The amendment of the period of limitation and the jurisdiction of the Inspecting Assistant Commissioner under sections 274 and 275 of the Income Tax Act, 1961, does not affect pending proceedings unless there is a clear indication to the contrary in the Amendment Act.

JUDGMENT :

B.J. Divan, J.

In this case, at the instance of the revenue, the following questions have been referred to us for our opinion :

"(1) Whether the finding of the Tribunal that the penalty order made by the Inspecting Assistant Commissioner under section 271(1)(c) read with section 274(2) as it stood before the amendment by the Taxation Laws (Amendment) Act, 1970, was time-barred, is erroneous in law in view of the amendment of section 275 by the aforesaid Amendment Act with effect from April 1, 1971 ?

(2) Whether the finding of the Tribunal that the Inspecting Assistant Commissioner had not jurisdiction tinder section 274(2) of the Act, in view of its amendment by the abovesaid Amendment Act, 1970, was erroneous in law ?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the penalty levied by the Inspecting Assistant Commissioner ?"

2. The facts giving rise to this reference are as follows : The relevant assessment year is 1968-69. At the time of passing the assessment order, the Income-tax Officer had held that a cash credit of Rs. 3,100 was not established by the assessee and hence it was added to the income of the assessee. The assessee had claimed deduction for two items of interest, namely, Rs. 2,680 paid to Harsukhlal Vadilal Chokshi and Rs. 880 paid to Gorakh Bachubhai & Company. The Income-tax Officer held that these amounts of interest were also not in fact paid. These two items of interest were, therefore, disallowed. Thus, the total amount disallowed was Rs. 6,660. At the time of passing the assessment order on October 3, 1969, the Income-tax Officer had also directed that penalty notice under section 274 read with section 271 for not furnishing correct particulars of income should be issued. As the law then stood, the minimum penalty leviable being in excess of Rs. 1,000, it was only the Inspecting Assistant Commissioner who was competent to impose the penalty in this case. Under section 275 as it stood before the Amendment Act of 1970 which came into force with effect from April 1, 1971, the period of limitation was two years from the date of the initiation of penalty proceedings. Hence, if the law had stood unamended, the Inspecting Assistant Commissioner was required to pass the order of penalty before October 3, 1971. However, the new amendment Act, namely, the Taxation Laws (Amendment) Act, 1970, was brought into force with effect from April 1, 1971, and as a result the period of limitation was enlarged from two years from the date of the initiation of penalty proceedings to two years from the end of the financial year in which the penalty proceedings were initiated. The Inspecting Assistant Commissioner passed the order of penalty on October 12, 1971, levying a penalty of Rs. 6,810. Against the order of the Inspecting Assistant Commissioner the assessee, which is a registered firm, went in appeal to the Tribunal and the Tribunal held that if the Amendment Act of 1970 were to apply, then the Inspecting Assistant Commissioner had no jurisdiction to hear the case and if the Amendment Act were not to apply, then the order of penalty was barred by limitation. Under these circumstances the, appeal filed by the assessee-firm was allowed and thereafter, at the instance of the revenue, the above-mentioned three questions have been referred to us.

3. Before the Amendment Act of 1970 which came into force with effect from April 1, 1971, under section 274, when the case was falling under clause (c) of sub-section (1) of section 271 and the minimum penalty imposable exceeded a sum of rupees one thousand, the Income-tax Officer was bound to refer the case to the Inspecting Assistant Commissioner who was to have all the powers conferred under the Chapter in which section 274 is set out for the imposition of penalty. Under section 274 as it stood before the amendment, no order imposing a penalty under that Chapter could be passed after the expiration of two years fro