Penalty proceedings remain valid if initiated correctly, but must be concluded by the officer with jurisdiction.

Penalty imposed under section 271(1)(c) was treated as without jurisdiction because the Inspecting Assistant Commissioner lacked authority after the statutory amendment. The initiation of penalty proceedings, however, remained valid, and a validly initiated proceeding does not end merely because it was disposed of by an officer without jurisdiction. The matter had to be concluded by the Income-tax Officer having jurisdiction, while the question of limitation under section 275 was left open for consideration at that stage. The cancellation of the penalty was therefore upheld, and the proceeding was held not to have culminated finally.

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Issues: Whether the cancellation of penalty under section 271(1)(c) was justified where the penalty had been imposed by an officer lacking jurisdiction, and whether the proceedings had nevertheless come to an end.

Analysis: The penalty order was treated as without jurisdiction because, after amendment of the Act, the Inspecting Assistant Commissioner was not competent to impose the penalty. At the same time, the initiation of penalty proceedings was held to be valid. A proceeding validly initiated does not terminate merely because it was disposed of by an lacking jurisdiction; it must be finalised by the officer who has jurisdiction. The question of limitation under section 275 was not decided, and the Income-tax Officer was left free to consider it while completing the matter.

Conclusion: The cancellation of the penalty was upheld and the question was answered in the affirmative, against the Revenue. The penalty proceeding was held not to have culminated and was required to be concluded by the Income-tax Officer having jurisdiction.

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