Law: Income Tax Act, 1961

Section: 256,271(1)(c),274.

Income-tax----Penalty---Concealment of income---Law applicable---Jurisdiction to levy penalty---Penalty proceedings pending before IAC on 31-3-1976---Effect of omission of subsection (2) of S.274 with effect from 1-4-1976 --- IAC competent to continue with proceedings and pass appropriate orders--­Tribunal not considering merits of case---Matter remanded---Indian Income Tax Act, 1961, Ss. 271(1)(c) & 274. The Income-tax Officer before completing the assessment on March 23, 1974, initiated proceedings for penalty under section 271(1)(c) of the Income-tax Act, 1961, and referred the matter to the Inspecting Assistant Commissioner for levy of penalty. The Inspecting Assistant Commissioner on August 29, 1979, imposed penalty. The assessee contended that in view of the Taxation Laws (Amendment) Act, 1975, omitting subsection (2) of section 274 with effect from April 1, 1976, the Inspecting Assistant Commissioner had no jurisdiction to impose penalty after April 1, 1976. The Tribunal accepted the contention of the assessee. On a reference: Held, (i) that the Inspecting Assistant Commissioner did not lose jurisdiction to continue with the penalty proceedings pending before him on March 31, 1976. He was entitled to continue with those proceedings and pass appropriate orders according to law. CIT v. Sharadamma (R.) (Smt.) (1996) 219 ITR 671 (SC) fol. (ii) that when the Appellate Tribunal cancelled the penalty on the ground that the Inspecting Assistant Commissioner had no jurisdiction to levy penalty, it did not go into the merits of the case as it .was found unnecessary to express any opinion on the merits of the case. It way now necessary that the Tribunal should go into the merits of the case w. regards the levy of penalty and decide the matter accordingly. CIT v. Star Oil Mills (1997) 228 ITR 26 (Mad.) ref. JUDGMENT N. V. BALASUBRAMANIAN, J.---This reference arises out of the order of the Income-tax Appellate Tribunal passed in I.T.A. No. 2004/Mds. of 1979, relating to the assessment year 1971-72. The Appellate Tribunal referred the following question of law under section 256(1) of the Income Tax Act, 1961, for our opinion: "Whether, on the facts and in the…

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