JAYALAKSHMI CLOTH STORES Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The Income-tax Appellate Tribunal referred the following question of law for consideration of this court under s. 256(1) of the I.T. Act :

(2.) For the income-tax assessment years 1969-70 and 1970-71, the ITO made certain enquiries and came to the conclusion that the assessee had concealed its income in the returns filed. Assessments for these two years were completed on 18/03/1972. On the same date, the ITO issued notices for both the assessment years requiring the assessee to show cause why penalty should not be levied for concealment of income. The assessee submitted an explanation asserting that no income was concealed. The explanation was rejected. The ITO determined the income concealed for the assessment year 1969-70 at Rs. 25,000 and at Rs. 20,000 for the assessment year 1970-71. He levied penalty equal to the amount of income concealed for both the assessment years. The assessee appealed against the orders levying penalty. The AAC as well as the Income-tax Appellate Tribunal rejected the assessees contention that no income was concealed. The ITOs finding that penalty is leviable was affirmed by the appellate authorities. Before the Tribunal, the assessee had taken a contention that the ITO had no jurisdiction to pass the orders of penalty for the assessment years 1969-70 and 1970-71. It is claimed that in accordance with the law relating to the income-tax assessment years 1969-70 and 1970-71, the proper authority to levy the penalty is the IAC where the minimum penalty leviable is more than Rs. 1,000. As in the present case, the minimum penalty is more than Rs. 1,000, the assessee claimed that the jurisdiction to levy the penalty vested not with the ITO, but with the IAC under s. 274(2) of the I.T. Act. The Tribunal rejected the contention of the assessee. The Tribunal held that the present case is covered by the amendment which came into force on 1/04/1971, by the Taxation Laws (Amendment) Act, 1970. According to the amendment that came into force, power is conferred on the ITO himself to levy penalty where the income concealed does not exceed Rs. 25,000. As in the present case, the income concealed did not exceed Rs. 25,000 for either of the assessment years, the Tribunal held that the proper authority to levy the penalty was the ITO by virtue of the amendment that came into force on 1/04/1971. The Tribunal also found that the ITO did not make any reference to the IAC in the matter of levying the penalty acting under s. 274(2) of the I.T. Act as was in force prior to 1971 and, therefore, the IAC had no jurisdiction at the relevant time. Relying on the decision of this court in Addl. CIT v. Dr. Khaja Khutabuddinkhan [1978] 114 ITR 905, the Tribunal held that the jurisdiction is not vested in the IAC to levy the penalty. In that view, the assessees contention regarding lack of jurisdiction on the part of the ITO to pass the orders of penalty was rejected. The assessee applied for and obtained the present reference against the above finding.

(3.) The learned counsel for the assessee contended that the assessment years involved were 1969-70 and 1970-71 and the penalty is leviable in this case in accordance with the law governing the above-mentioned two assessment years. Alternatively, it is contended that penalty is leviable in accordance with the law in existence at the time when the offence of concealment was allegedly committed by the assessee. It is pointed out that the returns were filed long prior to 1/04/1971, when the amendment came into force and, consequently, the law that governs the levy of penalty is the law in existence at the time of filing the returns wherein the offence of concealment was allegedly committed. Reliance is placed on the decision of the Supreme Court in Brij Mohan v. CIT [1979] 120 ITR 1. In that view of the matter, the learned counsel for the assessee urged that the ITO had no power to levy the penalties for the two assessment years on 21/03/1974, by applying the amendment that came into force on 1/04/1971.