Jurisdiction to impose penalty under section 271(1)(c) ended after section 274 was amended, so the penalty orders failed.

Amendment of section 274 by the Taxation Laws (Amendment) Act, 1975 deleted sub-section (2) and divested the Inspecting Assistant Commissioner of jurisdiction to impose penalty under section 271(1)(c) where the reference was made after the amendment took effect. On the stated facts, the reassessments were completed in 1976 and the penalty orders were passed thereafter, so the penalties were without jurisdiction. The cancellation of the penalty orders was therefore upheld in favour of the assessee and against the Revenue.

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Issues: Whether the penalty orders passed by the Inspecting Assistant Commissioner under section 271(1)(c) of the Income-tax Act, 1961 were without jurisdiction after the amendment to section 274 of the Act.

Analysis: The relevant assessment years were 1972-73 and 1973-74. The reassessments were completed on 30 April 1976, and the penalties were imposed on 31 July 1976. By the time the reference for penalty was made, section 274 had been amended by the Taxation Laws (Amendment) Act, 1975, with sub-section (2) deleted. As a result, the Inspecting Assistant Commissioner had been divested of jurisdiction to impose the penalty. The timing of any earlier reference before 1 April 1976 was not in issue.

Conclusion: The penalty orders were rightly cancelled as having been passed without jurisdiction, and the question referred was answered in the affirmative in favour of the assessee and against the Revenue.

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