1982 (9) TMI 140 - AT - Income Tax

Tribunal rules ITO lacked jurisdiction for penalties under IT Act 1961

INCOME TAX OFFICER. Versus CA DVIKA.

The Tribunal upheld the AAC's decision that the ITO lacked jurisdiction to impose penalties under section 274(2) of the IT Act, 1961 for assessment years ... - Issues:Jurisdiction of the ITO to impose penalty under section 274(2) of the IT Act, 1961 for assessment years 1966-67 and 1967-68.Detailed Analysis:The main contention in the departmental appeals was whether the ITO had the jurisdiction to impose penalties for the assessment years 1966-67 and 1967-68 under section 274(2) of the IT Act, 1961. The AAC had held that the ITO had no jurisdiction to impose the penalties as per the law in force on the dates the original returns were filed. The concealment of income was alleged in these returns, and penalties were levied under section 271(1)(C) of the IT Act, 1961. The Departmental Representative referred to rulings of the Karnataka High Court and argued that after the omission of section 274(2) of the IT Act, 1961, the IAC would not have jurisdiction to pass orders of penalties in cases where concealment of income exceeded a certain amount. The assessee relied on the order of the AAC, and reference was made to a ruling of the Madras High Court in another case.The key issue for decision in the appeals was whether the penalties imposed by the ITO were valid after the amendment of section 274(2) of the IT Act, 1961. It was agreed that the original returns were filed on specific dates, and the concealment occurred in those returns. The Supreme Court's dictum in the case of Brij Mohan vs. CIT was cited, emphasizing that the law in force at the time of the concealment was relevant for imposing penalties. The Departmental Representative argued that this ruling should only apply to the substantive part of penalty proceedings, but the Tribunal found no support for this contention. A previous decision of the Madras High Court was cited, which contradicted the Revenue's arguments and supported the AAC's order in the present case.The Tribunal upheld the order of the AAC for both years based on the binding ruling of the Madras High Court and the lack of reference to the Supreme Court's dictum in the Karnataka High Court's ruling. Consequently, the appeals of the Revenue were dismissed, affirming the decision of the AAC in the matter of jurisdiction to impose penalties under the IT Act, 1961.