S.R. Singh, J. - (1.) AT the instance of Rampur Finance Corporation Ltd., Kanpur (hereinafter referred to as "the assessee"), the Income-tax Appellate Tribunal has drawn up a statement of the case and referred the following questions to be answered by this court under Section 256(1) of the Income-tax Act, 1961, briefly called the Act: "1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the authority by whom the penalty was to be imposed and the period of limitation by which the order of penalty was to be passed were matters of procedure and, therefore, in respect of these matters the law as applicable on the date of the initiation of penalty proceedings and not the law as applicable on the date of the filing of the original return will be applicable and, in this view, holding that the penalty was to be imposed by the Income-tax Officer and was within the time limit of two years from the end of the financial year in which the proceedings of penalty were initiated ? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in holding that the imposition of penalty was justified ?"
(2.) THE assessee is a private limited company. It filed a return of income on September 13, 1969/September 17, 1969, in regard to the relevant assessment year 1969-70 claiming a loss of Rs. 431. In the course of assessment proceedings the Income-tax Officer found that the assessee had not shown any income from the house property known as Nishat Manjil, Bhopal. While completing the assessment, the Income-tax Officer took the income from house property at Rs. 10,000, and, together with other income, he made assessment on a total income of Rs. 18,032 (rounded off to Rs. 18,030) on January 31, 1972. THE Income-tax Officer also initiated proceedings for imposition of penalty for concealment of income from house property, in the course of the said assessment proceeding, vide notice dated January 31, 1972. Subsequently, however, the Income-tax Officer had reason to believe that the income from the house property had been under-assessed. He, therefore, reopened the assessment and took the income from house property at Rs. 20,000 and, together with other income, made assessment on a total income of Rs, 20,082 on August 14, 1973. On the same day the Income-tax Officer issued another notice under Section 271(1)(c) of the Act. THE income from house property was, however, reduced by the Appellate Assistant Commissioner to Rs. 6,000, vide order dated December 13, 1973. The Income-tax Officer, by means of order dated March 29, 1976, imposed a sum of Rs. 6,000 as penalty. The matter was then taken up in appeal to the Appellate Assistant Commissioner of Income-tax, Special Range, Kanpur, who upheld the order imposing penalty passed by the Income-tax Officer. The assessee then preferred an appeal to the Income-tax Appellate Tribunal, Allahabad Bench, which maintained the order of penalty as confirmed by the Appellate Assistant Commissioner and dismissed the appeal, vide its judgment and order dated September 24, 1977. The present income-tax reference arises out of the said judgment and order of the Tribunal. We have heard learned counsel appearing for the assessee and the Revenue. The submission made on behalf of the assessee is that the law relating to limitation and jurisdiction in regard to the imposition of penalty should be the one in force on the date the return was filed, i.e., September 13 and 17, 1969, and not the one in force on the date of initiation of the penalty proceedings. Learned counsel for the assessee contended that, in view of Section 275 as it stood on the date the return was filed, the order of penalty could not have been passed on March 29, 1976. He further contends that, according to Section 274(2) of the Act as it stood on the date the return was filed, the Income-tax Officer had no jurisdiction to impose the penalty as it was a case falling under Clause (c) of Sub-section (1) of Section 271 and the minimum penalty imposable exceeds a sum of Rs. 1,000 in which case the Income-tax Officer was obliged to refer the matter to the Inspecting Assistant Commissioner of Income-tax.
(3.) IN order to appreciate the questions referred to this court, it would be pertinent to quote the relevant provisions of law relating to imposition of penalty in force on the date of submission of the return and those in force on the date of initiation of the penalty proceedings. The first relevant provision of law is Section 274(2). The said section as it stood on the date of submission of the return may be quoted below : "274.(2) Notwithstanding anything contained in Clause (iii) of Subsection (1) of Section 271, if in a case falling under Clause (c) of that Subsection, 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." It may be stated that the words "the minimum penalty imposable exceeds a sum of rupees one thousand" were substituted by the words "the amount of income (as determined by the Income-tax Officer on assessment) in respect of which the particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twenty-five thousand rupees" by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971. This Sub-section was omitted by section 65 of the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1976. Thereafter, the following was inserted as Sub-section (2) by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989. "274. (2) No order imposing a penalty under this Chapter shall be made- (a) by the Income-tax Officer, where the penalty exceeds ten thousand rupees ; (b) by the Assistant Commissioner, where the penalty exceeds twenty thousand rupees, except with the prior approval of the Deputy Commissioner." ;