thereof on account of the deletion of subsection (2) of section 274 of the Income Tax Act, 1961. The Inspecting Assistant Commissioner would not lose the jurisdiction to continue with the proceedings pending before him on March 31, 1976, by virtue of the deletion of subsection (2) of section 274 by the Taxation Laws (Amendment) Act. 1975, with effect from April 1, 1976. He would be entitled to continue with those proceedings and pass appropriate orders according to law.
CIT v. Sharadamma (R.) (Smt.) (1996) 219 ITR 671 (SC) fol.
Abdul Azeez (R.) v. CIT (1981) t28 IT$ 547 (Kar.); CIT v. Dhadi Sahu (1993) 199 ITR 610 (SC) and Manujendra Dutt v. Purnedu Prosad Roy Chowdhury AIR 1967 SC 1419 ref.
S.V. Subramaniam for C. V. Rajan for the Commissioner.
Nemo for the Assessee.
JUDGMENT
K. A. SWAMI, C. J.---This reference arises out of the order, dated November 27, 1980, passed by the Income-tax Appellate Tribunal, Madras Bench, in I.T.A. No.602/Mds. of 1978-79 relating to the assessment year 1973-74.
The question referred to us for decision is as follows:
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the Inspecting. Assistant Commissioner had no jurisdiction to impose penalty under section 271(1)(c) in this case and accordingly in cancelling the penalty of Rs.70,600 levied for the assessment year 1975-76?"
The Tribunal by the order referred to above has held that consequent to the coming into force of the Taxation Laws (Amendment) Act, 1975, on April 1, 1976, the Inspecting Assistant Commissioner ceased to have jurisdiction in the matter, therefore, he could not have passed an order of penalty on March 1, 1978. On this ground, the Tribunal has set aside the penalty.
In this case, we are only concerned with the order of the Tribunal setting aside the penalty. The assessment has become final. The necessary facts of the case are as follows:
The assessee is a firm consisting of two partners dealing in groundnut kernels as also manufacture of groundnut oil. On August 20, 1973, it filed a return admitting an income of Rs.59,032. During the course of the examination of the accounts of the assessee-firm, it was noticed that the assessee-firm had sold kernels to another firm by name Star Oil Seeds Traders. This firm was claimed to be a partnership firm consisting of the wives of the two partners of the assessee-firm. This firm was said to have come into existence by a deed drawn up on April 1, 1972. That firm was also carrying on the same business as that of the assessee and the goods sold by that firm were to the, same company, namely, Hindustan Lever Ltd. The Income-tax Officer, therefore, concluded that the firm, Star Oil Seeds Traders, was nova genuine firm, but was only a business of the assessee-firm carried on in the name of another firm. He refused registration to the other firm and included the income in the assessment of the assessee-firm. As a result of this, the total income of the assessee-firm was assessed at Rs.1,41,927 as against Rs.58,032 returned. Since the income of the other firm was not included in the return filed by the assessee-firm, the Income-tax Officer initiated penalty action under section 271(1)(c) and referred the matter to the Inspecting Assistant Commissioner as at the relevant time the penalty was to be 'imposed by the Inspecting Assistant Commissioner as the amount of penalty exceeded Rs.25,000. The Inspecting Assistant Commissioner by his order, dated March 1, 1978, imposed a penalty of Rs.70,600 under section 271(1)(c) as the addition has been confirmed by the Appellate Tribunal also on appeal. The assessee filed an appeal before the Appellate Tribunal against the penalty imposed by the Inspecting Assistant Commissioner.
As already stated, the Appellate Tribunal by its order, dated November 27, 1980, while holding on the merits that the -penalty is exigible, since the assessee has been found to be guilty of concealment, deleted the penalty on the ground that the Inspecting Assistant Commissioner had no jurisdiction to impose penalty due to the coming into force of the Taxation Laws (Amendment) Act, 1975.
Therefore, the question that arises for consideration is, whether the Inspecting Assistant Commissioner will continue to have jurisdiction even in a case where reference was made to him by the Income-tax Officer, at the time when the Inspecting Assistant Commissioner had jurisdiction to levy the penalty; in other words, whether the Inspecting Assistant Commissioner who was vested with jurisdiction properly under law, when the reference was made, could be said to have been divested of it, after it came to be amended.
We need not go into the question as to whether the amendment pertains to substantive or procedural law, as has been considered by the Tribunal, in view of the fact that the matter is directly covered by a decision of the Supreme Court in CIT v. Smt. R. Sharadamma (1996) 219 ITR 671. The Supreme Court after referring to another decision of the same Court in CIT v. Dhadi Sahu (1993) 199 ITR 610 and on overruling the decision of the Karnataka High Court in R. Abdul Azeez v. CIT (1981) 128 ITR 547 has held as follows (page 675):
"This Court pointed out that the view taken by it is also the view taken by the Gujarat, Patna, Punjab and Haryana, Bombay, Calcutta and Madhya Pradesh High Courts, whereas the Allahabad and Karnataka High Courts had taken a contrary view. The Court disapproved the contrary view taken by the Allahabad and Karnataka High Courts and approved the view taken by the other High Courts.
In our opinion, the principle underlying the said decision is squarely applicable herein. In this case also, a reference was made to the Inspecting Assistant Commissioner in accordance with the law in force on the date of reference. Once the Inspecting Assistant Commissioner was, thus, seized of the matter, he did not lose seisin thereof on account of the deletion of subsection (2) of section 274. This is also the principle underlying section 6 of the General Clauses Act.
We may also mention that in Dhadi Sahu's case, (1993) 199 ITR 610, this Court referred, inter alia, to the earlier decision of this Court in Manujendra Dutt v. Pumedu Prosad Roy Chowdhury, AIR 1967 SC 1419, which too was a case of deletion of section 29 of the Calcutta Thika Tenancy Act, 1949, by the Amendment Act of 1953. It was held by this Court that by virtue of the said deletion, the Controller, before whom the proceeding was pending, was not deprived of the jurisdiction to try the matter pending before him on the date of coming into force of the amending Act.
We are, therefore, of the,, view that the Inspecting Assistant Commissioner did not lose the jurisdiction to continue with the proceedings pending before him on March 31, 1976, by virtue of the deletion of subsection (2) of section 274 by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976. He was entitled to continue with those proceedings and pass appropriate orders according to law."
Accordingly, following the said judgment, the question referred to us for decision is answered in the negative and in favour of the Department. No order as to costs.
M.B.A./3039/FC???????????????????????????????????????????????????????????????????????????????? Reference answered.