Jurisdiction of the Inspecting Assistant Commissioner to impose penalty is determined based on the date of reference by the Income-tax Officer, not the date of initiation of penalty proceedings.

1. This reference under section 256(1) of the Income-tax Act, 1961, is at the instance of the Revenue to decide the following question of law :

" Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Inspecting Assistant Commissioner had no jurisdiction to levy the impugned penalty under section 271(1)(c) ? "

2. The relevant assessment year is 1972-73.

3. The assessee is an individual. The Income-tax Officer completed the assessment on March 22, 1975, assessing the total income at Rs. 51,747 making an addition therein of Rs. 36,000 as " income from undisclosed sources ". The Income-tax Officer also initiated penalty proceedings under section 271(1)(c) of the Act and referred the matter to the Inspecting Assistant Commissioner in view of the fact that the penalty leviable exceeded the jurisdiction of the Income-tax Officer. The Inspecting Assistant Commissioner after hearing the assessee imposed a penalty of Rs. 23,400 by his order dated January 17, 1977. The assessee's appeal to the Tribunal succeeded. The Tribunal accepted the contention that the Inspecting Assistant Commissioner had no jurisdiction to impose the penalty by order dated January 17, 1977, after the amendment by which sub-section (2) of section 274 of the Act had been deleted with effect from April 1, 1976. Hence, this reference at the instance of the Revenue.

4. We have already held in CIT v. Sri Niwas Rice and Oil Industries (D.B income-tax Reference No. 341 of 1980 decided on August 7, 1987-[1988] 169 ITR 253) , following the decision in CIT v. Shri Ram Prakash Saraf [1986] 160 ITR 860) (MP) , that the question of the Inspecting Assistant Commissioner's jurisdiction to impose penalty is to be determined with reference to the date on which the Income-tax Officer made the reference to the Inspecting Assistant Commissioner and not the date of initiation of penalty proceedings by the Income-tax Officer. Applying this test, the question of the, Inspecting Assistant Commissioner's jurisdiction to impose penalty in the present case also has to be decided on the basis of the date on which the reference was made by the Income-tax Officer to the Inspecting Assistant Commissioner and not on the basis of the date on which the penalty proceedings were initiated by the Income-tax Officer. In other words, only if the reference was made by the Income-tax Officer to the Inspecting Assistant Commissioner prior to April 1, 1976, when sub-section (2) of section 274 of the Act was deleted, the Inspecting Assistant Commissioner would have jurisdiction to impose penalty, since the Inspecting Assistant Commissioner's jurisdiction was saved even after the deletion of sub-section (2) of section 274 only in respect of the references made to the Inspecting Assistant Commissioner and pending with the Inspecting Assistant Commissioner prior to April 1, 1976. The Tribunal has not applied this test for deciding the question of the Inspecting Assistant Commissioner's jurisdiction. Accordingly, the Tribunal was not justified in deciding the question of jurisdiction except on the basis of this test. The Tribunal is, therefore, required to decide the question afresh on the basis indicated above and with advertence to the above observations.

5. Consequently, the reference is answered in favour of the Revenue by holding that the Tribunal was not justified in deciding the question of the Inspecting Assistant Commissioner's jurisdiction to impose penalty with reference to the date of initiation of penalty proceedings by the Income-tax Officer instead of the date of reference of the matter by the Income-tax Officer to the Inspecting Assistant Commissioner.

6. No costs.

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