1981 (1) TMI 2 - HC - Income Tax

Court upholds Income-tax Officer's penalty jurisdiction under amended section 274(2)

Commissioner Of Income-Tax Versus Rizumal Pherumal

Commissioner Of Income-Tax Versus Rizumal Pherumal - [1988] 169 ITR 25, 63 CTR 132 Issues Involved:1. Jurisdiction of the Income-tax Officer to impose penalty.2. Reasonable opportunity of being heard provided to the assessee.Issue-wise Detailed Analysis:1. Jurisdiction of the Income-tax Officer to Impose Penalty:The primary issue was whether the Income-tax Officer had the jurisdiction to impose a penalty on the assessee under the amended section 274(2) of the Income-tax Act, 1961. The assessee filed a return on June 28, 1969, and the Income-tax Officer made an assessment on November 26, 1971, including a concealed income of Rs. 2,000 and levied a penalty of the same amount. The Tribunal had set aside the penalty on the grounds that, as per section 274(2) at the time of filing the return, the Income-tax Officer did not have jurisdiction to levy the penalty, and it should have been referred to the Inspecting Assistant Commissioner.The court examined the legislative amendments to section 274(2), which initially required the Income-tax Officer to refer cases involving penalties exceeding Rs. 1,000 to the Inspecting Assistant Commissioner. However, the amendment effective from April 1, 1971, changed this threshold to Rs. 25,000. The court noted that the amended procedural provision was applicable at the time of the assessment and penalty imposition, thus the Income-tax Officer had jurisdiction as the concealed amount was less than Rs. 25,000.The court rejected the Tribunal's reliance on the Madras High Court decisions in CGT v. C. Muthukumaraswamy Mudaliar and Continental Commercial Corporation v. ITO, clarifying that those cases dealt with different contexts and did not pertain to the procedural jurisdiction under section 274(2). The court emphasized that section 274(2) is a procedural provision, and its amendment applied to actions taken after its effective date, irrespective of when the return was filed. Thus, the first question was answered in the negative, favoring the Revenue.2. Reasonable Opportunity of Being Heard:The second issue was whether the assessee was given a reasonable opportunity of being heard before the penalty was imposed. The Tribunal had also set aside the penalty on the grounds that the show-cause notice was ambiguous and did not provide a clear charge, thus denying the assessee a reasonable opportunity to defend.However, during the proceedings, the assessee's counsel conceded that given the small amount involved, this question could be answered in the affirmative. Consequently, the court agreed and answered the second question in the affirmative, favoring the Revenue.Conclusion:The court concluded that the Income-tax Officer had the jurisdiction to impose the penalty under the amended section 274(2) as it stood at the time of the assessment. The procedural amendment applied to the case, and the Tribunal's decision was incorrect in holding that the penalty imposition was without jurisdiction. Additionally, the court found that the assessee was provided a reasonable opportunity of being heard. Both questions were answered in favor of the Revenue, and the assessee was ordered to pay the costs of the reference.