Rajasthan H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the IAC had no jurisdiction to levy the impugned penalty under s. 271(1)(c) ?

Counsel Appeared

R.N. Surolia, for the Revenue

BY THE COURT :

This reference under s. 256(1) of the IT Act, 1961, is at the instance of the Revenue to decide the following question of law :

” Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the IAC had no jurisdiction to levy the impugned penalty under s. 271(1)(c) ? ”

The relevant assessment year is 1972-73.

2. The assessee is an individual. The ITO completed the assessment on March 22, 1975, assessing the total income at Rs. 51,747 making an addition therein of Rs. 36,000 as ” income from undisclosed sources “. The ITO also initiated penalty proceedings under s. 271(1)(c) of the Act and referred the matter to the IAC in view of the fact that the penalty leviable exceeded the jurisdiction of the ITO. The IAC after hearing the assessee imposed a penalty of Rs. 23,400 by his order dated January 17, 1977. The assessee’s appeal to the Tribunal succeeded. The Tribunal accepted the contention that the IAC had no jurisdiction to impose the penalty by order dated January 17, 1977, after the amendment by which sub-s. (2) of s. 274 of the Act had been deleted w.e.f. April 1, 1976. Hence, this reference at the instance of the Revenue.

3. We have already held in CIT vs. Sri Niwas Rice & Oil Industries [D.B IT Ref. No. 341 of 1980 decided on August 7, 1987(1988) 68 CTR (Raj) 60: (1988) 169 ITR 253(Raj)], following the decision in CIT vs. Shri Ram Prakash Saraf (1986) 51CTR (MP) 236:(1986) 160 ITR 860(MP), that the question of the IAC jurisdiction to impose penalty is to be determined with reference to the date on which the ITO made the reference to the IAC and not the date of initiation of penalty proceedings by the ITO. Applying this test, the question of the, IAC’s jurisdiction to impose penalty in the present case also has to be decided on the basis of the date on which the reference was made by the ITO to the IAC and not on the basis of the date on which the penalty proceedings were initiated by the ITO. In other words, only if the reference was made by the ITO to the IAC prior to April 1, 1976, when subs. (2) of s. 274 of the Act was deleted, the IAC would have jurisdiction to impose penalty, since the IAC’s jurisdiction was saved even after the deletion of subs. (2) of s. 274 only in respect of the references made to the IAC and pending with the IAC prior to April 1, 1976. The Tribunal has not applied this test for deciding the question of the IAC’s jurisdiction. Accordingly, the Tribunal was not justified in deciding the question of jurisdiction except on the basis of this test. The Tribunal is, therefore, required to decide the question afresh on the basis indicated above and with advertence to the above observations.

Consequently, the reference is answered in favour of the Revenue by holding that the Tribunal was not justified in deciding the question of the IAC’s jurisdiction to impose penalty with reference to the date of initiation of penalty proceedings by the ITO instead of the date of reference of the matter by the ITO to the IAC.

No costs.

[Citation : 169 ITR 255]