The IAC has no jurisdiction to impose penalty on the assessee on a new charge of concealment of income which was not referred to it by the ITO.

( 1 ) THE following question is involved in this reference under Section 256 (1) of the I. T. Act, 1961 :"whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the IAC travelled beyond his jurisdiction, and accordingly, the penalty order passed by him was null and void ?"

( 2 ) THE penalty proceedings arose out of the assessment year 1963-64. The assessee is a firm. The facts stated by the Tribunal may be briefly stated as follows : the ITO brought Rs. 10,263 to tax as the assessee's income from undisclosed sources and issued a notice under Section 274 read with Section 271 (1) (c) of the Act to the assessee for concealment of Rs. 10,263 as its income. As the minimum penalty imposable on Rs. 10,263 exceeded Rs. 1,000, the ITO referred the penalty proceeding to the IAC before whom it was admitted by the assessee's representative that this amount was wrongly shown by the assessee's accountant in the balance-sheet without verifying the correct facts. The assessee's explanation was that this amount was shown by mistake in the balance-sheet as a partner of the assessee-firm who was looking after the accounts died suddenly and the clerk who was entrusted with the maintenance of account books was not conversant with the accounts. The assessee's representative also filed a revised balance-sheet before the IAC who, on the basis of the said revised balance-sheet and on the materials placed by the assessee before him, recomputed the income and held that the assessee had understated Rs. 19,647 as its income and accordingly he imposed penalty of Rs. 16,300 on the assessee. The assessee appealed and it was found by the Tribunal that the charge of concealment of income of Rs. 10,263 made against the assessee by the ITO was washed away by the findings of the IAC who had made out a new case of concealment of a different sum of Rs. 19,647 against the assessee and had imposed penalty on it. Accordingly, the Tribunal set aside the penalty by holding that the IAC had no jurisdiction to impose penalty in respect of concealment of Rs. 19,677.

( 3 ) THERE is no decision of this court on the question involved in this reference in which no one has appeared for the assessee. In view of the contentions made on the 9th August, 1976, by Mr. Ajit Sengupta, the learned counsel for the revenue, we adjourned this matter and requested the learned counsel, Dr. Debi Pal, and his junior, Mr. Murarka, to assist us. They have done so and we record our appreciation to them.

( 4 ) MR. Sengupta contended that since the validity of the penalty proceedings initiated by the ITO was not questioned by the assessee in the appeal filed before the Tribunal, it should be held that the ITO was satisfied in the course of the assessment proceeding that the assessee had concealed its income. He urged that the basis of charge of concealment was not altered by the IAC who, on the evidence adduced by the assessee, had altered the amount of concealment of its income and, therefore, the IAC had jurisdiction to impose the penalty. It was finally contended by him that at least to the extent of Rs. 10,263 the IAC had jurisdiction to impose the penalty.

( 5 ) ON the other hand, Dr. Pal submitted that the revenue not having questioned the findings of the Tribunal, namely, that the charge of concealment of Rs. 10,263 made against the assessee by the ITO was washed away by the findings of the IAC and that the IAC had imposed penalty on a new case of concealment of Rs. 19,647 on the ground of perversity has accepted these findings and, therefore, according to Dr. Pal, it cannot be said that the ITO was satisfied in the course of the assessment proceeding that the assessee had concealed Rs. 19,647 as its income. Dr. Pal also submitted that the IAC had no jurisdiction to recompute the income of the assessee and to make out a new case of concealment of income in respect of Rs. 19,647.

( 6 ) DR. Pal has cited a decision of the Allahabad High