S.C. Agrawal, J. - (1.) IN this reference, made under Section 256(1) of the INcome -tax Act, 1961 (hereinafter referred to as "the Act"), at the instance of the assessee, the INcome -tax Appellate Tribunal, Jaipur Bench, Jaipur (hereinafter referred to as "the Tribunal"), has referred the following questions for the consideration of this court: "1. Whether the Tribunal was justified in holding that the penalty provisions which govern the levy of a penalty in a case are those which exist on the date on which the return is filed and that the law as in force on the first day of the assessment year will not govern the levy of penalty ? 2. Whether, on the facts and in the circumstnaces of the case, the Tribunal was justified in applying the law of penalty contained in Section 271(1 )(c) as it stood on April 10, 1969, after the date on which the returns for the assessment years 1966 -67 and 1967 -68 were filed -
(2.) THIS reference relates to the assessment years 1966 -67 and 1967 -68. The assessee carries on business in purchase and sale of jewellery, precious stones and antiques. In respect of the assessment year 1966 -67, the assessee filed a return declaring an income of Rs. 3,295. The Income -tax Officer, by his assessment order dated December 18, 1969, assessed the assessee's income at Rs. 25,000. In the said assessment order, it was also directed that penalty notice under Sections 274/271(1)(b) and 271(1)(c) of the Act may be issued. In respect of the assessment year 1967 -68, the assessee, in the return, declared an income of Rs. 4,500 and the Income -tax Officer, in his assessment order dated February 25, 1970, assessed the income of the assessee at Rs. 20,000. In the said assessment order, the Income -tax Officer, also mentioned that penalty notice under Section 274 read with Sections 271(1)(b) and 271(1)(c) had already been issued. The assessee filed appeals against these assessment orders. The said appeals were dismissed by the Appellate Assistant Commissioner by his order dated July 23, 1970, The assessee went in further appeal before the Tribunal and the Tribunal, by order dated April 6, 1972, partly allowed the appeals and the income of the assessee was assessed at Rs. 15,000 for each year. Since the income returned by the assessee was less than 80% of the income as finally assessed, penalty proceedings were initiated by the Income -tax Officer by issuing a notice under Section 271(1)(c) read with Section 274 of the Act. The said penalty proceedings were referred by the Income -tax Officer to the Inspecting Assistant Commissioner, Jaipur Range I, Jaipur, and the Inspecting Assistant Commissioner after giving an opportunity to the assessee to make his submissions, passed orders dated February 22, 1972, whereby he levied a penalty of Rs. 22,000 on the assessee under Section 271(1)(c) in respect of the assessment year 1966 -67 and a penalty of Rs. 16,000 under Section 271(1)(c) in respect of the assessment year 1967 -68. Against both these orders passed by the Inspecting Assistant Commissioner, the assessee filed appeals before the Tribunal which were decided by the Tribunal by the order dated May 30, 1973. Before the Tribunal, it was submitted on behalf of the assessee that the penalty had been imposed by the Inspecting Assistant Commissioner in respect of the assessment years 1966 -67 and 1967 -68 on the basis of the provisions of Section 271(1)(c) as amended with effect from April 1, 1968, and that in respect of the assessment years 1966 -67 and 1967 -68, the law regarding the imposition of penalty which came into force with effect from April 1, 1968, could not be applied and penalty could only be imposed in accordance with the law which was applicable during the assessment years 1966 -67 and 1967 -68. It was also submitted on behalf of the assessee before the Tribunal that the Income -tax Officer was the competent authority to impose the minimum penalty as per the law applicable on April 1, 1966, and on April 1, 1967, because the minimum penalty at the relevant time was less than Rs. 1,000 and that the Inspecting Assistant Commissioner erred in exercising jurisdiction in the matter. The Tribunal rejected these contentions urged on behalf of the assessee and held that, for the purpose of imposing penalty, the relevant law to be applied is the law which was in force on the date on which the false return was filed and not the law which was in force on the first day of the relevant assessment year and that, in the present case, the returns for both the years had been filed on April 10, 1969, and, therefore, the law applicable would be the law which was in force on April 10, 1969, i.e., the law as it stood after the amendment of 1968. According to the Tribunal, the jurisdiction of the Inspecting Assistant Commissioner had also to be determined on the basis of the provisions with regard to penalty as they stood on the date of the filing of the return, and that the Inspecting Assistant Commissioner had jurisdiction to deal with the matter because the amount of penalty leviable exceeded Rs. 1,000. The Tribunal, however, reduced the penalty to Rs. 14,000 for the assessment year 1966 -67 and Rs. 12,000 for the assessment year 1967 -68 and, to this extent, the Tribunal partly allowed the appeals of the assessee. Feeling aggrieved by the said order of the Tribunal, the assessee filed an application under Section 256(1) of the Act and on the said application, the Tribunal has referred the two questions mentioned above for the consideration of this court. We have heard Shri N. M. Ranka, learned counsel for the assessee, and Shri V. K. Singhal, learned counsel for the Revenue. Shri Ranka has urged that imposition of penalty under the Act involves two aspects, viz., (i) the quantum of penalty that can be imposed, and (ii) the jurisdiction of the authority who is entitled to impose the penalty. Shri Ranka has pointed out that, in the present case, the Tribunal has expressed the view that, in respect of both these matters, the law to be applied is the law which was in force on the date of filing the return. Shri Ranka has submitted that, in view of the decision of the Supreme Court in Brij Mohan v. CIT [1979] 120 ITR 1, the relevant date for applying the law in the matter of the quantum of penalty that can be imposed under Section 271 of the Act is the date on which the wrongful act for which penalty is leviable was committed, and if the wrongful act is concealment of income, the said date is the date on which the return was filed. As regards the date with reference to which the jurisdiction of the authority imposing the penalty is to be considered, the submission of Shri Ranka is that the authority passing the order imposing the penalty should possess the jurisdiction to do so at the time of initiation of the penalty proceedings as well as on the date of passing of the final order imposing the penalty. Shri Ranka has contended that in the present case on the date of the passing of the orders dated February 22, 1972, imposing the penalty under Section 271(1)(c) read with Section 274 of the Act, the Inspecting Assistant Commissioner had ceased to have jurisdiction to impose the penalty in this matter in view of the amendment introduced in Section 274(2) of the Act by the Taxation Laws (Amendment), Act, 1970, with effect from April 1, 1971. As a result of the said amendment, the jurisdiction of the Income -tax Officer to impose penalty under Section 271(1)(c) was enlarged and he was empowered to impose penalty in cases where the amount of income in respect of which particulars had been concealed or inaccurate particulars had been furnished did not exceed Rs. 25,000 and to that extent the jurisdiction of the Inspecting Assistant Commissioner was curtailed and that since the amount of the income in respect of which particulars had been concealed or inaccurate particulars had been furnished was less than Rs. 25,000, the Income -tax Officer was entitled to impose the penalty and the Inspecting Assistant Commissioner had no jurisdiction to pass the orders imposing the penalty on February 22, 1972, i.e., after April 1, 1971. Shri Singhal has, however, submitted that the contention urged by Shri Ranka with regard to the Inspecting Assistant Commissioner having lost the jurisdiction to pass the orders dated February 22, 1972, is not covered by the questions which have been referred and since this question does not arise out of the order dated May 30, 1973, passed by the Tribunal, this contention should not be permitted to be raised. Shri Singhal has also supported the orders passed by the Inspecting Assistant Commissioner and has submitted that the jurisdiction of the Inspecting Assistant Commissioner has to be determined on the basis of the law as it stood on the date of initiation of the penalty proceedings and that, in the present case, the penalty proceedings had been initiated by the Income -tax Officer by issuing notices under Section 271(1)(c) of the Act by his orders dated December 18, 1969, and February 25, 1970, much before April 1, 1971, and that the penalty proceedings initiated on the basis of these notices which were pending before the Inspecting Assistant Commissioner on April 1, 1971, could be disposed of by the Inspecting Assistant Commissioner in spite of the change in the provisions of Section 274(2) of the Act by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971.
(3.) IN view of the aforesaid submissions, we find that in so far as question No. 2 is concerned, there does not appear to be any controversy between the parties in view of the decision of the Supreme Court in Brij Mohan v. CIT [1979] 120 ITR 1, that the law in relation to the quantum of penalty which can be imposed under Section 271(1)(c) is the law existing on the date of concealment of income, namely, the date of filing the return. The Tribunal has also proceeded on that basis. As regards the jurisdiction of the Inspecting Assistant Commissioner to pass the orders dated February 22, 1972, we find that question No. 1 is not happily worded inasmuch as it confines the matter to be considered on the basis of only two dates, namely, the date on which the return was filed or the first day of the assessment year in relation to which the penalty is being imposed. We find that the question with regard to the jurisdiction of the Inspecting Assistant Commissioner to pass the orders dated February 22, 1972, has to be considered in a wider perspective inasmuch as, apart from the two dates covered by that question, there are decisions of various High Courts in which it has been held that the jurisdiction of the officer imposing the penalty has to be determined on the basis of law as it stood on (i) the date on which the penalty proceedings were initiated ; (ii) the date on which the matter was referred by the Income -tax Officer to the Inspecting Assistant Commissioner ; (iii) the date on which the order imposing the penalty was passed. We find that, before the Tribunal, the broad question was with regard to the jurisdiction of the Inspecting Assistant Commissioner to pass the orders dated February 22, 1972, imposing the penalty and it was urged that, on the date of passing of those orders, the Inspecting Assistant Commissioner did not have the jurisdiction to pass the said orders. The said contention was based on the ground that the law with regard to the jurisdiction of the officer to impose the penalty has to be the law in force on the first day of the assessment year in respect of which the penalty was imposed and the said contention was rejected by the Tribunal. Shri Ranka is now questioning the jurisdiction of the Inspecting Assistant Commissioner on a different basis, namely, that, on the date of the passing of the orders dated February 22, 1972, the Inspecting Assistant Commissioner had ceased to have the jurisdiction to pass the said orders in view of the amendment introduced in Section 274(2) by the Taxation Laws (Amendment) Act, 1970. We are of the view that this contention of Shri Ranka is only one facet of the contention urged before the Tribunal that the Inspecting Assistant Commissioner had no jurisdiction to pass the orders dated February 22, 1972, and, in our opinion, the assessee cannot be precluded from raising this contention. Question No. 1 as framed by the Tribunal confines its scope to two alternatives only, namely, the law existing on the date on which the return was filed and the law in force on the first day of the assessment year in respect of which the penalty has been imposed. The question as framed does not enable the court to examine any other alternative with regard to the applicability of the law relating to conferment of jurisdiction and since divergent views have been expressed by the various High Courts on this aspect, we consider it appropriate in the interest of justice to reframe question No. 1 as under : "Whether, on the date of the passing of the orders dated February 22, 1972, the Inspecting Assistant Commissioner had the jurisdiction under Section 274(2) of the Act to pass the said orders imposing penalty under Section 271 (1)(c) of the Act - ;