COMMISSIONER OF INCOME TAX Vs. ABDULLABHAI HASSANALI

JUDGEMENT

(1.) THE question we are asked to answer in this reference under S. 256(1) of the IT Act, 1961, made at the instance of the Revenue, reads thus :

(2.) THE assessment year concerned is 1966 67. The ITO made the order of assessment on September 28, 1970. He noted in the order that penalty proceedings under S. 271(1)(c) were started and required the issue of notice under S. 274. The ITO made the reference to the IAC to determine he quantum of penalty only on February 15, 1973. He did so because the minimum penalty imposable when be made the assessment was Rs. 18,968. By February 15, 1973, the minimum penalty imposable had been reduced to Rs. 1,882 by reason of the quantum appeal filed by the assessee. The IAC, by his order dated March 27, 1973, imposed a penalty of Rs. 3,000 upon the assessee. The assessee carried the matter in regard to the imposition of penalty to the Tribunal. It was contended before the Tribunal that S. 274(2) was amended w.e.f. April 1, 1971, and that thereafter the IAC had jurisdiction only in cases in which the minimum penalty imposable exceeded the sum of Rs. 25,000 whereas in paragraph 5 of this order, the IAC had stated that the minimum penalty was Rs. 1,882. Following the earlier view taken by the Nagpur Bench of the Tribunal that the amendment of S. 274(2) was a procedural amendment and applicable in all pending cases, the Tribunal allowed the appeal and quashed the penalty. It is out of this order of the Tribunal that the question referred to us arises.

(3.) MR . Thakar, learned counsel for the assessee, drew our attention to a judgment of this Court which has taken such an argument into account. This is the judgment in CIT vs. Gangadas (1984) 41CTR(Bom)175: (1984) 150 ITR 437 (Bom). The ITO passed an order of assessment in this matter on July 31, 1969, and noted therein that penalty proceedings under S. 271(1)(c) were initiated. He referred the case to the IAC in regard to the imposition of penalty only on June 28, 1971. The penalty was thereafter imposed. It was challenged on the basis that on the date on which the reference to the IAC was made, the IAC, by reason of the amendment to the relevant provision, had lost the jurisdiction to determine the penalty except where the amount of income in respect of which particulars were concealed exceeded Rs. 25,000. This Court came to the conclusion that the making of a reference under S. 274(2) by the ITO was more than a ministerial act. At the time when he made a reference, the ITO had to make a conscious determination of the question of jurisdiction. When the ITO made the reference in that matter, i.e., on June 28, 1971, it was the ITO and not the IAC who had the jurisdiction to levy the penalty. The reference made to the IAC and the penalty imposed by the IAC Were, therefore, bad in law.