Rajasthan High Court - Jaipur
Commissioner Of Income-Tax vs Sri Niwas Rice And Oil Industries on 7 August, 1987
Equivalent citations: [1988]169ITR253(RAJ)
Author: J.S. Verma
Bench: J.S. Verma
JUDGMENT
1. This reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue is to decide the following question of law, namely:
" Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty levied under Section 271(1)(c) holding that the Inspecting Assistant Commissioner had no jurisdiction to levy the said penalty on March 23, 1978 ? "
2. The relevant assessment year is 1973-74. The Income-tax Officer completed the assessment on February 27, 1976, by including an amount of Rs. 53,457 to the returned income and he also initiated penalty proceedings under Section 271(1)(c) of the Act. Thereafter, the matter was referred by the Income-tax Officer to the Inspecting Assistant Commissioner since the amount of concealed income exceeded Rs. 25,000. The Inspecting Assistant Commissioner issued a show-cause notice to the assessee on March 1, 1978, and after obtaining the assessee's reply, imposed penalty under Section 271(1)(c) of the Act by an order dated March 23, 1978.
3. The assessee contended that the amendment deleting Sub-section (2) of Section 274 in the Income-tax Act by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976, had the result of divesting the Inspecting Assistant Commissioner of the jurisdiction to levy the penalty after that date. The Tribunal has accepted this contention of the assessee and cancelled the Inspecting Assistant Commissioner's order imposing penalty. Hence, this reference at the instance of the Revenue.
4. The effect of deletion of Sub-section (2) of Section 274 of the Income-tax Act, 1961, with effect from April 1, 1976, in the above manner was considered in CIT v. Shri Ram Prakash Saraf[1986] 160 ITR 860 (MP). It was held therein that the date of making reference to the Inspecting Assistant Commissioner by the Income-tax Officer is the determining factor and not the date of initiation of penalty proceedings by the Income-tax Officer. In other words, even when the penalty proceedings were initiated by the Income-tax Officer prior to April 1, 1976, if the reference by the Income-tax Officer to the Inspecting Assistant Commissioner was made subsequent to April 1, 1976, when Sub-section (2) of Section 274 of the Act was deleted, then the reference made to the Inspecting Assistant Commissioner was incompetent and the Inspecting Assistant Commissioner had no jurisdiction to impose the penalty. It is only the references made to the Inspecting Assistant Commissioner by the Income-tax Officer prior to April 1, 1976, which are saved and not those references which were made after April 1, 1976. The same view was taken in some other decisions of the Madhya Pradesh High Court referred to therein and also rendered subsequently. No decision taking a contrary view has been cited before us. We do not find any reason to take a different view.
5. From the above principle, it follows that mere initiation of penalty proceedings on February 27, 1976, by the Income-tax Officer prior to the deletion of Sub-section (2) of Section 274 of the Act with effect from April 1, 1976, did not have the effect of saving the jurisdiction of the Inspecting Assistant Commissioner to impose the penalty unless a reference on that basis had also been made by the Income-tax Officer to the Inspecting Assistant Commissioner prior to April 1, 1976. In the facts stated in the statement of case as well as the Tribunal's order, we do not find any mention of the date on which the reference was made by the Income-tax Officer to the Inspecting Assistant Commissioner and the only dates mentioned are March 1, 1978, as the date of show-cause notice given by the Inspecting Assistant Commissioner and March 23, 1978, as the date of the Inspecting Assistant Commissioner's order imposing penalty. Obviously, the Tribunal did not decide this point on the basis of the date of reference, which really is the determining factor for deciding the point. The Tribunal shall, therefore, decide the matter afresh on this basis.
6. Consequently, the reference is answered by holding that the Tribunal was not justified in deciding the matter of the Inspecting Assistant Commissioner's jurisdiction to levy the penalty by an order dated March 23, 1978, except on the basis of the date on which the reference was made by the Income-tax Officer to the inspecting Assistant Commissioner. The Tribunal is, therefore, required to decide the matter afresh with advertence to the above observations.
7. No order as to costs.