Porwal Udyog (India) vs Commissioner of Income Tax

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

"Whether, on the facts and in the circumstances of the case, the Inspecting Assistant Commissioner had any jurisdiction to impose penalty u/s 271(1)(c) on March 23, 1977, after Sub-section (2) of Section 274 was deleted with effect from April 1, 1976, by the Taxation Laws (Amendment) Act, 1975 ?"

When the reference came up for hearing before a Division Bench of this court, the court by its order dated September 17, 1980, directed the Tribunal to send a supplementary statement of the case and specify the date on which the matter regarding imposition of penalty was referred by the Income Tax Officer to the Inspecting Assistant Commissioner. In pursuance of that direction, the Tribunal has now sent a supplementary statement of the case. The Tribunal has found that the case for the levy of penalty u/s 271(1)(c) of the Act was referred by the Income Tax Officer, "E" Ward, Circle-I, Indore, to the Inspecting Assistant Commissioner, Range-I, Indore, for further proceedings, vide his memo dated September 11, 1975.

In view of the facts stated in the supplementary statement of the case, it must be held, following a Division Bench decision of this court in Commissioner of Income Tax Vs. A.N. Tiwari, that as the reference was made to the Inspecting Assistant Commissioner u/s 274(2) of the Act in accordance with the provisions of that section, as it stood at the time of making the reference, the reference would not be invalidated by the subsequent amendment deleting Section 274(2) from April 1, 1976. Shri Choudhary, learned counsel for the assessee, contended that there was no material on record to show whether the matter which was referred by the Income Tax Officer to the Inspecting Assistant Commissioner fulfilled the requirement of a valid reference u/s 274(2) of the Act.

Now, it is not disputed that the Act or the Rules framed under the Act do not prescribe any form in which a reference is required to be made u/s 274(2) of the Act. The answer to the question as to which was the date when the reference was made, will depend upon the ascertainment of the fact when the Income Tax Officer, who had jurisdiction, had moved the Inspecting Assistant Commissioner having jurisdiction to initiate proceedings against an assessee for imposition of penalty u/s 274(2) of the Act. As the Income Tax Officer in the instant case had referred to the Inspecting Assistant Commissioner having jurisdiction the question of imposition of penalty u/s 271(1)(c) of the Act on September 11, 1975, it must be held that a valid reference was made by the Income Tax Officer to the Inspecting Assistant Commissioner u/s 274(2) of the Act prior to April 1, 1976. In this view of the matter, the Tribunal, in our opinion, was justified in law in holding that the Inspecting Assistant Commissioner had jurisdiction to impose penalty u/s 271(1)(c) of the Act on the assessee.

Our answer to the question referred to this court is, therefore, in the affirmative and against the assessee. In the circumstances of the case, parties shall bear their own costs of this reference.