H.N. Seth, J.
1. At the instance of the CIT, the Income-tax Appellate Tribunal, Delhi Bench, has stated the case and referred the following question for the opinion of this court I
' Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in cancelling the levy of penalty by the Inspecting Assistant Commissioner under Section 271(1)(c) read with Section 274(2) of the I.T. Act, 1961, relating to the assessment year 1966-67 '
2. The assessee, M/s. India Hotel, Nainital, was assessed to income-tax on 16th August, 1966. The ITO formed an opinion that as the assessee had concealed the particulars of its income and had furnished inaccurate particulars thereof, minimum amount of penalty imposable upon it was Rs. 1,000. Accordingly, as required by Section 274(2) of the I.T. Act, he referred the case to the IAC for imposing such penalty as he thought proper. It appears that while the penalty proceedings were pending before the IAC, the assessee filed an appeal against the assessment order dated August 16, 1966. The AAC allowed the appeal filed by the assessee in part and reduced its taxable income by a sum of Rs. 3,000. Consequently, the minimum penalty imposable on the assessee came to less than Rs. 1,000. However, the IAC concluded the penalty proceedings and by his order dated July 23, 1968, imposed upon the assessee a penalty of Rs. 1,000 under Section 271 of the I.T. Act. Being aggrieved by the aforesaid order of the IAC, the assessee preferred an appeal before the Income-tax Appellate Tribunal, Delhi Bench. The I.T. Appellate Tribunal, by its order dated 20th May, 1970, allowed the appeal and set aside the order of the IAC dated July 23, 1968, on the ground that as the effect of the order dated October 16, 1967, passed by the AAC was that minimum amount of penalty imposable upon the assessee became less than Rs. 1,000, the IAC ceased to have jurisdiction to deal with the penalty proceedings. Subsequently, at the instance of the CIT, the Tribunal stated the case and referred the aforesaid question for the opinion of this court.
3. We have heard learned counsel for the CIT. Section 271(1)(c) of the I.T. Act, as it stood at the relevant time, provided that if the ITO, in the course of any proceedings under the Act, was satisfied that the assessee had concealed the particulars of his income or had deliberately furnished inaccurate particulars of such income, the assessee became liable, in addition to any tax payable by him, to pay certain minimum amount of penalty calculated at the rate specified therein. Section 274 then provided that notwithstanding the provisions in Clause (iii) of Section 271(1), if in a case falling under Clause (c) of that sub-section, the minimum penalty imposable exceeded Rs. 1,000 the ITO had to refer the case to the IAC, who, for the purposes, had all the powers for the imposition of penalty. A reading of these two sections clearly indicates that under the law, as it then stood, the IAC acquired jurisdiction to impose penalty in cases falling under Clause (c) of Section 271(1) when a reference for the purpose was made to him by the ITO concerned. Once the reference was made, the IAC became seized of the matter and acquired all the jurisdiction to deal with the question of penalty which could be imposed on the assessee. We are unable to agree with the Tribunal's view that, according to Section 274 of the Act, the primary condition that the minimum amount of penalty imposable on the assessee exceeds Rs. 1,000 should exist not only when the ITO made the reference but also when the IAC exercised his powers. A reading of the section indicates that the condition regarding minimum amount of penalty imposable relates only to the jurisdiction of the ITO to refer the matter to the IAC whose jurisdiction depends on a valid reference being made to him. Accordingly, if at the time of making the reference, the minimum penalty imposable exceeded Rs. 1,000 the reference would be valid and the IAC will have ample jurisdiction to deal with the matter. His jurisdiction to deal with the reference made to him by the ITO could not get ousted merely because the assessee preferred an appeal against the assessment order. Once a reference is made to the IAC, it is for him to determine the amount of penalty imposable on the assessee. The Act does not provide that if after making the reference the assessment made by the ITO is reduced in appeal, the reference should be withdrawn, and the matter should again be dealt with by the ITO. In our opinion, merely because, in appeal, the quantum of taxable income of the assessee is reduced by the appellate authority, the jurisdiction of the IAC to deal with the penalty proceedings did not get ousted. The reduction in the assessment might affect the amount of penalty that may be imposed upon the assessee but it could not oust the jurisdiction of the IAC to deal with the matter. In case, as a result of reduction in assessment, even if made subsequent to imposition of penalty by the IAC, the assessee became entitled to claim some relief in respect of the penalty imposed upon him, he could get his grievance redressed by filing an appeal against the penalty order.
4. Aforesaid view expressed by us is further supported by a subsequent amendment made in Section 274(2) of the I.T. Act. Relevant portion of the amended Section 274(2) of the Act runs thus:
' 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 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......the Income-tax Officer shall refer the caseto the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty.'
5. This amendment makes the legislative intent absolutely clear that what determines the jurisdiction of the ITO to make a reference to the IAC for imposing the penalty and for the IAC to deal with the reference, is the minimum amount of penalty payable on the income as assessed by the ITO and not as determined in appeal. If the minimum amount of penalty payable in respect of the concealed income or income in respect of which inaccurate particulars have been given as determined by the ITO at the time of assessment exceeds a particular amount, he has to make a reference to the IAC, otherwise he is to deal with the matter himself. Any subsequent alteration in the assessment would not affect the jurisdiction of the IAC to deal with the penalty proceedings. In our opinion, the amendment made in this section merely clarifies the legal position so as to arrive at any possible conclusion.
6. In this view of the matter, we answer the question referred to us in the negative and in favour of the department As no one has appeared in this case on behalf of the assessee, we make no order as to costs of this reference.