Law:

Section:

Section 274(2) [omitted with effect from 1-4-1976] of the Income-tax Act, 1961 - Penalty - Reference to IAC - Assessee filed original return on 28-7-1970 which it later revised on reassessment - ITO made reassessment on 14-11-1974 - Section 274(2) was by then amended with effect from 1-4-1971 - Whether levy of penalty was relatable to date of reassessment and not to date of original return and, therefore, ITO was competent to levy penalty - Held, yes Facts The assessee-firm filed its original return on 28-7-1970, which was accepted by the ITO. Later, the ITO reopened the assessment and, on the assessee filing a revised return showing higher income, reassessment was completed on 14-11-1974. Section 274(2) was by then amended by the Taxation Laws (Amendment) Act, 1970, with effect from 1-4-1971. The ITO, thereupon, levied penalty under section 271(1)(c), which, on appeal, was confirmed by the AAC. The assessee, on second appeal, claimed before the Tribunal that the concealment was with reference to the original return filed on 28-7-1970, and as per the law prevailing on that date, the ITO had no jurisdiction to levy penalty but should have referred the matter to the IAC under section 274(2). The Tribunal held that the ITO was competent to levy penalty without making reference to the IAG, as the law prevailing on the date of reassessment was applicable. On reference : Held The act of concealment of income constituted the provocation for levy of penalty. Therefore, the law prevailing on the date of infraction of the provisions should be necessarily applied for visiting the concealment of income by levy of penalty. Insofar as the forum having competence to levy penalty was concerned, the crucial factor is the date of finalisation of assessment contemporaneous with initiation of penalty. The assumption of jurisdiction to levy penalty is founded upon the satisfaction of the officer regarding concealment and this satisfaction is finally arrived at on the date of passing the order. Therefore, the search for the authority to be seized of the competence to levy penalty is only on the date of satisfaction regarding concealment and initiation of penal proceedings and…

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