1. The few facts which are necessary to be stated for the purpose of this reference are that on a revised returned filed on February 5, 1970, by the assessee declaring a total income of Rs. 72,682, the ITO by his assessment order dated March 20, 1970, made under, s. 143(3) of the I.T. Act, 1961, determined the total income at about Rs, 1,21,000 and he initiated penalty proceedings under s. 241(1)(a) and (c) of the Act. After the ITO issued a show-cause notice under s. 274(1) of the Act and there was no response from the assessee to the said show-cause notice, the ITO issued another show-cause notice under s. 274(1) to the assessee stating therein that the case was being referred to the IAC and he sent a copy of that notice to the IAC. The IAC further issued a show cause-notice of the assessee under s. 274(1) and he imposed a penalty of Rs. 30,000. It is common ground that the reference made to the IAC was made on the footing tht the minimum penalty imposable was Rs. 12,096 which was 20 per cent. of the amount of the tax sought to be evaded and that was also the basis on which the IAC proceeded to impose the penalty. The IAC holding that the assessee had concealed particulars of his income imposed a penalty of Rs. 30,000.
2. In the assessee's appeal before the Income-tax Appellate Tribunal, the Tribunal took the view that as the IAC had assumed jurisdiction on the footing that the minimum penalty imposable was Rs. 12,096 which was less s then Rs. 25,000, the order of the IAC was without jurisdiction. It was contended before the Tribunal on behalf of the assessee that even otherwise the order of penalty was made beyond the period of limitation prescribed in s. 275 and the Tribunal took the view that the amendment of s. 275 was brought into force form April 1, 1971, and 'at that stage the period of limitation of two years which was prescribed under that section as it then existed had not expired'. Arising out of this order of the Tribunal, the following three questions were referred under s. 256(1) at the instance of the Revenue :
1. Whether there is material on record for holding that the Income-tax Officer referred the case to the Inspecting Assistant Commissioner under section 274(2) in March, 1972 ?
2. If the answer to the first question is in the affirmative, whether on the facts and in the circumstances of the case, the provisions of section 274(2), as amended on April 1, 1971, are applicable ?
3. If the answer to the first question is in the negative, whether, on the facts and in the circumstances of the case, the provision of section 274(2) as amended on April 1, 1971, are applicable ?
3. So far as the question of limitation was concerned, the following question was referred at the instance of the assessee :
'Whether, on the facts and in the circumstances of the case, the order of the Inspecting Assistant Commissioner dated March 23, 1972, was barred by the period of limitation ?'
4. Now, so far as question No. 1 referred at the instance of the Revenue is concerned, it is clear that that question is concluded by the finding of fact recorded by the Tribunal. This statement of the case in para. No. 11 clearly recites as follows :
'On March 7, 1972, the Income-tax Officer issued another show-cause notice under section 274(1) to the assessee stating therein that the case was being referred to the Inspecting Assistant Commissioner and he sent a copy of the notice to the Inspecting Assistant Commissioner.'
5. Assuming for a moment that the said question No. 1 was a question of law, in view of the finding recorded by the Tribunal, the answer to that question has to be in the affirmative.
6. So far as the second question is concerned, we have already taken the view in Income-tax Reference No. 260 of 1976, that the jurisdiction in respect of penalty proceedings after April 1, 1971, would be governed by s. 274(2) and that a reference to the IAC could only be made in a case contemplated by that provision. On the facts of the footing that the minimum penalty imposable was Rs. 12,096. The proper authority who could have had jurisdiction to deal with the matter of imposition of penalty was he IT O and not the IAC. Any action taken by the IAC would be wholly without jurisdiction in view of the express provision in s. 274(2) of the Act. The Tribunal was, therefore, right in holding that the order of penalty made by the IAC was invalid. Accordingly, question No. 2 would have to be answered in the affirmative.
7. We may further observe that a similar view is taken by the Allahabad High Court in CIT v. Smt. Rani Devi : 116ITR358(All) , that by the amended provision in s. 274(2), the jurisdiction of the IAC to initiate penalty proceedings was confined to cases where the amount of concealed income was in excess of Rs. 25,000 and in a case where of concealed income was Rs. 10,000 but the case was referred to the IAC, he had no jurisdiction to entertain the case and the order of penalty was, therefore, invalid. In that case, the ITO referred the case to the IAC on January 19, 1973, when the concealed income was Rs. 10,000 and the IAC passed the order of penalty on February 24, 1973.
8. In view of our answer to question No. 1, question No. 3 does not arise. In view of our answers to questions Nos. 1 and 2, it is not necessary to deal with or answer the question raised at the instance of the assessee The answers to the questions referred at the instance of the Revenue are as follows :
Question No. 1 : In the affirmative and against the Revenue.
Question No. 2 : In the affirmative and against the Revenue.
Question No. 3 : Need not be answered. Revenue to pay the costs of this reference.