Penalty proceedings without jurisdiction do not end validly initiated action; competent officer must conclude the matter lawfully.

An order cancelling penalty under section 271(1)(c) was upheld, but an order passed by an officer lacking jurisdiction did not bring validly initiated penalty proceedings to an end. Those proceedings had to be concluded lawfully by the competent Income-tax Officer. The issue of limitation under section 275 was left open, with liberty to the competent officer to consider it at final disposal. The reference was answered in the affirmative and against the Revenue.

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Issues: Whether the cancellation of penalty under section 271(1)(c) was justified, and whether the penalty proceedings had come to an end despite the order being passed by an lacking jurisdiction.

Analysis: The validity of the initiation of penalty proceedings was not in dispute. An order passed by an officer without jurisdiction did not terminate proceedings that had been validly initiated; such proceedings had still to be brought to a lawful conclusion by the officer having jurisdiction. The question of limitation under section 275 was left open, with liberty to the competent officer to consider it at the stage of final disposal.

Conclusion: The cancellation of penalty was upheld, but the penalty proceeding was held not to have been finally concluded and remained to be disposed of by the competent Income-tax Officer. The reference was answered in the affirmative and against the Revenue.

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