COMMISSIONER OF INCOME TAX Vs. P I ISSAC

JUDGEMENT

(1.) The Income Tax Appellate Tribunal, Cochin Bench has referred the following question of law for decision of this court under S.256(1) of the Income Tax Act 1981.

(2.) The assessee is a registered firm. The firm disclosed an income of Rs. 2,39,000/- in its return for the assessment year 1973-74. The Income Tax Officer completed the assessment on 28-1-1974 on income determined at R.2,49,250/-. Thereafter there was a search in the business premises of the assessee and on disclosure of certain materials showing concealment of income, the Income Tax Officer issued notice under S.148 of the Act. Thereafter, the assessee filed a return disclosing an income of Rs. 3,13,350/- made up of Rs. 2,49,250/- originally assessed under the head 'business' and a further sum of Rs. 64,100/- under the head 'other sources'. The Income Tax Officer brought this sum of Rs. 64,100/- to tax in the revised assessment made on 21-10-1975 and referred the matter to the Inspecting Assistant Commissioner under S.274(2) of the Act for imposition of penalty. The Inspecting Assistant Commissioner by order dated 20-10-1977 imposed a penalty of Rs. 64,150/-. The assessee appealed to the Tribunal questioning the jurisdiction of the Inspecting Assistant Commissioner to impose penalty after S.274(2) was omitted with effect from 1-4-1976 as per S.65 of the Taxation Law Amendment Act, 1975. The Tribunal by its order dated 1-3-1980 has set aside the order imposing penalty on the ground that the Inspecting Assistant Commissioner has no jurisdiction to impose penalty after the Taxation Law Amendment Act, 1975 had come into force. The question of law mentioned above is referred to this court at the instance of the Commissioner of Income Tax.

(3.) When the case came up before a Division Bench, the Revenue raised a contention that the point involved in the reference is covered by the decision of a Division Bench of this court in P. M. Kunhimuhammed and Brothers v. CIT (152 ITR 691). The Division Bench felt that the question as to whether the Inspecting Assistant Commissioner continues to have jurisdiction to impose penalty after the deletion of sub-s.(2) of S.274 by S.65 Of the Taxation Law Amendment Act 1975 was not considered by the Division Bench. In Kunhimuhammed's case and in view of the importance of the question the case was referred for decision by a Full Bench. S.271(1) empowers the Income Tax Officer or the Appellate Assistant Commissioner or the Commissioner (Appeals) as the case may be to impose penalty on satisfaction of the matters specified in clauses (a), (b) or (c). In the present case we are concerned with clause (c) of S.271(1). The relevant portion of the section is extracted below: