1991 Supreme(Raj) 799

RAJASTHAN HIGH COURT AT JAIPUR BENCH
K.C.Agrawal, M.B.Sharma, M.R.Calla, JJ.
Nem Kumar Tholia - Appellant
Versus
Additional Commissioner of Income - Respondent
F.B. Reference No. 19 of 1974.
Decided On : 7-08-1991

Headnote:

INCOME TAX - Penalty - Jurisdiction of Inspecting Assistant Commissioner to impose penalty - Amendment of section 274(2) of the Income-tax Act, 1961 by the Taxation Laws (Amendment) Act, 1970 - Whether the Inspecting Assistant Commissioner had the jurisdiction under section 274(2) of the Act to pass the orders imposing penalty under section 271(1)(c) of the Act on the date of passing of the orders - Held, no.

Fact of the Case:

The assessee filed a return of income for the assessment years 1966-67 and 1967-68 declaring an income of Rs. 3,295 and Rs. 4,500 respectively. The Income-tax Officer, by his assessment orders dated December 18, 1969, and February 25, 1970, assessed the assessee's income at Rs. 25,000 and Rs. 20,000 respectively. Penalty proceedings were initiated by the Income-tax Officer by issuing notices under section 271(1)(c) read with section 274 of the Act. The said penalty proceedings were referred by the Income-tax Officer to the Inspecting Assistant Commissioner, Jaipur Range I, Jaipur, and the Inspecting Assistant Commissioner after giving an opportunity to the assessee to make his submissions, passed orders dated February 22, 1972, whereby he levied a penalty of Rs. 22,000 on the assessee under section 271(1)(c) in respect of the assessment year 1966-67 and a penalty of Rs. 16,000 under section 271(1)(c) in respect of the assessment year 1967-68. Against both these orders passed by the Inspecting Assistant Commissioner, the assessee filed appeals before the Tribunal which were decided by the Tribunal by order dated May 30, 1973. The Tribunal rejected the contentions urged on behalf of the assessee and held that, for the purpose of imposing penalty, the relevant law to be applied is the law which was in force on the date on which the false return was filed and not the law which was in force on the first day of the relevant assessment year and that, in the 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.

Finding of the Court:

The court held that the Inspecting Assistant Commissioner had no jurisdiction under section 274(2) of the Act to pass the orders imposing penalty under section 271(1)(c) of the Act on the date of passing of the orders.

Issues: Whether, on the date of the passing of the orders dated February 22, 1972, the Inspecting Assistant Commissioner had the jurisdiction under section 274(2) of the Act to pass the said orders imposing penalty under section 271 (1) (c) of the Act ?

Ratio Decidendi: The court held that the jurisdiction of the Inspecting Assistant Commissioner to impose penalty under section 271(1)(c) of the Act is to be determined on the basis of the law in force on the date of passing of the orders imposing the penalty and not on the basis of the law in force on the date of initiation of the penalty proceedings or the date of filing of the return. The court further held that the amendment of section 274(2) of the Act by the Taxation Laws (Amendment) Act, 1970, which came into force on April 1, 1971, had the effect of taking away the jurisdiction of the Inspecting Assistant Commissioner to impose penalty under section 271(1)(c) of the Act in cases where the amount of income in respect of which particulars had been concealed or inaccurate particulars had been furnished did not exceed Rs. 25,000.

Final Decision: The court answered the reference in favour of the assessee and against the Revenue.