Jurisdiction at final order stage governs penalty powers after amendment withdraws authority from pending tax proceedings

An adjudicating authority must possess jurisdiction on the date of the final penalty order, not merely when penalty proceedings are initiated. After the Taxation Laws (Amendment) Act, 1975 withdrew the Inspecting Assistant Commissioner's power under section 274(2) with effect from 1 April 1976, pending references could not be completed by that authority under section 271(1)(c). The proper authority to impose penalty after the amendment was the Income-tax Officer, so the earlier referring authority could not validly conclude the matter once its jurisdiction had been removed.

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Issues: Whether the Inspecting Assistant Commissioner retained jurisdiction to levy penalty under section 271(1)(c) of the Income-tax Act, 1961, after 1 April 1976, when sub-section (2) of section 274 stood deleted, although the penalty proceedings had been initiated earlier.

Analysis: The controlling question was whether the authority making the final penalty order must possess jurisdiction not only when the matter is first referred but also on the date of the final adjudication. The amendment brought by the Taxation Laws (Amendment) Act, 1975, with effect from 1 April 1976, withdrew the Inspecting Assistant Commissioner's power under section 274(2). Once that jurisdiction stood withdrawn, pending references could not be concluded by that authority. The proper authority to impose penalty after the amendment was the Income-tax Officer.

Conclusion: The Inspecting Assistant Commissioner had no jurisdiction to pass the penalty order after 1 April 1976, and the question was answered in the affirmative, in favour of the assessee and against the Department.

Ratio Decidendi: An adjudicating authority must possess jurisdiction on the date of the final order, and where the statute withdraws that jurisdiction, pending proceedings cannot be concluded by the erstwhile authority.

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