Commissioner Of Income-Tax vs Sanwal Dass Miri Mal
1995 Latest Caselaw 939 Del

JUDGMENT

Y.K. Sabaharwal, J.

1. During the course of assessment proceedings for the assessment year 1969-70, the Income-tax Officer examined the stock register produced by the assessee and found that there was discrepancy of 1,000 kgs. of aluminium. It was found that as on June 21, 1968, the quantity of aluminium in stock was shown at 3,147 kgs. as against the correct quantity of 4,147 kgs. The Income-tax Officer held that the assessee had sold 1,000 kgs. of aluminium outside the books of account and made an addition of Rs. 21,200 towards the total income of the assessee. The order of assessment was made on September 17, 1971. He also initiated penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961, against the assessee and by his order dated March 19, 1974, imposed a penalty of Rs. 20,000. On appeal, the Appellate Assistant Commissioner upheld the order of the Income-tax Officer. The assessee went in appeal before the Income-tax Appellate Tribunal. The Tribunal held that the Income-tax Officer had no jurisdiction to impose penalty in view of the provisions of section 274(2) of the Income-tax Act which were applicable on the date of filing of the return when the incident of concealment took place. The penalty order passed by the Income-tax Officer was held by the Tribunal to be without jurisdiction and was set aside.

2. Under the aforesaid circumstances, at the instance of the Revenue, the following question has been referred to us for opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in setting aside the penalty order passed by the Income-tax Officer imposing a penalty of Rs. 20,000 under section 271(1)(c) of the Income-tax Act, by holding that the Income-tax Officer had no jurisdiction to impose the penalty?"

3. It may be useful to reproduce section 274(2) as it stood before April 1, 1971, which reads as under :

"Notwithstanding anything contained in clause (iii) of sub-section (1) of section 271, if in a case falling under clause (c) of that sub-section, the minimum penalty imposable exceeds a sum of rupees one thousand, the Income-tax Officer shall refer the case to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty."

4. It is clear from the aforesaid provisions that before the amendment the amount of penalty imposable was the determining factor for deciding which authority had jurisdiction. After the amendment it is not the amount of penalty which determined the jurisdiction but the determining factor for deciding which authority has jurisdiction is the amount of income concealed.

5. In the present case, as noticed above, the addition of Rs. 21,200 was made. Further, penalty proceedings were initiated after April 1, 1971, since the order of assessment itself is September 17, 1971.

6. On these facts, the question as to which officer, has jurisdiction, is no longer res integra in view of the decision of the Supreme Court in Varkey Chacko v. CIT [1993] 203 ITR 885. The Supreme Court has held that the penalty proceedings can be initiated only after the assessment order has been made which finds such concealment or furnishing of inaccurate particulars. Who, at this point of time, has the authority to impose the penalty is what is relevant. In this view, the Income-tax Officer had jurisdiction to impose penalty.

7. For the reasons aforesaid, the answer to the question has to be in the negative, in favor of the Revenue and against the assessee.

8. Now, the case will go back to the Tribunal in terms of paragraph 9 of the statement of case.