Penalty jurisdiction depended on pre-1 April 1976 reference, not mere prior initiation of proceedings.

After deletion of section 274(2) of the Income-tax Act with effect from 1 April 1976, the Inspecting Assistant Commissioner retained penalty jurisdiction only where the reference had already been made before that date. Mere commencement of penalty proceedings before 1 April 1976 did not preserve jurisdiction if the reference was made later. On that basis, the Inspecting Assistant Commissioner lacked jurisdiction to levy the penalty.

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Issues: Whether the Inspecting Assistant Commissioner of Income-tax had jurisdiction to levy penalty where the reference to him was made after 1 April 1976, notwithstanding that penalty proceedings had been initiated earlier.

Analysis: On the deletion of sub-section (2) of section 274 of the Income-tax Act, 1961, with effect from 1 April 1976, the Inspecting Assistant Commissioner retained jurisdiction to levy penalty only where the reference had been made to him before that date. Mere initiation of penalty proceedings before 1 April 1976 was held to be insufficient if the reference itself was made subsequently.

Conclusion: The Inspecting Assistant Commissioner had no jurisdiction to levy the penalty in the present case.

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