TMI Blog1989 (5) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... e omission of section 274(2) from the statute book with effect from April 1, 1976 ? " Shortly stated, the facts are that during the assessment proceedings the Income-tax Officer found that the assessee's claim of commission payment of about Rs. 12.13 lakhs was not supported by adequate evidence. The Income-tax Officer also found that some notices issued under section 131 and letters written under section 133(b) to the alleged recipients of the commission were either returned unserved or there was no compliance with the terms of the notices though the same were duly served. Consequently, the Income-tax Officer considered that the expenses in these accounts were considerably inflated in order to reduce taxable income. Accordingly, he disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facie, apply to all pending as well as future actions. The matter of jurisdiction is procedural and, therefore, it is to be guided by the law as it exists on the date of its exercise. Consequently, if on the day the Inspecting Assistant Commissioner imposed penalty, he had lost jurisdiction due to change in law, the order of penalty will be vitiated.... We hold that the Inspecting Assistant Commissioner had lost his jurisdiction over this case after the omission of section 274(2) from the statute book with effect from April 1, 1976. Consequently, we find it difficult to maintain the levy of penalty and so we cancel the same. ". The facts are not in dispute. The assessment was completed on March 29, 1974, and on that day the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of penalty on or after April 1, 1976, even in respect of the proceedings referred to him by the Income-tax Officer prior to April 1, 1976. The other view is that the Inspecting Assistant Commissioner has the jurisdiction to pass order in such a case which had been validly and properly referred to him prior to April 1, 1976. This view has been taken by the Punjab and Madhya Pradesh High Courts. In Arya Confectionery Works v. CIT [1987] 163 ITR 840, a similar question came up before the Madhya Pradesh High Court. There, the Madhya Pradesh High Court after considering its earlier decision held that where the Income-tax Officer made a reference to the Inspecting Assistant Commissioner for imposition of penalty under section 271(1)(c) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecting Assistant Commissioner would assume jurisdiction. Section 274(2) of the Act was amended by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971. The amended section, inter alia, provides that if in a case falling under section 271(1)(c), the amount of income as determined by the Income-tax Officer on assessment in respect of which particulars have been concealed or inaccurate particulars have been furnished exceeds Rs. 25,000, the Income-tax Officer shall refer the case to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under the Chapter for the imposition of penalty. This court held that the amended section 274(2) does not take away the jurisdiction of the Inspecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal held that in view of the amendment of section 274(2), the Inspecting Assistant Commissioner lost jurisdiction to impose the penalties since, before the amendment, he had jurisdiction in cases where the minimum penalty imposable exceeded Rs. 1,000, whereas, after the amendment, the Inspecting Assistant Commissioner had jurisdiction only in cases where the concealment by the assessee exceeded Rs. 25,000. The Orissa High Court held that as the matter was still pending and by change of procedure the reference became incompetent, the Inspecting Assistant Commissioner no longer had jurisdiction to deal with the matter or to complete the proceedings. The view of the Orissa High Court was that if the law is changed on the date of hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with reference to the subsequent events Thus, where the Inspecting Assistant Commissioner had jurisdiction on the date penalty proceedings were duly referred by the Income-tax Officer and such proceedings were pending before him such jurisdiction cannot be divested by what has subsequently happened. On the date the matter was referred to the Inspecting Assistant Commissioner, he undoubtedly had jurisdiction to impose penalty but during the time when the matter of penalty had been pending in reference before him the law was changed, This change would not automatically divest the Inspecting Assistant Commissioner of the power when the matter was referred to him unless an intention is shown by making provision for change-over of the proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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