COMMISSIONER OF INCOME TAX Vs. VARKEY CHACKO

JUDGEMENT

(1.) The Judgment of the court was delivered by Balakrishna Eradi, C. J. - The Income Tax Appellate Tribunal. Cochin Bench (hereinafter called the Tribunal) has referred to this court under S.256(2) of the Income Tax Act, 1961 (for short the Act) the following question of law pursuant to the order, dated 31st May, 1977 passed by this court in O. P. No. 887 of 1977 filed by the Commissioner of Income Tax: -

(2.) For the assessment year 1968-69, the relevant accounting period in respect of which was the year that ended on 31st March 1968, the assessee had filed his return on 16th April 1970. The assessment was completed by the Income Tax Officer on 27th March 1972 and on the same date itself the Income Tax Officer initiated penalty proceedings against the assessee on the basis of a finding reached by him in the assessment order that there had been concealment of income by the assessee in respect of an amount which did not exceed Rs. 25,000. After considering the objections put forward by the assessee the Income Tax Officer by his order, dated 26th March 1974 imposed a penalty of Rs. 10,000 for concealment of income. The Appellate Assistant Commissioner before whom the matter was carried in appeal by the assessee set aside the aforesaid order passed by the Income Tax Officer on the ground that the Income Tax Officer had no jurisdiction to levy the penalty since the minimum penalty imposable exceeded the sum of Rs. 1,000. In so holding the Appellate Assistant Commissioner had proceeded on the basis that the jurisdiction of the Income Tax Officer in relation to the proceeding for imposition of the penalty in the instant case was governed by the provisions of sub-s.(2) of S.274 of the Act as they stood prior to the amendment introduced therein by the Taxation Laws (Amendment) Act, 1970. Accordingly the Appellate Assistant Commissioner held that the only competent authority who could levy a penalty in the case was the Inspecting Assistant Commissioner. The department carried the matter in appeal before the Tribunal. The Tribunal confirmed the order of the Appellate Assistant Commissioner holding that the law governing the imposition of penalty for concealment of income is the law that was in force on the date on which the return in which concealment is said to have taken place was furnished before the Income Tax Officer and that the amendments made by the Taxation Laws (Amendment) Act, 1970 empowering the Income Tax Officer to levy penalty in cases where minimum penalty imposable is less than Rs. 25,000 had no application to the instant case because the amendment had not been made expressly retrospective. The Tribunal was further of the view that the aforesaid amendment introduced in S.274(2) in 1970 empowering the Income Tax Officer to levy penalty in cases where minimum penalty imposable is less than Rs. 25,000 could not apply to the penalty proceedings initiated after the amendment Act came into force in respect of a return furnished on a date prior to the coming into force of the amended provision because "the provision with regard to the specification of authority for imposition of penalty unlike the provision for time limit for completion of penalty proceedings is substantive and not procedural in law". It is the legality and correctness of the aforesaid reasoning stated by the Tribunal in support of its conclusion affirming the order of the Appellate Assistant Commissioner that we are called upon to examine and decide in this case.

(3.) S.271 of the Act confers power on the Income Tax Officer/the Appellate Assistant Commissioner for imposition of penalty on an assessee on the ground of (a) failure to furnish the return of total income without reasonable cause, or (b) failure to comply with a notice issued under S.142(1) or S.143(2) of the Act without reasonable cause or (c) concealment of particulars of his income or furnishing of inaccurate particulars of his income. S.272 empowers the Income Tax Officer to levy penalty on the ground of failure to give notice of discontinuance of business or profession as required by S.176(3). By S.273 the Income Tax Officer is invested with the power to impose penalty on an assessee who has either furnished under S.212 an estimate of advance tax payable by him which he knew or had reason to believe to be untrue, or has without reasonable cause failed to furnish an estimate of advance tax payable by him. Then we come to S.274 which Section has been given the marginal heading 'procedure'. sub-s.(1) thereof lays down that no order imposing a penalty shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. sub-s.(2) of S.274, which is the provision with which we are directly concerned, was amended by S.49 of the Taxation Laws (Amendment) Act, 1970 with effect from 1st April 1971. Prior to the said amendment the said sub-section was in the following terms: -