TaxTMI 
TaxTMI 
TaxTMI 
1991 (8) TMI 64
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.... years 1966-67 and 1967-68 were filed?" This reference relates to the assessment years 1966-67 and 1967-68. The assessee carries on business in purchase and sale of jewellery, precious stones and antiques. In respect of the assessment year 1966-67, the assessee filed a return declaring an income of Rs. 3,295. The Incometax Officer, by his assessment order dated December 18, 1969, assessed the assessee's income at Rs. 25,000. In the said assessment order, it was also directed that penalty notice under sections 274/271(1)(b) and 271(1)(c)of the Act may be issued. In respect of the assessment year 1967-68, the assessee, in the return, declared an income of Rs. 4,500 and the Incometax Officer, in his assessment order dated February 25, 1970, assessed the income of the assessee at Rs. 20,000. In the said assessment order, the Income-tax Officer, also mentioned that penalty notice under section 274 read with sections 271(1)(b) and 271(1)(c) had already been issued. The assessee filed appeals against these assessment orders. The said appeals were dismissed by the Appellate Assistant Commissioner by his order dated July 23, 1970. The assessee went in further appeal before the Tribunal an....
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.... present case, the returns for both the years had been filed on April 10, 1969, and, therefore, the law applicable would be the law which was in force on April 10, 1969, i.e., the law as it stood after the amendment of 1968. According to the Tribunal, the jurisdiction of the Inspecting Assistant Commissioner had also to be determined on the basis of the provisions with regard to penalty as they stood on the date of the filing of the return, and that the Inspecting Assistant Commissioner had jurisdiction to deal with the matter because the amount of penalty leviable exceeded Rs. 1,000. The Tribunal, however, reduced the penalty to Rs. 14,000 for the assessment year 1966-67 and Rs. 12,000 for the assessment year 1967-68 and, to this extent, the Tribunal partly allowed the appeals of the assessee. Feeling aggrieved by the said order of the Tribunal, the assessee filed an application under section 256 (1) of the Act and on the said application, the Tribunal has referred the two questions mentioned above for the consideration of this court. We have heard Shri N. M. Ranka, learned counsel for the assessee, and Shri V. K. Singhal, learned counsel for the Revenue. Shri Ranka has urged th....
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.... the penalty on February 22, 1972, i.e., after April 1, 1971. Shri Singhal has, however, submitted that the contention urged by Shri Ranka with regard to the Inspecting Assistant Commissioner having lost the jurisdiction to pass the orders dated February 22, 1972, is not covered by the questions which have been referred and since this question does not arise out of the order dated May 30, 1973, passed by the Tribunal, this contention should not be permitted to be raised. Shri Singhal has also supported the orders passed by the Inspecting Assistant Commissioner and has submitted that the jurisdiction of the Inspecting Assistant Commissioner has to be determined on the basis of the law as it stood on the date of initiation of the penalty proceedings and that, in the present case, the penalty proceedings had been initiated by the Income-tax Officer by issuing notices under section 271(1)(c) of the Act by his orders dated December 18, 1969, and February 25, 1970, much before April 1, 1971, and that the penalty proceedings initiated on the basis of these notices which were pending before the Inspecting Assistant Commissioner on April 1, 1971, could be disposed of by the Inspecting Assi....
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....on of the Inspecting Assistant Commissioner on a different basis, namely, that, on the date of the passing of the orders dated February 22, 1972, the Inspecting Assistant Commissioner had ceased to have the jurisdiction to pass the said orders in view of the amendment introduced in section 274(2) by the Taxation Laws (Amendment) Act, 1970. We are of the view that this contention of Shri Ranka is only one facet of the contention urged before the Tribunal that the Inspecting Assistant Commissioner had no jurisdiction to pass the orders dated February 22, 1972, and, in our opinion, the assessee cannot be precluded from raising this contention. Question No. 1 as framed by the Tribunal confines its scope to two alternatives only, namely, the law existing on the date on which the return was filed and the law in force on the first day of the assessment year in respect of which the penalty has been imposed. The question as framed does not enable the court to examine any other alternative with regard to the applicability of the law relating to conferment of jurisdiction and since divergent views have been expressed by the various High Courts on this aspect, we consider it appropriate in th....
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..... In Uma Maheswari and Co. v. CIT [1987] 167 ITR 628, the Andhra Pradesh High Court has expressed the view that the date on which the Income-tax Officer arrived at the satisfaction in terms of section 271 of the Act should be the date with reference to which a jurisdiction to impose penalty under section 274 must be determined and since the satisfaction is recorded by the Income-tax Officer in the order of assessment, then the date of the order of assessment should be the date with reference to which the jurisdiction under section 274(2) must be determined. The same view was taken by the Bombay High Court in CIT v. Deorao Shrawan Maundekar [1988] 169 ITR 19 (Bom). Special leave petition filed against the said decision of the Bombay High Court was dismissed by the Supreme Court. The High Court of Punjab and Haryana, in CIT v. Raman Industries [1980] 121 ITR 405 and CIT v. Sadhu Ram [1981] 127 ITR 517 (P & H), has held that the date on which the penalty proceedings have been initiated by the Income-tax Officer would govern the jurisdiction under section 274(2) of the Act. The same view has been reiterated by the said High Court in its recent decision in CIT v. Gopi Ram Mulakh Rai' ....
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.... CIT v. Mohinder Lal [1987] 168 ITR 101 (P & H) [FB], it has also been held that penalty proceedings which were pending on the date of amendment of section 274(2) of the Act have to be governed by the old law and not by the amended provisions. The High Courts of Allahabad (Mohd. Oais and Co. v. CIT [1983] 142 ITR 104; CIT v. Om Sons [1979] 116 ITR 215; CIT v. J. K. Jute Mill Co. [1987] 163 ITR 816 ; Ratan Deo v. CIT [1987] 163 ITR 837), Orissa (CIT v. Dhadi Sahu [1976] 105 ITR 56 ; Bhikari Charan Panda v. IAC [1978] 112 ITR 526 and Radheshyam Agarwalla v. CIT [1978] 113 ITR 196), Karnataka (Addl. CIT v. M. Y. Chandragi [1981] 128 ITR 256 ; CIT v. Sujatha Industries [1987] 163 ITR 263), Gauhati (Banwarilal Chowkhani v. CWT [1983] 142 ITR 264) and Kerala (CIT v. P. I. Issac [1987] 168 ITR 793 (Ker) [FB]) have taken the view that the jurisdiction of the officer to pass the order imposing the penalty conferred by section 274(2) of the Act must have existed not only on the date of initiation of the proceedings but must have also existed on the date of the passing of the final order and if, on the said date, the said officer has ceased to have jurisdiction, he cannot pass the order impo....
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....ion of the assessment when satisfaction of these income-tax authorities is reached that a case for imposition of penalty arises. Having noticed the divergence of opinion amongst various High Courts on this question and keeping in view the decisions of this court holding that the date of reference by the Income-tax Officer is the relevant date as well as the subsequent decision in Rasoolji Buxji v. CIT [1988] 174 ITR 328 (Raj) , that the date of satisfaction by the income-tax authorities about the default is the date of completion of the assessment, we are of the view that question No. 1 (as reframed by us) needs consideration by larger Bench. Since the said question is the main question which needs to be considered in this reference, we are of the view that the entire reference may be considered by the larger Bench and we, therefore, refer it to the larger Bench. The papers may be placed before the Hon'ble Chief Justice for necessary directions. JUDGMENT OF FULL BENCH The judgment of the court was delivered by K. C. AGRAWAL C. J. -By the judgment dated January 29, 1974, the Income-tax Appellate Tribunal, Jaipur Bench, made a reference under section 256(1) of the Income-tax Act....
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....ined by the Income-tax Officer on assessment), in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twenty-five thousand rupees, the Income-tax Officer shall refer the case to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty." The original scheme of this section was different. Sub-section (2) of the section, prior to its revision with effect from April 1, 1976, provided that if a case fell under section 271(1)(c) (concealment of income) and the minimum penalty imposable exceeded Rs. 1,000 (or the concealed income exceeded Rs. 25,000 under the amended law from April 1, 1971), the Income-tax Officer (though entitled to initiate penalty proceedings by issuing or directing the issue of a show-cause notice) had no power to impose a penalty under section 271, but he was bound to refer the case to the Inspecting Assistant Commissioner who was empowered to impose penalty in such a case. (Gupta Rice Mills v. CIT [1980] 123 ITR 825 (All)). If the Income-tax Officer initiated penalty proceedings only on the basis of the substantive ....
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....cation that the two questions, as aforesaid, were referred. Learned counsel for the assessee urged that the Inspecting Assistant Commissioner of Income-tax had no jurisdiction to impose penalty on February 22, 1972, as by that time section 274(2) had been amended by the Taxation Laws (Amendment) Act, 1970, which came into force with effect from April 1, 1971. The contention of learned counsel for the assessee was that, as a result of the amendment, the jurisdiction of the Incometax Officer to impose penalty under section 271(1)(c) was restored and, therefore, the Income-tax Officer could impose penalty if the concealment of income or the inaccurate particulars furnished did not exceed Rs. 25,000. He urged his arguments at length dealing with amendments with which we are concerned in the present case, as to whether they should be retrospective or prospective. Sri V. K. Singhal, learned counsel for the Revenue, urged that the jurisdiction of the Inspecting Assistant Commissioner to deal with the matter of penalty was to be looked at as on the date of initiation of the proceeding and not with reference to subsequent events. The Inspecting Assistant Commissioner could not be divested....
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.... under section 271(1)(c) in pursuance of the reference made under section 274(2) on December 23, 1976, was without jurisdiction in view of the fact that sub-section (2) of section 274 had been omitted by section 65 of the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976. In the proceeding before the Inspecting Assistant Commissioner, the assessee raised a preliminary objection that with effect from April 1, 1976, the Inspecting Assistant Commissioner had been divested of his jurisdiction under section 274(2) and, thus, the reference, made to him on December 23, 1976, was illegal. Notwithstanding the objection, the Inspecting Assistant Commissioner imposed the penalty of Rs. 58,000, vide his order dated February 25, 1978. On the assessee's appeal, the Tribunal quashed the penalty on preliminary objection. The difference between the present case before us and the one reported above is that the present case is concerned with the amendment made in section 274n(2) by the Taxation Laws (Amendment) Act, 1970, which came into effect from April 1, 1971, whereas the case before the Full Bench, aforesaid, was dealing with the later amendment made by the Taxation Laws (Ame....
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....enugopala Reddiar v. Chidambara Reddiar, AIR 1943 FC 24 ; Colonial Sugar Refining Co. Ltd. v. Irving 1905 AC 369 (PC) and New India Insurance Co. Ltd. v. Shanti Misra [1977] 47 Comp Cas 453 ; AIR 1976 SC 237. When the court was further faced with the question as to what would happen if the forum of appeal was changed from the old one to a new one, the court referred to the decision of the Supreme Court in Maria Christine's case, AIR 1979 SC 1352. The learned judge, who delivered the judgment, observed as under : "This case, therefore, cannot be relied upon to contend that in the case of a change of forum by the Amending Act, pending cases would also stand transferred even if the earlier forum where the proceedings were instituted is still available." We are, respectfully, unable to subscribe to the view taken in the aforesaid case. The right of appeal could not be mixed up with the power of the Income-tax Officer to make a reference to the Inspecting Assistant Commissioner. In fact, these are two separate matters. Secondly, the existence of a forum (as distinguished from its abolition) is different from taking away of the jurisdiction. The mere fact that the Inspecting Assistant ....
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....penalty proceedings against an assessee can arise." In CIT v. Raman Industries [1980] 121 ITR 405, the Punjab and Haryana High Court went to the extent of saying that the jurisdiction of the Tribunal to try a case was a vested right and, therefore, it had to be determined according to the law in force at the time of institution of proceedings. We are unable to accept the view taken by the Punjab and Haryana High Court, inasmuch as getting a case decided on a reference made by the Income-tax Officer to the Inspecting Assistant Commissioner did not confer any vested right. The Punjab and Haryana High Court omitted to take into consideration the well-established principle that forum is a matter of procedure and laws of procedure have retrospective effect, unless the statute otherwise provides. At this stage, we wish to refer to the decision in CIT v. Dhadi Sahu [1976] 105 ITR 56 (Orissa), wherein, the Hon'ble Ranganath Misra J., as he then was, observed as under (p. 59) : "The question referred to us can appropriately be answered by examining the effect of the amending provision, namely, whether it took away the jurisdiction of the Inspecting Assistant Commissioner in a pending ref....