Pending penalty proceedings retained jurisdiction despite deletion of section 274(2), validating the penalty order under income-tax law.

Penalty proceedings initiated and concluded before 1 April 1976 were not divested of jurisdiction by the amendment deleting section 274(2) of the Income-tax Act. The Inspecting Assistant Commissioner therefore retained authority to impose penalty under section 271(1)(c) in matters already pending before him. On that basis, the Tribunal was wrong to cancel the penalty for want of jurisdiction, and the cancellation was held unsustainable. The legal position followed the Supreme Court view that pending proceedings were unaffected by the deletion of section 274(2).

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Issues: Whether the Inspecting Assistant Commissioner retained jurisdiction to impose penalty under section 271(1)(c) of the Income-tax Act, 1961 after the amendment to section 274, and whether the Tribunal was justified in cancelling the penalty on the ground of want of jurisdiction.

Analysis: The relevant penalty proceedings had already been initiated and the penalty order had been passed before 1 April 1976. In view of the Supreme Court ruling that the Inspecting Assistant Commissioner did not lose jurisdiction over proceedings already pending before him upon deletion of section 274(2), the amendment did not divest jurisdiction in such pending matters.

Conclusion: The Inspecting Assistant Commissioner had jurisdiction to impose the penalty, and the Tribunal's order cancelling the penalty for want of jurisdiction was unsustainable. The question was answered in favour of the Revenue and against the assessee.

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