COMMISSIONER OF INCOME TAX Vs. RAM PRAKASH SARAF

JUDGEMENT

(1.) THIS reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue is to decide the following questions of law, namely :

(2.) THIS reference relates to the assessment year 1975-76. The assessee derives income from purchase of old silver ornaments and the sale thereof after converting them into new ones. There was a search in the business and residential premises of the assessee on October 8 and 9, 1974, when certain articles were seized from his possession. In the assessment order passed by the Income-tax Officer on March 31, 1976, he held that the assessee concealed an income of Rs. 80,697. Accordingly, the Income-tax Officer, by the same order, initiated penalty proceedings against the assessee under Section 271(1)(c) of the Income-tax Act. The Income-tax Officer, after giving an opportunity to the assessee to show cause against the imposition of penalty, as required by Sub-section (3) of Section 274, made a reference to the Inspecting Assistant Commissioner on July 15, 1977, under Sub-section (2) of Section 274 of the Act, even though Sub-section (2) of Section 274 of the Act had been deleted by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976, and according to the proviso to Sub-clause (iii) of Clause (c) of Sub-section (1) of Section 271 of the Act, the Income-tax Officer himself was empowered to impose penalty with the previous approval of the Inspecting Assistant Commissioner where concealment of income was in excess of Rs. 25,000. The Inspecting Assistant Commissioner, after issuing a fresh notice to the assessee and considering his reply, imposed a penalty of Rs. 80,00 under Section 271(1)(c) read with Section 274(2) by his order dated August 23, 1978.

(3.) THE above view taken by us is also in accord with the earlier view of this court dealing with a similar question as a result of similar amendments made with effect from April 1, 1971, in Sections 271(1)(c) and 274(2) of the Act. As a result of these amendments made with effect from April 1, 1971, the question arose whether the reference made by the Income-tax Officer to the Inspecting Assistant Commissioner before April 1, 1971, was invalidated by the amendment or not. In CIT v. A. N. Tiwari [1980] 124 ITR 680 (MP), it was held that references validly made by the Income-tax Officer before April 1, 1971, according to the law as it then stood, were not invalidated by the amendments made with effect from April 1, 1971, and the same were governed by the unamended provisions. In other words, it was the date of making the reference and not the date of initiation of penalty proceedings which was taken as the determining factor for this purpose. That decision was followed subsequently in Addl. CIT v. Nand Kishore [1983] 143 ITR 182 (MP) and CIT v. Fakirchand Dayaram [1983] 143 ITR 184 (MP). THE ratio of these earlier decisions supports the conclusion we have reached in the present case.