Law:

Section:

Section 274 read with section 271(1)(c) of the Income-tax Act, 1961 - Penalty - Procedure for imposition of - Assessment year 1965-66 - Whether when a matter is referred to IAC by ITO under section 274(1), IAC has no jurisdiction to impose penalty on a ground different from that on which ITO had started penalty proceedings, nor can he take into account any further concealment discovered by himself - Held, yes FACTS For the relevant assessment year, the assessee filed his return of income disclosing certain loss. The assessee thereafter, filed a revised return disclosing an income which was further revised to Rs. 74282. The assessee was, however, assessed on a total income of Rs. 98,100. The ITO initiated penalty proceedings against the assessee and as the minimum penalty imposable under the Act exceeded Rs. 1,000, the ITO referred the matter to the IAC who, after hearing the assessee, came to the conclusion that penalty could not be imposed on the charge of concealment or of furnishing inaccurate particulars of income. The IAC, however, held that the assessee was guilty of concealment and of furnishing inaccurate particulars, and accordingly, imposed penalty upon the assessee. On appeal the Tribunal observed that from a perusal of the ITO's order it was clear that the ITO was satisfied that penalty proceedings should be initiated against the assessee because a cash credit was added to the income of the assessee as income from undisclosed sources. The Tribunal held that the IAC having found that no penalty could be imposed on the assessee on the charge of concealment or of furnishing inaccurate particulars of its income so far as the addition of cash credit was concerned, the IAC had no jurisdiction to enlarge the scope of the penalty proceedings by referring to the original return filed by the assessee disclosing a loss. In that view of the matter, the Tribunal held that no penalty could be imposed against the assessee. On reference : HELD It is well settled that when the matter is referred to the IAC by the ITO under section 274(1), the IAC has no jurisdiction to impose a penalty on a ground different from that on which the ITO had started the penalty…

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