1993 (8) TMI 1 - SC - Income Tax

Penalty jurisdiction under ss. 271(1)(c), 274(2) tied to assessment date, not return filing, appeal dismissed

SC held that jurisdiction to impose penalty under s. 271(1)(c) depends on the law in force on the date when the assessing authority records satisfaction ... Jurisdiction of Inspecting Assistant Commissioner to pass the orders of penalty - Return was filed before amendment of section 274(2) but assessment was made after amendment - Whether, the Income-tax Appellate Tribunal is right in law in holding that the Income-tax Officer had no jurisdiction to levy the penalty and that he should have referred the case to the Inspecting Assistant Commissioner for imposition of penalty ? - HELD THAT:- A combined reading of section 271(1)(c)(iii) and section 274(2) provided a clear indication that, under the provisions of section 274(2) as they stood prior to the amendment of 1970, the competence of the Income-tax Officer to exercise the power of imposition of penalty against an assessee under section 271(1)(c) was to depend upon the findings arrived at by him in the assessment proceedings as to the factum of concealment and the amount of income in respect of which such concealment had taken place. It was only on arriving at/such a finding that the question of initiation of penalty proceedings could arise. A penalty for concealment of particulars of income or for furnishing inaccurate particulars of income can be imposed only when the assessing authority is satisfied that there has been such concealment or furnishing of inaccurate particulars. A penalty proceeding, therefore, can be initiated only after an assessment order has been made which finds such concealment or furnishing of inaccurate particulars. Who, at this point of time, has the authority to impose the penalty is what is relevant. Whoever this authority may be, he is obliged to impose such penalty as was permissible under the law in that behalf on the date on which the offence of concealment of income was committed, that is to say, on the date of the offending return. The two aspects must firmly be borne in mind, namely, who may impose the penalty and in what measure. In the instant case, when the Income-tax Officer reached the satisfaction that the assessee had concealed his income and made the assessment order on March 27, 1972, the amended provisions of section 274 (2) were in operation and they entitled the Income-tax Officer to impose penalty in cases where the amount of income in respect of which particulars had been concealed were, as here, less than Rs. 25,000. We are, therefore, of the view that the High Court answered the question referred to it correctly. - appeal, therefore, is dismissed. Issues:1. Jurisdiction of the Income-tax Officer to levy penalty under the Income-tax Act, 1961 before and after the amendment of section 274(2).2. Applicability of the law in force at the time of initiation of penalty proceedings.3. Interpretation of the provisions of section 271(1)(c) and section 274(2) in the context of concealment of income.Detailed Analysis:1. The main issue in this case revolves around the jurisdiction of the Income-tax Officer to levy a penalty under the Income-tax Act, 1961, specifically focusing on the amendment of section 274(2). Prior to the amendment, the Income-tax Officer was required to refer cases to the Inspecting Assistant Commissioner if the minimum penalty imposable exceeded Rs. 1,000. However, post-amendment, the referral was mandatory only if the amount of income concealed exceeded Rs. 25,000. The case involved penalty proceedings initiated against the assessee for concealment of income below Rs. 25,000, leading to a dispute regarding the authority of the Income-tax Officer to impose the penalty.2. The High Court analyzed the applicability of the law in force at the time of initiation of penalty proceedings. It was held that the competence or jurisdiction of the authority to initiate penalty proceedings should be governed by the law in force on the date of initiation of such proceedings. The court emphasized that the law applicable to penalty proceedings is determined by the provisions in force when the offending return was filed. The judgment referred to previous cases to support this interpretation, highlighting the importance of the timing of the assessment order in relation to the imposition of penalties.3. The interpretation of section 271(1)(c) and section 274(2) was crucial in determining the authority to impose penalties for concealment of income. The court considered the satisfaction of the income-tax authorities regarding the commission of a default by the assessee as a key factor triggering penalty provisions. It was clarified that the penalty could only be imposed after the completion of the assessment, emphasizing the significance of the date of completion of assessment for penalty purposes. The court also referred to specific cases to illustrate the application of the law based on the timing of the initiation of penalty proceedings and the jurisdiction of the assessing authorities.In conclusion, the Supreme Court upheld the decision of the High Court, affirming that the Income-tax Officer had the authority to impose the penalty under the amended provisions of section 274(2) when the concealment of income was established, even if the concealed amount was below Rs. 25,000. The judgment emphasized the importance of aligning the imposition of penalties with the law in force at the time of initiating penalty proceedings, ensuring that penalties are imposed in accordance with the relevant statutory provisions.