IAC lacked authority for penalty order under ITA 1961; Tribunal nullifies penalty. High Court enforces timely penalty proceedings.

The Income-tax Appellate Tribunal held that the Inspecting Assistant Commissioner (IAC) was not legally competent to pass a penalty order under section 271(1)(iii) of the Income Tax Act, 1961, as the penalty amount was less than Rs. 25,000, which could have been imposed by the Income Tax Officer (ITO). Consequently, the Tribunal set aside the penalty order. Regarding the timeliness of the penalty order, the High Court applied the amended clause stipulating that penalty proceedings must be completed within two years of the initiation, emphasizing the retrospective effect of procedural laws.

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Issues involved:
1. Competency of Inspecting Assistant Commissioner to pass penalty order
2. Timeliness of penalty order by Inspecting Assistant Commissioner

Competency of Inspecting Assistant Commissioner:
The Income-tax Appellate Tribunal referred questions regarding the legality of the Inspecting Assistant Commissioner (IAC) passing the penalty order. The IAC imposed a penalty of Rs. 16,000 under section 271(1)(iii) of the Income Tax Act, 1961. The Tribunal held that the IAC was not legally competent to pass the penalty order as it could have been imposed by the Income Tax Officer (ITO) since the penalty was less than Rs. 25,000. The Tribunal set aside the penalty order based on this ground.

Timeliness of penalty order:
The assessment order was concluded on February 9, 1970, and the penalty order was passed on March 4, 1972. The issue was whether the penalty order was within the time limit prescribed by section 275(b) of the Act. The clause regarding the time limit was amended before the penalty was imposed, stating that the penalty proceedings could be completed within two years of the completion of the financial year in which the penalty proceedings were initiated. The High Court held that the amended clause would be applicable for determining the limitation, as procedural laws have retrospective effect unless specified otherwise. Citing previous decisions, the Court concluded that the limitation for imposing the penalty would be governed by the amended clause in effect when the penalty was imposed.

Separate Judgment:
No separate judgment was delivered by the judges in this case.

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