1987 (8) TMI 82 - HC - Income Tax

Tax Court Rules Jurisdiction Shift in Penalty Imposition Post-Amendment, Emphasizes Law at Penalty Initiation

The court held that the Inspecting Assistant Commissioner lacked jurisdiction to levy the penalty after the omission of section 274(2) by the Taxation ... Jurisdiction To Levy Penalty, Penalty Issues Involved:1. Jurisdiction of the Inspecting Assistant Commissioner to levy penalty after the omission of section 274(2) of the Income-tax Act, 1961.2. Applicability of the law in force at the time of initiation of penalty proceedings.3. Effect of the deletion of section 274(2) on pending penalty proceedings.Detailed Analysis:1. Jurisdiction of the Inspecting Assistant Commissioner to Levy Penalty After the Omission of Section 274(2):The primary issue in this case was whether the Inspecting Assistant Commissioner had jurisdiction to levy a penalty under section 271(1)(c) for the assessment year 1973-74, notwithstanding the omission of section 274(2) by the Taxation Laws (Amendment) Act, 1975, effective from April 1, 1976. The court noted that the Income-tax Officer referred the case to the Inspecting Assistant Commissioner prior to April 1, 1976, when the concealment of income exceeded Rs. 25,000. At that time, the Inspecting Assistant Commissioner had jurisdiction and was the competent authority to impose penalties. However, the Inspecting Assistant Commissioner passed the penalty order after April 1, 1976, when he was divested of his jurisdiction due to the omission of section 274(2). The court concluded that the Inspecting Assistant Commissioner ceased to have jurisdiction to impose penalties after April 1, 1976, and the jurisdiction reverted to the Income-tax Officer.2. Applicability of the Law in Force at the Time of Initiation of Penalty Proceedings:The court examined whether the competence of the authority to impose penalties should be determined by the law in force at the time of initiation of penalty proceedings. It referred to previous judgments, including Kunhimuhammed's case, which held that the competence of the authority is determined by the law in force on the date of initiation of the penalty proceedings. The court agreed with this view and held that the jurisdiction of the Income-tax Officer or the Inspecting Assistant Commissioner is to be determined with reference to the date of initiation of the penalty proceedings. The initiation of penalty proceedings in this case was on the date the Income-tax Officer made the reference to the Inspecting Assistant Commissioner.3. Effect of the Deletion of Section 274(2) on Pending Penalty Proceedings:The court considered the effect of the deletion of section 274(2) on pending penalty proceedings. It reviewed various high court decisions and concluded that a change in the forum is a matter of procedure and does not affect pending actions unless there is a clear intention to the contrary. The court noted that the deletion of section 274(2) by the Taxation Laws (Amendment) Act, 1975, was retrospective and affected pending proceedings. Therefore, the Inspecting Assistant Commissioner was divested of his jurisdiction to impose penalties after April 1, 1976, and the jurisdiction to impose penalties reverted to the Income-tax Officer.Conclusion:The court answered the referred question in the negative, holding that the Inspecting Assistant Commissioner did not have jurisdiction to levy the penalty after the omission of section 274(2) by the Taxation Laws (Amendment) Act, 1975. The judgment was in favor of the assessee and against the Revenue. The court directed that a copy of the judgment be forwarded to the Tribunal as required by law.