Jurisdiction of the Inspecting Assistant Commissioner to impose penalty after the enforcement of the Amending Act on April 1, 1971

( 1 ) THE Income-lax Appellate Tribunal, Allahabad Bench, has referred to this court for its opinion the following question :

"whether, on the facts and in the circumstances of the case, the Appellate Tribunal was legally justified in cancelling the penally imposed by the Inspecting Assistant Commissioner after April 1, 1971 (1976?), i. e. , on February 9, 1977 ?"

( 2 ) THE relevant assessment year in regard to the penalty proceedings was 1972-73. The facts giving rise to the penalty proceedings, in a nutshell, are that the assessce had claimed development rebate and depreciation on machinery which was alleged to be installed by the assessee, but the Income-tax Officer had rejected the claim of the assessee and consequently penalty proceedings were initiated. The order of imposition of penalty was passed on February 9, 1977. The Tribunal in referring the aforesaid question to this court has placed reliance on a decision of a Division Bench of this court in CIT v. Om Sons [1979] 116 ITR 215. In that case, for the assessment year 1969-70, while computing the assessment, the Income tax Officer initiated proceedings under Section 271 (1) (e) of the Income tax Act and referred the matter to the Inspecting Assistant Commissioner under Section 274 of the Act. The Inspecting Assistant commissioner held that the provisions of Section 271 (1) (e) were attracted and imposed the penalty by order dated November 29, 1971. On appeal, the Tribunal held that as Section 274 (2)of the Income-tax Act had been amended with effect from April 1, 1971, by the Taxation Laws (Amendment) Act of 1970, the Inspecting Assistant Commissioner, did not have jurisdiction to impose penalty. Affirming the view of the Tribunal, it was held in that case by this court that a court or tribunal deciding a matter must not only be possessed of jurisdiction initially but also be clothed with the power to decide the matter when the final order is passed. Since the final order in that case was passed on November 29, 1971, when the Inspecting Assistant Commissioner had ceased to have jurisdiction in view of the enforcement of the Taxation Laws (Amendment) Act of 1970, with effect from April 1, 1971, this court held that the view taken by the Tribunal was correct. Similar are the facts in the instant case also. As already seen above, the order imposing penalty was passed on February 9, 1977, i. e. , after April 1, 1971 (1976?), and since the inspecting Assistant Commissioner ceased to have jurisdiction to impose penalty after April 1, 1971 (1976 ?), in view of the provisions contained in the Amending Act, the question referred to this court by the Tribunal deserves to be answered in the affirmative.

( 3 ) WE, accordingly, answer the question referred to us in the affirmative, in favour of the assessee and against the Department. The assessee would be entitled to its costs which are assessed at Rs. 250.

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