Bombay High Court
Commissioner Of Income-Tax vs Abdullabhai Hassanali on 16 January, 1987
Equivalent citations: [1988]169ITR22(BOM)
Author: S.P. Bharucha
Bench: S.P. Bharucha
JUDGMENT S.P. Bharucha, J.
1. The question we are asked to answer in this reference under section 256(1) of the Income-tax Act, 1961, made at the instance of the Revenue, reads thus :
"Whether, on the facts and in the circumstances of the case, the Inspecting Assistant Commissioner had jurisdiction to impose the penalty by passing an order under section 271(1)(c) read with section 274(2) ?"
2. The assessment year concerned is 1966-67. The Income-tax Officer made the order of assessment on September 28, 1970. He noted in the order that penalty proceedings under section 271(1)(c) were started and required the issue of notice under section 274. The Income-tax Officer made the reference to the Inspecting Assistant Commissioner to determine the quantum of penalty only on February 15, 1973. He did so because the minimum penalty imposable when he made the assessment was Rs. 18,968. By February 15, 1973, the minimum penalty imposable had been reduced to Rs. 1,882 by reason of the quantum appeal filed by the assessee. The Inspecting Assistant Commissioner, by his order dated March 27, 1973, imposed a penalty of Rs. 3,000 upon the assessee. The assessee carried the matter in regard to the imposition of penalty to the Income-tax Appellate Tribunal. It was contended before the Tribunal that section 274(2) was amended with effect from April 1, 1971, and that thereafter the Inspecting Assistant Commissioner had jurisdiction only in cases in which the minimum penalty imposable exceeded the sum of Rs. 25,000 whereas in paragraph 5 of this order, the Inspecting Assistant Commissioner had stated that the minimum penalty was Rs. 1,882. Following an earlier view taken by the Nagpur Bench of the Tribunal that the amendment of section 274(2) was a procedural amendment and applicable in all pending cases, the Tribunal allowed the appeal and quashed the penalty. It is out of this order of the Tribunal that the question referred to us arises.
3. Mr. Jetly, learned counsel for the Revenue, relied upon the judgment of the Nagpur Bench of this court in CIT v. Rizumal Pherumal [1988] 169 ITR 25. This judgment was followed by this Bench on January 14, 1987, in Income-tax Reference No. 149 of 1974 CIT v. Deorao Shrawan Maundekar [1988] 169 ITR 19 (supra). We then read the judgment earlier mentioned as indicating that the relevant date for the purpose of determining who had the power to levy a penalty was the date on which the Income-tax Officer decided that the penalty must be levied and we followed it. We may note only that neither in the earlier matter nor in the matter before us was there any argument that the date upon which the Income-tax Officer had recorded his satisfaction in regard to the levy of penalty was other than the date upon which he had made a reference in regard to the quantum of penalty to the Inspecting Assistant Commissioner.
4. Mr. Thakkar, learned counsel for the assessee, drew our attention to a judgment of this court which has taken such an argument into account. This is the judgment in CIT v. Gangadas [1984] 150 ITR 437 (Bom). The Income-tax Officer passed an order of assessment in this matter on July 31, 1969, and noted therein that penalty proceedings under section 271(1)(c) were initiated. He referred the case to the Inspecting Assistant Commissioner in regard to the imposition of penalty only on June 28, 1971. The penalty was thereafter imposed. It was challenged on the basis that on the date on which the reference to the Inspecting Assistant Commissioner was made, the Inspecting Assistant Commissioner, by reason of the amendment to the relevant provision, had lost the jurisdiction to determine the penalty except where the amount of income in respect of which particulars were concealed exceeded Rs. 25,000. This court came to the conclusion that the making of a reference under section 274(2) by the Income-tax Officer was more than a ministerial act. At the time when he made a reference, the Income-tax Officer had to make a conscious determination of the question of jurisdiction. When the Income-tax Officer made the reference in that matter, i.e., on June 28, 1971, it was the Income-tax Officer and not the Inspecting Assistant Commissioner who had the jurisdiction to levy the penalty. The reference made to the Inspecting Assistant Commissioner and the penalty imposed by the Inspecting Assistant Commissioner were, therefore, bad in law.
5. A similar view was taken in similar circumstances by the Nagpur Bench of this court in CIT v. Bhutani Enterprises [1984] 147 ITR 389.
6. Having regard to the judgments of this court delivered under circumstances identical to those that exist before us, we must answer the question posed to us in the negative and in favour of the assessee.
7. There shall be no order as to costs.