1987 (9) TMI 15 - HC - Income Tax

Summary

Issues:
1. Jurisdiction of the Inspecting Assistant Commissioner to levy penalty under section 18(1)(c) of the Wealth-tax Act for the assessment years 1969-70 and 1970-71.

Analysis:

The case involved references under section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue regarding the cancellation of penalty orders passed under section 18(1)(c) of the Wealth-tax Act, 1957, for the assessment years 1969-70 and 1970-71. The Inspecting Assistant Commissioner had imposed penalties of Rs. 3,70,333 and Rs. 3,95,333 for the respective years on March 2, 1977. The Tribunal upheld the assessee's contention that the Inspecting Assistant Commissioner lacked jurisdiction to levy the penalties after the amendment to section 18 of the Wealth-tax Act, effective from April 1, 1976, which deleted the earlier sub-section (3) and substituted it with a new subsection (3).

In a similar context of income-tax matters, it was established that post the amendment in section 274 by the Taxation Laws (Amendment) Act, 1975, effective from April 1, 1976, the Inspecting Assistant Commissioner did not possess the authority to impose penalties on references made subsequent to that date. The determining factor was deemed to be the date of making the reference, saving only those references made before April 1, 1976, for the Inspecting Assistant Commissioner's jurisdiction. This principle was applied to the Wealth-tax Act as well, concluding that the Inspecting Assistant Commissioner lacked jurisdiction to impose penalties for the assessment years in question, as the references were made after April 1, 1976.

Therefore, the High Court ruled in favor of the assessee, holding that the Tribunal was justified in canceling the penalties for both years due to the lack of jurisdiction of the Inspecting Assistant Commissioner post the amendment in the Wealth-tax Act. No costs were awarded in this matter.