Judgment

S.P.BHARUCHA, J.

(1) THIS is an appeal on a certificate granted by the High court of Kerala. The judgment under appeal was delivered on a reference under Section 256(2 of the Income Tax Act, 1961. It answered in the negative, that is, against the appellant (assessee) and in favour of the Revenue (respondent), the following question:

"WHETHER on the facts and in the circumstances of the case, 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?"

(2) THE reference pertained to the Assessment Year 1968-69, the relevant accounting period having ended on 31/03/1968.

(3) THE assessee filed his return on 16/04/1970. With effect from April I, 1971, Ss. (2 of Section 274 of the Income Tax Act, 1961, was amended. Prior to the said amendment where, in a case falling under clause (iii) of Ss. (1 of Section 271, the minimum penalty imposable exceeded the sum of Rs. 1,000.00, the Income Tax Officer was obliged to refer the case to the Inspecting Assistant Commissioner. By reason of the said amendment the Income Tax Officer was obliged to refer to the Inspecting Assistant Commissioner such cases falling under clause (c) of Ss. (1 of Section 271 where the amount of income, as determined by the ITO on assessment, in respect of which particulars had been concealed or inaccurate particulars had been furnished exceeded the sum of Rs. 25,000.00 . On 27/03/1972, the ITO made the orders of assessment and initiated penalty proceedings against the assessee on the basis of a finding recorded in the assessment order that there had been concealment of income in respect of an amount which did not exceed Rs. 25,000.00 . After considering the assessees objections, the ITO, by order dated 26/03/1974, imposed a penalty of Rs 10,000.00.

(4) THE assessee appealed to the Appellate Assistant Commissioner, who set a aside the penalty order on the ground that the ITO did not have the jurisdiction to levy the penalty. The Revenue carried the matter to the Income Tax Appellate tribunal, which confirmed the order of the AAC. It held that the law governing the imposition of penalty for concealment of income was the law that was in force on the date on which the return in which the concealment had been made was filed and that the said amendment had no application to the case because it had not been made expressly retrospective.

(5) ARISING out of the order of the tribunal, the question quoted above was referred to the High court. The High court noted that the question to be considered was whether the proceedings for imposition of penalty taken in the case were governed by the provisions of Section 274(2 as they stood prior to the said amendment or whether it was the Ss. as amended that would apply. It concluded that the competence or jurisdiction of the authority to initiate the penalty proceedings could be governed only by the law which was in force on the date of initiation of such proceedings. A combined reading of Section 271(l)(c)(m) 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 ITO to exercise the power of imposition of penalty against an assessee under Section 271(l)(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. In this connection, the High court referred to the judgment of this court in Jain Brothers v. Union of India . Accordingly, the tribunal was held to be in error and the question referred to the High court was answered in the negative, that is, agains