TaxTMI 
TaxTMI 
1999 (12) TMI 37
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....osed sources was made, which, according to the Assessing Officer, represented unaccounted purchase of copra. The Assessing Officer initiated proceedings under section 271(1)(c) of the Act. As the minimum penalty leviable exceeded Rs. 25,000, the Assessing Officer referred the case to the Inspecting Assistant Commissioner of Income-tax (in short "the IAC") for disposal. The Inspecting Assistant Commissioner by order dated July 26, 1979, imposed penalty of Rs. 3,25,845. The assessee took the stand in appeal before the Tribunal that the order of penalty passed by the Inspecting Assistant Commissioner on July 26, 1979, was bad in law. In essence, the stand was that the order having been passed after the amendment made in the Act relating to jurisdiction with effect from April 1, 1976, the Inspecting Assistant Commissioner did not have jurisdiction to pass the order. The Tribunal noticed that the penalty was leviable in respect of the following amounts : &nbs....
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.... Considering the third item, it was held that as the amount was in the nature of an advance, it did not represent any cash credit and hence penalty was not imposable. Referring to the fourth item, the Tribunal rejected the explanation of the assessee and held that penalty was imposable. After upholding the penalty in respect of some of the additions and deleting the penalty in respect of some others, the Tribunal held that the Inspecting Assistant Commissioner did not have jurisdiction to impose penalty. For this purpose, reliance was placed on a Full Bench decision of this court in CIT v, P. I. Issac [1987] 168 ITR 793. The Revenue sought for a reference and as stated above, the question has been referred for the opinion of this court. When the matter was taken up for hearing by the Division Bench, it was submitted by the Revenue that in view of the decisions of the apex court in CIT v. Dhadi Sahu [1993] 199 ITR 610 and Varkey Chacho v. CIT [1993] 203 ITR 885, the decision in Issac's case [1987] 168 ITR 793 (Ker) [FB], was not correct. Reference was made by the assessee to a decision of this court in CIT v. Late S. M. Syed Mohamed [1995] 216 ITR 331 [FB], to contend that the Re....
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....a matter of procedure and the amendment Act is retrospective in regard also to matters pending before the Inspecting Assistant Commissioner. Relying on this decision, the Tribunal cancelled the penalty. In CIT v. Smt. R. Sharadamma [1996] 219 ITR 671, the apex court held that once the Inspecting Assistant Commissioner was seized of the matter, he did not lose seisin thereof on account of deletion of sub-section (2) of section 274 by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976, and the Inspecting Assistant Commissioner did not lose the jurisdiction to continue with the proceedings pending before him on March 31, 1976. He was entitled to continue with those proceedings and pass appropriate orders according to law. The Full Bench of this court in Issac's case [1987] 168 ITR 793, mainly followed the reasoning of the Division Bench of the Orissa High Court in CIT v. Dhadi Sahu [1976] 105 ITR 56, in support of their conclusion in preference to the view of the Division Bench of this court in the case of CIT v. Varkey Chacko [1982] 136 ITR 733. On appeal, the decision of the Orissa High Court was reversed by the apex court in the case reported in CIT v. Dhadi....
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....1987 on the identical issue which is faced in the present appeal before us. In that case also, the matter was referred to the Inspecting Assistant Commissioner in 1975 and it was the Inspecting Assistant Commissioner who had jurisdiction to levy the penalty. The order Of imposition of penalty was passed after April 1, 1976. The question that their Lordships of the High Court considered was whether in these circumstances it could be said that the Inspecting Assistant Commissioner who had initiated the penalty proceedings prior to the amendment of law which was effective from April 1, 1976, could be said to have jurisdiction for levy of penalty even after April 1, 1976. Their Lordships were of the view that by virtue of the amendment made to section 271(1)(c) with effect from April 1, 1976, the jurisdiction to levy penalty by an Inspecting Assistant Commissioner had been divested of and once it is divested, he could not have passed the order at all and in case he passes such an order, that order would be an illegal order and invalid in the eye of law. Accordingly, they quashed the order of imposition of penalty as null and void. Respectfully following their Lordships' view as above, ....