- (1.) THIS reference under s. 256(1) of the IT Act, 1961, at the instance of the Revenue is to decide the following question of law, namely: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the penalty levied under s. 271(1)(c) holding that the IAC had no jurisdiction to levy the said penalty on March 23, 1978 ?
(2.) THE relevant assessment year is 1973-74. THE ITO completed the assessment on February 27, 1976, by including an amount of Rs. 53,457 to the returned income and he also initiated penalty proceedings under s. 271 (1)(c) of the Act. THEreafter, the matter was referred by the ITO to the IAC since the amount of concealed income exceeded Rs. 25,000. THE IAC issued a show-cause notice to the assessee on March 1, 1978, and after obtaining the assessee's reply, imposed penalty under s. 27](1)(c) of the Act by an order dated March 23, 1978. The assessee contended that the amendment deleting sub-s. (2) of s. 274 in the IT Act by the Taxation Laws (Amendment) Act, 1975, w.e.f. April 1, 1976, had the result of divesting the IAC of the jurisdiction to levy the penalty after that date. The Tribunal has accepted this contention of the assessee and cancelled the IAC's order imposing penalty. Hence, this reference at the instance of the Revenue. The effect of deletion of sub-s. (2) of s. 274 of the IT Act, 1961, w.e.f. April 1, 1976, in the above manner was considered in CIT vs. Shri Ram Prakash, Saraf (1986) 51 CTR (MP) 236:(1986) 160 ITR 860 (MP). It was held therein that the date of making reference to the IAC by the ITO is the determining factor and not the date of initiation of penalty proceedings by the ITO. In other words, even when the penalty proceedings were initiated by the ITO prior to April 1, 1976, if the reference by the ITO to the IAC was made subsequent to April 1, 1976, when sub-s. (2) of s. 274 of the Act was deleted, then the reference made to the IAC was incompetent and the IAC had no jurisdiction to impose the penalty. It is only the references made to the IAC by the ITO prior to April 1, 1976, which are saved and not those references which were made after April 1, 1976. The same view was taken in some other decisions of the Madhya Pradesh High Court referred to there in and also rendered subsequently. No decision taking a contrary view has been cited before us. We do not find any reason to take a different view. From the above principle, it follows that mere initiation of penalty proceedings on February 27, 1976, by the ITO prior to the deletion of sub-s. (2) of s. 274 of the Act w.e.f. April 1, 1976, did not have the effect of saving the jurisdiction of the IAC to impose the penalty unless a reference on that basis had also been made by the ITO to the IAC prior to April 1, 1976. In the facts stated in the statement of case as well as the Tribunal's order, we do not find any mention of the date on which the reference was made by the ITO to the IAC and the on only dates mentioned are March 1, 1978, as the date of show-cause notice given by the IAC and March 23, 1978, as the date of the IAC's order imposing penalty. Obviously, the Tribunal did not decide this point on the basis of the date of reference, which really is the determing factor for deciding the point. The Tribunal shall, therefore, decide the matter afresh on this basis. Consequently, the reference is answered by holding that the Tribunal was not justified in deciding the matter of the IAC's jurisdiction to levy the penalty by an order dated March 23, 1978, except on the basis of the date on which the reference was made by the ITO to the IAC. The Tribunal is, therefore, required to decide the matter afresh with advertence to the above observations.
(3.) NO order as to costs.;