IMPORTANT POINT
The Inspecting Assistant Commissioner did not lose the jurisdiction to continue with the proceedings pending before him on March 31, 1976 by virtue of the deletion of sub-section (2) of Section 274 of the Income Tax Act, by the Taxation Laws (Amendment) Act, 1970 w.e.f. 1-4-1976.

ORDER

This appeal is preferred against the order of the Karnataka High Court answering the question referred to it under Section 256(1) of the Income Tax Act in the affirmative, i.e. in favour of the assessee and against the Revenue. The question referred to the High Court reads :

"Whether on the facts and in the circumstances of the case, the I.T.A.T. is right in law in cancelling the penalty levied by the Inspecting Assistant Commissioner under Section 271(1)(c) holding that the Inspecting Assistant Commissioner had no jurisdiction to levy penalty under Section 271(1)(c) in view of changed provisions of law ?"

2. The assessment year concerned herein is 1972-73.

The High Court followed its earlier decision in R. Abdul Azeez v. Commissioner of Income Tax, Karnataka1, and has answered the question against the Revenue. In R. Abdul Azeez, the Karnataka High Court had taken the view that by virtue of the omission of sub-section (2) of Section 274 by the Taxation Laws (Amendment) Act, 1975 with effect from April 1, 1976, the penalty proceedings pending before the Inspecting Assistant Commissioner on March 31, 1976 cannot continue before him thereafter and that he has no jurisdiction to continue those proceedings or to pass any orders therein. It has been held that any orders passed by him on or after April 1, 1976, levying penalty, are without jurisdiction. The question is whether the said view is correct. We think not. We are supported in saying so by the ratio of the decision of this Court in Commissioner of Income Tax v. Dhadi Sahu2.

The facts in Dhadi Sahu are the following : the assessment years concerned therein were 1968-69 and 1969-70. Assessment orders were passed in respect of the said assessment years on February 28, 1970. The Income Tax Officer initiated proceedings for the imposition of penalty under Section 271(1)(c) of the Act and the matter was referred to the Inspecting Assistant Commissioner under Section 274(2) of the Act. On the said date, Section 274(2) of the Act read as follows :

"Notwithstanding anything contained in clause (iii) of sub-section (i) of Section 271, if in a case falling under clause (c) of that sub-section, the minimum penalty imposable exceeds a sum of ru pees one thousand, 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."

Pending reference of the case before the Inspecting Assistant Commissioner, Section 274(2) was amended with effect from April 1,1971 by the Taxation Laws (Amendment) Act, 1970. The amended sub-section (2) read as follows :

"Notwithstanding anything contained in clause (iii) of sub-section (1) of Section 271, if in a case falling under clause (c), of that sub-section, the amount of income (as determined by the Income-tax Officer on assessment) in respect of which the particulars have been concealedor 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 words underlined by us were substituted for the words "the minimum penalty imposable exceeds a sum of Rupees one thousand".]

On February 15, 1975, the Inspecting Assistant Commissioner passed orders imposing penalties for both the said assessment years.

The assessee filed appeals before the Tribunal contending that by virtue of the amendment effect by Taxation Laws (Amendment) Act, 1970, the Inspecting Assistant Commissioner lost jurisdiction to proceed with the said penalty proceedings with effect from April 1, 1971 inasmuch as in the said cases, the amount of income in respect of which the particulars have been concealed, was less than Rupees twenty five thousand, within the meaning of sub-section (2) of Section 274 as amended in 1970 with effect from April