Law:

Section:

Section 274(2) [as it stood prior to its omission with effect from 1-4-1976] of the Income-tax Act, 1961-Penalty-Jurisdiction of iac to impose-Whether where for concealing income of less than Rs. 25,000 relevant to assessment year 1968-69, ito referred penalty proceedings to iac on 8-2-1973, penalty order passed by iac were without jurisdiction in view of amendment of section 274(2) with effect from 1-4-1971-Held, yes Facts In the return of income for the assessment year 1968-69, the assessee concealed income of less than Rs. 25,000. The ITO referred the penalty proceedings to the IAC and the IAC eventually imposed penalty on the assessee for concealment of income. On appeal, the Tribunal took the view that as the reference of the penalty proceedings was made by the ITO to the IAC after the provisions of section 274(2) amended by the Taxation Laws (Amendment) Act, 1970, with effect from 1-4-1971 came into force, the amended law applied and the IAC had no jurisdiction to impose any penalty under amended section 274(2) as the concealed income was less than the limit of Rs. 25,000 prescribed by amended section 274(2). On reference : Held The law that determines the question of jurisdiction of the ITO or the IAC is the law prevalent on the date of conferring power. The IAC could not assume jurisdiction without an order of reference by the ITO. The source of jurisdiction by the IAC is a valid reference made by the ITO. An order of reference is a condition precedent for vesting and then the exercise of jurisdiction by the IAC. If the order of reference is void ab initio, the IAC does not acquire any jurisdiction to impose the penalty. In the instant case, the ITO made the reference on 8-2-1973. The ITO could have made a valid reference to the IAC only if the concealed income exceeded Rs. 25,000. This was not the case and so no valid reference could be made. Therefore, the Tribunal was justified. case review CIT v. S. Sardar Singh [1978] 113 ITR 541 (Gauhati) followed. CIT v. Khetshibhai Madhani [1972] 85 ITR 315 (Guj.),Smt. Dayawanti v. CWT [1981] 128 ITR 504 (Punj. & Har.) and CIT v. Kundan Lal [1982] 11 Taxman 150 (Delhi) relied on. CIT v. Mela Ram Jagdish Raj…

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