Law:

Section:

Section 274 read with section 271(1)(c) of the <#ACT>Income-tax Act, 1961 - Penalty - Procedure for imposition of - Assessment year 1966-67 - Whether once reference is made to IAC under Section 271(1)(c) by ITO for imposition of penalty, IAC becomes seized of matter and acquires all jurisdiction to deal with question of penalty which can be imposed on assessee - Held, yes - Whether merely because, in appeal, quantum of taxable income of assessee is reduced by appellate authority, jurisdiction of IAC to deal with penalty proceedings can not get ousted - Held, yes FACTS The ITO while making assessment of the assessee formed an opinion that as the assessee had concealed the particulars of its income and had furnished inaccurate particulars of its income, minimum amount of penalty imposable upon it was Rs. 1,000. Accordingly, under section 274(2) he referred the case to the IAC for imposing such penalty as he thought proper. While the penalty proceedings were pending before the IAC, the assessee filed an appeal against the assessment order. The AAC allowed the appeal filed by the assessee in part and reduced its taxable income by a sum of Rs. 3,000. consequently, the minimum penalty imposable on the assessee-came to be less than Rs. 1,000. However, the IAC concluded the penalty proceedings and imposed upon the assessee a penalty of Rs. 1,000 under section 271. On appeal the Tribunal, set aside the order of the IAC, on the ground that as the effect of the order passed by the AAC was that minimum amount of penalty imposable upon the assessee became less than Rs. 1,000, the IAC ceased to have jurisdiction to deal with the penalty proceedings. On reference: HELD A reading of sections 271(1)(c ) and section 274 clearly indicates that under the law, as it then stood, the IAC acquired jurisdiction to impose penalty in cases falling under clause (c) of section 271(1) when a reference for the purpose was made to him by the ITO concerned. Once the reference was made, the IAC became seized of the matter and acquired all the jurisdiction to deal with the question of penalty which could be imposed on the assessee. The High Court did not agree with the Tribunal's view…

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