Addl. Commissioner of Income Tax vs Nandkishore (Legal heir of Mohanlal Ramniwal)

Sohani, J.—By this reference u/s 256(1) of the I.T. Act, 1961, hereinafter called "the Act", the Income Tax Appellate Tribunal, Indore Bench, has referred the following questions of law to this court for its opinion.

"1. Whether, on the facts and in the circumstances of the case, the amendment of Section 274(2) of the Income Tax Act, 1961, w. e. f. April 1, 1971, had the effect of taking away the jurisdiction of the IAC to proceed with penalty proceedings for the five assessment years in question already referred to him under that provision prior to April 1, 1971, where the amount of income as determined by the ITO on assessments in respect of which the particulars had been furnished, was a sum less than twenty-five thousand rupees in each case ?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amendment made in Section 274(2) w. e. f. April 1, 1971, extended the time-limit for finalisation of penalty proceedings ? "

The material facts giving rise to this reference briefly are as follows: The assessee is now represented by his legal representative. The assessee had filed return in pursuance of a notice u/s 148 of the Act on I 3th March, 1970. On completing the assessment, the ITO was of the view that the assessee was guilty of concealment of a part of. his income and he accordingly initiated penalty proceedings u/s 271(1)(c) of the Act. As the minimum penalty imposable under the Act exceeded a sum of Rs. 1,000, the ITO referred the matter to the IAC who, after hearing the assessee, found, by his order dated 17th March, 1973, that the assessee was guilty of concealment. Penalty was accordingly imposed on the assessee. Aggrieved by the order passed by the IAC, the assessee preferred an appeal before the Tribunal. It was contended before the Tribunal on behalf of the assessee that the provisions of Section 274(2) of the Act were amended with effect from 1st April, 1971, by the T. L. (Amend.) Act, 1970, and on the date when the IAC passed the impugned order, he did not have jurisdiction to impose penalty on the assessee. The contention was upheld by the Tribunal. It was also contended on behalf of the assessee that the period of limitation prescribed for finalisation of penalty proceedings had expired and the impugned order passed by the IAC was illegal on that account. This contention, however, was not upheld by the Tribunal. But in view the decision of the Tribunal on the question of the jurisdiction of the IAC, the Tribunal allowed the appeal. At the instance of the Department, the Tribunal has referred the aforesaid questions of law to this court for its opinion:

Now, as regards both the questions, the matter, is in our opinion, concluded by the two decisions of this court. In Commissioner of Income Tax Vs. A.N. Tiwari, , a Division Bench of this court has observed as follows (p. 685):

" Now Section 274(2) as it stood before 1st April, 1971, required the ITO to refer the case to the IAC, if the minimum penalty imposable exceeded a sum of Rs. 1,000. The IAC, on a reference made by the" ITO, got jurisdiction to impose penalty in such cases. The references validly made by the ITO before 1st April, 1971, were not invalidated by the amendment. In such pending references, in our opinion, the IAC continued to have jurisdiction to impose penalty even though the amount of income in respect of which the particulars were concealed did not exceed Rs. 25,000 and the case did not satisfy the requirement of Section 274(2) as amended. "

Similarly, in Commissioner of Income Tax Vs. Fakirchand Dayaram, infra) decided by a Division Bench of this court, it has been held that the amended provision enlarging the period of limitation would apply if in a particular penalty proceeding pending before the IAC the period of limitation was still running on 1st April, 1971.

In view of the aforesaid decisions, our answer to the first question referred to us is that the amendment of Section 274(2) of the Act, which came into force on 1st April, 1971, did not have the effect of taking away the jurisdiction of the IAC to proceed with the penalty proceedings in question. Our answer to the second question is that the Tribunal was justified in holding that the amendment made in Section 274(2) of the Act with effect from 1st April, 1971, extended the period of limitation for finalisation of penalty proceedings.

For these reasons, our answer to the first question referred to this court is in the negative and against the assessee. Our answer to the second question referred to this court is in the affirmative and in favour of the Department. In the circumstances of the case, parties shall bear their own costs of this reference.