R.N. Misra, J.
1. At the instance of the revenue on an application made under Section 256(1) of the Income-tax Act, 1961 (hereinafter to be referred to as 'the Act'), the Income-tax Appellate Tribunal, Cuttack Bench, has stated this case and referred the following question for opinion of the court:
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in cancelling the levy of penalty under Section 271(1)(c) of the Income-tax Act, 1961, as barred by limitation by holding that the amendment to Section 275 of the Act being operative from April 1, 1971, does not extend the period of limitation in respect of penalty proceedings initiated on December 31, 1970, pending for disposal as on April, 1971.'
2. Assessee is an advocate practising at Cuttack. In respect of the assessment year 1970-71, he filed a return disclosing an income of Rs. 3.933. His income was computed at Rs. 16,300. In appeal the total income was reduced to Rs. 14,300. A penalty proceeding was initiated under Section 271(1)(c) of the Act by the Income-tax Offer on December 31, 1970, and was duly referred to the Inspecting Assistant Commissioner under Section 274(2) of the Act. The Inspecting Assistant Commissioner by order dated 20th of February, 1973, imposed penalty on the assessee. Assessee claimed before the Tribunal in appeal that the assessment having been framed of December 31, 1970, and the penalty proceeding having bona initiated on the same day, the penalty proceeding had to close within two years as provided under the unamended Section 275 of the Act On behalf of the revenue it was contended before the Tribunal that the penalty proceeding was a pending action before the Inspecting Assistant Commissioner and the period of limitation prescribed under Section 275 of the Act was enlarged by amendment under the Taxation Laws (Amendment) Act of 1970 with effect from April 1, 1971, and as the final order imposing penalty has been passed within the period of limitation provided under the amended Section 275, no objection on the ground of limitation is available to be raised. The Tribunal held :
' In our view, Section 275 of the Act invests the assessee with substantial right and by amendment of that section which became applicable from April 1, 1971, the right is affected. The amendment brought in and became effective on April 1, 1971, merely does not deal with a matter of procedure but, indeed, affects the right of the assessee as to the period of limitation and, therefore, following the settled law, in the absence of any retrospective provisions in the substantive law, any amendment subsequent to the accrual of the right cannot take away or abridge without express provision of the law. The law governing the period of limitation on the date of initiation of the penalty proceedings being two years from the date of framing of the assessment, regardless of an appeal, the order of the Inspecting Assistant Commissioner is contrary to the provisions of the law, and, therefore, is cancelled...'
3. Admittedly, the order of assessment in this case was passed on December 31, 1970. Section 275 before its amendment provided thus:
' No order imposing a penalty under this Chapter shall be passed after the expiration of two years from the date of the completion of the proceedings in the course of which the proceedings for the imposition of penalty have been commenced.'
4. Before the two year period envisaged under Section 275 of the Act expired, the provisions under Section 275 underwent a complete overhauling by the Taxation Laws (Amendment) Act of 1970. The new provision reads thus :
' No order imposing a penalty under this Chapter shall be passed -
(a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Appellate Assistant Commissioner under Section 246 or an appeal to the Appellate Tribunal under Sub-section (2) of Section 253, after thy expiration of a period of-
(i) two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, arc completed, or
(ii) six months from the end of the month in which the order of the Appellate Assistant Commissioner or, as the case may be, the Appellate Tribunal is received by the Commissioner,
whichever period expires later ;
(b) in any other case, after the expiration of two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated are completed...'
5. Admittedly, if the new provision applies, the levy of penalty does not suffer from the bar of limitation. The sole question for consideration is as to whether the new provision applies or the matter had to be disposed of under the unamended law. We do not agree with the conclusion of the Tribunal. When the amending Act came into force, i.e., April 1, 1971, the two year period provided under Section 275 of the unamended Act had not expired. At that stage the new provision with effect from 1st April, 1971, introduced a new scheme of limitation. No right had accrued to the assesses when the law was changed. Therefore, the law as in force on the date when the order is made must be applicable. We have not been shown any decision contrary to such a view. On the other hand, Mr. Mohanty has accepted the analysis placed by us at the time of hearing that the real position is so. We would accordingly hold without feeling the need of referring to any authority to support our conclusion that the order of penalty does not suffer from the infirmity of limitation. Our answer to the question referred, therefore, shall be :
On the facts and in the circumstances of the case, the Tribunal was not justified in cancelling the levy of penalty under Section 271(1)(c) of the Act of 1961 as being barred by limitation by holding that the amended provision of Section 275 was not applicable to the facts of the case.
6. We make no order as to costs.
7. It may be stated that the assessee has made an application under article 226 of the Constitution to quash the imposition of penalty in O.J.C. No. 2044 of 1975, the main ground of challenge being that the Inspecting Assistant Commissioner has lost jurisdiction to the imposition of penalty. That contention Mr. Mohanty for the assessee wanted to raise here, but the question referred did not permit him to raise such a point. Such question to be raised in the writ application is very different and does not stand in our way in disposing of this reference application. We have not waited for the disposal of the writ application as we are of the view that our opinion in the matter does not affect the tenability of the petitioner's contention in the writ application.
N.K. Das, J.
8. I agree.