Law:

Section:

I. Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment years 1972-73 and 1973-74 - Whether where penalty proceedings under section 271(1)(c) were pending before IAC as on 31-3-1976, ITO did not loose jurisdiction to continue with proceedings pending before him by virtue of deletion of sub-section (2) of section 274 with effect from 1-4-1976 and, thus, order imposing penalty was made by him subsequent to that date was within his jurisdiction - Held, yes II. Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1973-74 - Whether penalty is impossible only in cases where tax has been levied and no penalty can be levied when result of computation of income made by Assessing Officer is loss - Held, yes FACTS I The proceedings under section 271(1)(c) were pending before the IAC as on 31-3-1976, and the order imposing penalty was made by him subsequent to that date. The Tribunal upheld the order of the IAC. On reference : HELD I In view of the decision of the Supreme Court in CIT v. Smt. R. Sharadamma [1996] 219 ITR 671 wherein it was held that the IAC does not loss the jurisdiction to continue with the proceedings pending before him on 31-3-1976 by virtue of the deletion of sub-section (2) of section 274 by the Taxation Laws (Amendment) Act, 1975 with effect from 1-4-1976, it was to be held in the instant case that the order so made by the IAC was within his jurisdiction. FACTS II The Tribunal held that the penalty under section 271(1)(c )(iii) was imposable even though the assessment for the year had resulted in a net loss and there was no total income assessed for the year and there was no tax payable thereon. On reference : HELD II Having regard to the law consistently laid down by the same High Court that penalty is imposable only in cases where tax has been levied, and that no penalty can be levied when the result of the computation made by the Assessing Officer is a loss, it must be held that the Tribunal was in error in holding that penalty was leviable even when the assessment did not show any taxable income, but had showed net loss. Note : The case was decided partly…

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