Law:

Section:

Section 274(2) of the income-tax act, 1961 [as amended by the taxation laws (amendment) act, 1970 with effect from 1-4-1971]-Penalty-Reference to iac-ito initiated penalty proceedings on 18-3-1972 for assessment years 1969-70 and 1970-71-As concealed income did not exceed Rs. 25,000, ito himself imposed penalty under section 271(1)(c)-Whether, in view of fact that amended section 274(2) had already come into force when penalty proceedings were initiated, ito had jurisdiction at relevant time-Held, yes. Facts For the assessment years 1969-70 and 1970-71, the ITO found that the assessee had concealed its income. The assessment for these two years were completed on 18-3-1972 and on the same day penalty proceedings were initiated by the ITO. The ITO determined the income concealed for each of the two assessment years at figures not exceeding Rs. 25,000 and levied penalty equal to the amount of income concealed for both the assessment years. On appeal, the AAC as well as the Tribunal upheld the ITO's order. Before the Tribunal, the assessee contended that the ITO had no jurisdiction to pass the orders of penalty because in view of section 274(2) (as it stood prior to 1-4-1971) the jurisdiction to levy the penalty was vested in the IAC, as the minimum penalty leviable was more than Rs. 1,000. The Tribunal, while rejecting the assessee's contention, held that as the income concealed did not exceed Rs. 25,000 for either of the said assessment years, the proper authority to levy the penalty was the ITO by virtue of the. amended section 274(2) that came into force on 1-4-1971. The Tribunal also found that the ITO had not made any reference to the IAC under section 274(2), as it stood prior to 1971, and, therefore, the IAC had no jurisdiction at the relevant time. On reference : Held The principle that the law in force on the first day of April of each assessment year governs the assessment for that year is applicable to assessment alone and not to the levy of penalty. The date on which the ITO passes an order of penalty has no relevance to determine the law that is applicable in the matter of levying the penalty. Further, the Supreme Court's decision in the case of Brij…

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