1. By this reference under Section 27(1) of the W.T. Act, 1957 (hereinafter referred to as 'the Act'), the Income-tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion:
'Whether, on the facts and in the circumstances of the case, the Inspecting Assistant Commissioner has jurisdiction to impose penalty under Section 18(1)(c) on December 3, 1977, after the amendment of Section 18(3) with effect from April 1. 1976, by the Taxation Laws (Amendment) Act, 1975 ?'
2. The material facts giving rise to this reference briefly are as follows :
For the assessment year 1975-76, the assessee filed her return declaring the value of her ornaments at Rs, 50,000. The WTO, while framing assessment on January 31, 1976, assessed the actual value of the ornaments at Rs. 85,000. The WTO also initiated penalty proceedings and referred the matter to the IAC, who by his order dated December 3, 1977, imposed a penalty of Rs. 35,000 upon the assessee. On appeal, it was contended on behalf of the assessee, before the Tribunal that the IAC had no jurisdiction to impose penalty after April 1, 1976, and, hence, his order was without jurisdiction. The Tribunal rejected that contention. Aggrieved by the order passed by the Tribunal, the assessee sought a reference and it is at the instance of the assessee that the aforesaid question has been referred to this court for its opinion.
3. When the matter came up for consideration before this court, by an order dated July 2, 1981, this court directed the Tribunal to send a supplementary statement of the case and to state the date on which the matter regarding imposition of penalty was referred by the WTO to the IAC, in the instant case. In pursuance of that order, a supplementary statement of the case has been received and it has been stated therein that the reference was made by the WTO to the IAC on March 11, 1977. It is in the light of this additional fact that we have to answer the question referred to this court.
4. By the Taxation Laws (Amendment) Act, 1975, which came into force from April 1, 1976, the provisions of Section 18(3) of the Act, which required the WTO to refer the case to the IAC in cases covered by that provision, have been recast as follows:
'18. (3) Notwithstanding anything contained in Clause (iii) of Sub-section (1), if, in a case falling under Clause (c) of that sub-section, the amount (as determined by the Wealth-tax Officer on assessment) in respect of which penalty is imposable under Clause (c) aforesaid, exceeds a sum of twenty-five thousand rupees, the Wealth-tax Officer shall not issue any direction under Sub-section (1) for payment by way of penalty without the previous approval of the Inspecting Assistant Commissioner.'
5. Thus, from April 1, 1976, the IAC has no jurisdiction to impose penalty. While considering similar provisions in the I.T. Act, 1961, a Division Bench of this court in CIT v. Tiwari : 124ITR680(MP) held that what was important to see was whether the reference was validly made to the IAC and that if the reference was valid in accordance with the provisions, as they stood at the time of making the reference, it would not be invalidated by subsequent amendment in that provision. The jurisdiction of the IAC for the purpose of imposing penalty is derived on a reference made to him by the WTO and if the reference was not validly made, then it follows that the IAC would have no jurisdiction to impose penalty. In the instant case, as stated in the supplementary statement of the case, the reference was made by the WTO on March 11, 1977, when the provisions of Section 18(3) of the Act requiring the WTO to refer the case to the IAC were substituted by the aforesaid provisions of Section 18(3) of the Act. In our opinion, therefore, on the facts and in the cirumstances of the case, the IAC of Wealth-tax had no jurisdiction to impose penalty under Section 18(1)(c) of the Act, after the amendment of Section 18(3) with effect from April 1, 1976, by the Taxation Laws (Amendment) Act, 1975. Our answer to the question referred to this court, therefore, is against the Department.
6. Reference answered accordingly.
7. Parties shall bear their own costs of this reference.