Penalty jurisdiction under section 274(2) survived where the reference was made before 1 April 1976 and remained pending.

Jurisdiction of the Inspecting Assistant Commissioner to impose penalty under section 274(2) of the Income-tax Act, 1961 depended on whether the reference had been made before 1 April 1976. A reference made after that date, after deletion of sub-section (2), was incompetent and could not confer penalty jurisdiction; however, a reference made before 1 April 1976 and still pending on that date was saved and remained valid. Because the reference here was made on 14 March 1972 and was pending on 1 April 1976, the authority had jurisdiction to levy penalty, and the Revenue succeeded.

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Issues: Whether the Inspecting Assistant Commissioner lacked jurisdiction to levy penalty after 1 April 1976 where the Income-tax Officer had referred the matter to him on 14 March 1972 and the reference was pending before that date.

Analysis: The jurisdiction of the Inspecting Assistant Commissioner depended on the date of reference under section 274(2) of the Income-tax Act, 1961. A reference made after 1 April 1976, after deletion of sub-section (2), was incompetent and did not confer jurisdiction to levy penalty, but a reference made before that date and pending on 1 April 1976 was saved and continued to authorise penalty proceedings.

Conclusion: The reference having been made on 14 March 1972 and remaining pending before 1 April 1976, the Inspecting Assistant Commissioner had jurisdiction to impose penalty. The answer is in favour of the Revenue and against the assessee.

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