Law:

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Section 271(1)(c) of the income-tax act, 1961-Penalty-For concealment of income-Assessment year 1957-58-In reassessment on 12-3-1970, ITO added Rs. 12,500 as assessee's income from undisclosed sources-Penalty proceedings initiated on 12 3-1970 under section 271(1)(c) and referred to IAC under section 274(2) as it then stood-IAC levied penalty on 17-3-1972-Tribunal cancelled penalty as time-barred and beyond lac's jurisdiction in view of amended provisions of section 274(2)-Whether tribunal right in law-Held, no Facts For the assessment year 1957-58, the original assessment was made on an income of Rs. 19,739. Consequent on its disclosure of Rs. 10,000 as its income which had escaped assessment, the ITO reopened the assessment under section 147(a) and completed the reassessment proceedings on 12-3-1970 after adding an amount of Rs. 12,500, representing unproved hundi loan, as income from undisclosed sources. For this default under section 271(1)(c), the ITO initiated penalty proceedings and referred the same on 12-3-1970 to the IAC under section 274(2), as it then stood. The IAC eventually levied a penalty of Rs. 2,750 on 17-3-1972. On appeal, the Tribunal set aside the penalty order as time-barred in view of the provisions of section 275(b) read with section 274(2) [as amended by the Taxation Laws (Amendment) Act, 1970 with effect from 1 4-1971]. It held (i) that, after 1-4-1971, the ITO could refer the case to the IAC only when the minimum penalty imposable exceeded Rs. 25,000 ; and (ii) that the IAC exercised jurisdiction not vested in law being violative of the aforesaid provisions of section 275 read with section 274(2). On reference : Held 1. Section 274(2), as amended with effect from 1-4-1911, neither takes away the jurisdiction of the IAC in respect of the proceedings for imposition of penalty which are pending before him, nor does it provide for transfer of such penalty proceedings by him to the ITO. It does not also say that the proceedings for imposition of penalty, which are pending before the IAC, shall abate if the amount of income as determined by the ITO on assessment, in respect of which the particulars have been concealed or inaccurate…

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