TMI Blog1978 (9) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... with out jurisdiction and illegal and in cancelling the same accordingly ? " The facts giving rise to this reference are as follows : We are concerned with the assessment year 1970-71. The assessee is a registered partnership firm and is engaged in the business of manufacturing of fans, electric motors, washing machines, etc. In the assessment made by the ITO for the year 1970-71 under s. 143(3) of the I.T. Act, 1961, an addition of Rs. 21,691 was made by the ITO on the ground that the gross profit disclosed was not acceptable because of certain defects found in the accounts maintained by the assessee. As a result of the addition, the income assessed by him came to Rs. 57,726 as against the assessee's returned income of Rs. 36,035. In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Rs. 25,770 due to the understatement of the opening stock and Rs. 21,691 which was the addition made by the ITO for the shortfall in the gross profit. When the IAC took up the hearing of the penalty proceedings, the facts concerning the understatement on account of double debit of the value of the opening stock and the enhancement of the income were brought to his notice. The IAC took note of the fact that the assessee had concealed its income or furnished inaccurate particulars of such income and its failure to return the correct income had arisen from fraud or gross or wilful neglect on its part, because if the assessee had been a little careful, it would have definitely come to know of the fact that the opening stock had been debited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articulars were held to have been furnished, was below Rs. 25,000, being the amount of Rs. 21,691, viz., the addition made by the ITO on account of low gross profit, the IAC did not have jurisdiction and, therefore, the order passed by him was not valid. It was further claimed that, after such amendment, the IAC did not have jurisdiction to impose the penalty and, therefore, his order of penalty was without jurisdiction. It was further claimed that although the addition ultimately sustained in the appeal by the AAC was the sum of Rs. 25,770, the addition was on altogether different ground, namely, the double debit of the value of the opening stock in the trading and P L accounts, whereas the addition made by the ITO was an estimated amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so either in express terms or by necessary implication. The Division Bench in CIT v. Royal Motor Car Co. [1977] 107 ITR 7) 53 (Guj), relying on the decision of the Privy Council in Colonial Sugar Refining Company v. Irving [1905] AC 369, held that the principle had been well recognised that though the right of appeal was a procedural right, it was a vested right. The Division Bench held that the IAC whose power was affected by the Amend. Act would continue to have jurisdiction in matters which were then pending before him, since the Amend. Act of 1970, neither in express words nor by necessary implication, had indicated that the jurisdiction of the IAC, even in pending matters, i.e., matters which were already referred to him, was to be af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quasi-criminal case, but it was incumbent upon the IAC to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. No such clear-cut finding was reached by the IAC and, on that ground alone, the order of penalty passed by the IAC was liable to be struck down. We may also point out that so far as the order of the AAC in matters under appeal was concerned, he had not directed any penalty proceedings, though it was before him in the course of the appeal that the question of double debiting of the opening stock in the profit and loss account to the extent of Rs. 25,770 was brought to the notice of the department. It is surp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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