Penalty jurisdiction must exist on the date of order; withdrawn competence invalidates levy despite earlier valid reference.

Penalty jurisdiction depends on the authority possessing competence on the date of the order, not merely when the reference was made. Although the penalty reference was valid when initiated, section 65 of the Taxation Laws (Amendment) Act, 1975 withdrew the Inspecting Assistant Commissioner's jurisdiction from 1 April 1976. Because the penalty order was passed after that withdrawal, the authority lacked competence to levy the penalty. The issue was resolved in favour of the assessee and against the Revenue.

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Issues: Whether the Inspecting Assistant Commissioner had jurisdiction to impose penalty on the date of passing the penalty order after the statutory withdrawal of such jurisdiction.

Analysis: The reference for penalty had been made when jurisdiction vested in the Inspecting Assistant Commissioner, but by virtue of section 65 of the Taxation Laws (Amendment) Act, 1975, that jurisdiction stood withdrawn with effect from 1 April 1976. The controlling rule applied was that, for valid levy of penalty, the authority must possess jurisdiction not only on the date of reference but also on the date of decision. Since the order was made after the jurisdiction had been divested, the authority lacked competence to decide the penalty matter.

Conclusion: The Inspecting Assistant Commissioner had no jurisdiction to levy penalty on the date of the order. The issue was decided in favour of the assessee and against the Revenue.

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