Income-tax---

----Penalty---Concealment of income---Jurisdiction to levy penalty---Law applicable---Effect of deletion of subsection (2) of S.274 w.e.f. 1-4-1976-- Penalty proceedings pending before IAC on 31-3-1976---IAC competent to continue proceedings and pass appropriate order---Indian Income Tax Act, 1961, Ss.271 & 274.

Where penalty proceedings were referred to the Inspecting Assistant Commissioner under section 274(2) of the Income Tax Act, 1961, prior to its amendment with effect from April 1, 1976, and the Inspecting Assistant Commissioner was, thus, seized of the matter, he would not lose seizin thereof on account of the deletion of subsection (2) of section 274 by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976, and the Inspecting Assistant Commissioner would not lose the jurisdiction to continue with the proceedings pending before him on March 31, 1976.

CIT v. Sharadamma (Smt.) (1996) 219 ITR 671 (SC) fol.

CIT v. Seth Purushothamdas Dwarkadas (1996) 221 ITR 304 (Mad.) ref.

C.V. Rajan for the Commissioner.

JUDGMENT

K.ATHANIKKACHALAM, J -At the instance of the Department, the Tribunal referred the following question for the opinion of this Court under section 256(1) of the Income Tax Act, 1961:

"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.65,000 imposed for the assessment year 1972-73?"

According to the facts of this case, the date of filing of the return was March 31, 1972. The assessment was made on February 7, 1975. Reference was made by the Income-tax Officer to the Inspecting Assistant Commissioner before April 1, 1976. The Inspecting Assistant Commissioner levied penalty on March 26, 1977, at Rs.65,000. The Inspecting Assistant Commissioner who was vested with the jurisdiction to levy penalty was no longer vested with such jurisdiction to levy penalty after April 1, 1976, since section 274(2) vesting the power with the Inspecting Assistant Commissioner had been omitted by section 65 of the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976. It was the Department's view that since the Inspecting Assistant Commissioner was already seized of the matter, the jurisdiction continued to vest with him. The Tribunal held that the Inspecting Assistant Commissioner has no jurisdiction to levy penalty Accordingly, the penalty was cancelled, which was levied under section 271(1)(c) of the Income-tax Act. However, this Court in CIT v. Seth Purusotamdas Dwarkadas (1996) 221 ITR 304, held that when the penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961, were referred to the Inspecting Assistant Commissioner, by the Income-tax Officer, section 274(2) was not amended and, therefore, the Inspecting Assistant Commissioner had jurisdiction to complete the penalty proceedings, even though the order under section 271(1)(c) was passed on March 30, -1977, i.e., after the amendment of section 274(2) by the Taxation Laws (Amendment) Act, 1975, which came into effect from April- 1, 1976. In CIT v. Smt. R. Sharadamma (1996) 219 ITR 671, the Supreme Court while considering the question of similar nature held that once the Inspecting Assistant Commissioner was, thus, seized of the matter, he did not lose seizing thereof on account of the deletion of subsection (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. In the present case, the Tribunal held that the Inspecting Assistant Commissioner had no jurisdiction to levy penalty under section 271(1)(c). In view of the decision of the Supreme Court referred to above, the orders passed by the Tribunal are not correct. Accordingly, the Tribunal is directed to dispose of the penalty appeal on the merits. We answer the question in the negative and in favour of the Department. No costs.

M.B.A./4060/FCReference answered.