COMMISSIONER OF INCOME TAX Vs. BALABHAI AND COMPANY

JUDGEMENT

(1.) THE question which arises for determination in this reference is covered by the decision of a Division Bench of this court in CIT v. Royal Motor Car Co. : [1977]107ITR753(Guj) . In order, however, to dispose of the reference, a few facts will have to be set out and we proceed to do so.

(2.) THE assessment year involved is assessment year 1970 -71, the relevant previous year being S.Y. 2025. The assessee is a firm which deals in cloth on wholesale basis. It appears that in the course of proceedings for assessment to income -tax, for the relevant assessment year, the ITO found on examination of the accounts of the assessee that it had not disclosed the closing stock. After further examination of the accounts, the ITO found that the assessee had not accounted for the sale of four bales of cloth. The assessee asked for and was given time to explain the discrepancy. The assessee thereupon filed a revised return including therein the sale price of four bales which came to Rs. 4,787. The ITO made the assessment including within the total income the aforesaid amount of Rs. 4,787 and he also simultaneously initiated penalty proceedings. Since, however, the minimum imposable penalty was more than Rs. 1,000, he referred the case to the IAC under the law then in force for taking further proceedings. This order was made by the ITO on January, 30, 1971.

(3.) THE assessee, feeling aggrieved by the order of penalty, preferred an appeal before the Tribunal. The impugned order was challenged before the Tribunal on merits as well as on the ground that the IAC had no power, authority and jurisdiction to impose the penalty. In support of the latter ground, it was urged that under s. 274 of the I.T. Act, 1961 (hereinafter referred to as 'the Act'), as it stood before the amendment, no order imposing a penalty could be passed after the expiration of two years from the date of the completion of the proceedings in the course of which the proceedings for the imposition of penalty had been commenced, and, that since, in the instant case, the order imposing penalty was passed outside the said time limit, the said order was without jurisdiction. The Tribunal found that s. 274 came to be amended by the Taxation laws (Amend.) Act, 1970 (hereinafter referred to as 'the Amendment Act'), on and with effect from April 1, 1971, that is to say, before the expiration of two years from the date of the completion of the proceedings in the course of which the proceedings for imposition of penalty had been commenced in the instant case, and that under the amended provision no order imposing penalty could be passed after the expiration of two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty had been initiated, were completed. This amended provision, according to the Tribunal, became applicable to the pending proceedings in the facts and circumstances of the present case, and since the order imposing penalty was passed before the expiration of two years from the end of the financial year 1970 -71, it could not be said that the said order was without power, authority or jurisdiction. The Tribunal, however, proceeded to hold that by the Amend. Act, the IAC got jurisdiction to impose penalty in cases only where the amount of income (as determined by the ITO on assessment) in respect of which the particulars had been concealed or inaccurate particulars had been furnished exceeded a sum of Rs. 25,000, and in the light of the said amendment read along with s. 271(1)(iii) as it then stood, he could impose penalty only in cases where the minimum imposable penalty amounted to Rs. 25,000. The IAC had, therefore, no jurisdiction in the present case to impose a penalty of Rs. 5,000. In view of these findings, the Tribunal set aside the order imposing penalty.