Rajasthan H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the learned Inspecting Assistant CIT did not have the power after March 31, 1976, consequent to the deletion of s. 274(2) of the IT Act, 1961, w.e.f. April 1, 1976, to levy penalty under s. 271 (1)(c) of the Act even in a case in which the penalty proceedings had been initiated before April 1, 1976, and were pending with the IAC on that date, and in cancelling the penalty of Rs. 5,000 levied on the assessee in this case ?

High Court Of Rajasthan

CIT vs. New Beawar Traders

Sections 271(1)(c), 274(2)

Asst. Year 1967-68

J.S. Verma, C.J. & Milap Chandra, J.

IT Ref. No. 14 of 1981

20th August, 1987

Counsel Appeared

B.R. Arora, for the Revenue : Rajendra Singhvi & D.S. Shishodia, for the Assessee

BY THE COURT :

This reference under s. 256(1) of the IT Act, 1961, at the instance of the Revenue was to answer the following question of law, namely: ” Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the learned Inspecting Assistant CIT did not have the power after March 31, 1976, consequent to the deletion of s. 274(2) of the IT Act, 1961, w.e.f. April 1, 1976, to levy penalty under s. 271 (1)(c) of the Act even in a case in which the penalty proceedings had been initiated before April 1, 1976, and were pending with the IAC on that date, and in cancelling the penalty of Rs. 5,000 levied on the assessee in this case ?”

2. The relevant assessment year is 1967-68. The assessee filed a return showing an income of Rs. 33,259 and the assessment was completed by the ITO on a total income of Rs. 94,668 on March 30, 1972. The amount was reduced in appeal to Rs. 76,168. The IAC gave notice to the assessee under s. 274(2) r/w s. 271 of the Act on March 30, 1972, and ultimately by order dated September 15, 1977, the IAC imposed a penalty of Rs. 5,000 under s. 271(1)(c) of the Act.

The assessee contended that the IAC had no jurisdiction to impose penalty by order dated September 15, 1977, passed subsequent to April 1, 1976, when sub-s. (2) of s. 274 had been deleted. This contention of the assessee was accepted by the Tribunal. Hence, this reference at the instance of the Revenue. Admittedly, the IAC had commenced the penalty proceedings by issuing notice to the assessee under s. 274(2) r/w s. 271 of the Act on March 30, 1972, i.e., much prior to the deletion of sub-s. (2) of s. 274 w.e.f. April 1, 1976. It has been held by us in CIT vs. Kishan Lal Kanhya Lal (1987) 66 CTR (Raj) 191 : (1988) 171 ITR 165 (D.B. IT Ref. No. 8 of 1981), decided today, and for the reasons given therein, the IAC had jurisdiction to impose penalty in such matters where the IAC was seized of the penalty proceedings prior to April 1, 1976. For the same reason, it has to be held that the IAC had jurisdiction to impose penalty in the present case since he was already seized of the penalty proceedings prior to April 1, 1976.

5. Consequently, the reference is answered in favour of the Revenue and against the assessee by holding that the Tribunal was not justified in taking the view that the IAC had no jurisdiction to impose penalty after March 31, 1976, even in a case like the present one where the penalty proceedings were pending before the IAC on that date. Since the Tribunal has not decided the appeal before it on merits, the appeal shall be decided afresh. No costs.

[Citation : 171 ITR 167]

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