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Commissioner of Income-tax Vs. Mela Ram Jagdish Raj and Co. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference No. 81 of 1975
Judge
Reported in[1981]132ITR897(P& H)
ActsIncome Tax Act, 1961 - Sections 271(1) and 274(2)
AppellantCommissioner of Income-tax
RespondentMela Ram Jagdish Raj and Co.
Appellant Advocate D.N. Awasthy and; B.K. Jhingan, Advs.
Respondent Advocate B.S. Gupta, Adv.
Cases ReferredAnant Gopal Sheorey v. State of Bombay
Excerpt:
.....the period of limitation for filing an appeal would commence from the date when the parties concerned acquire knowledge of passing of the said order. - it is well settled that a statute dealing with procedure is retrospective and its provisions also apply to the proceedings pending at the time of its enactment, but where the provisions of the statute affect vested rights the said provisions are prospective in operation unless there is an indication in the statute to the contrary. cit [1972]86itr557(sc) ,that section 271(1) contemplates that the ito should have been satisfied in the course of assessment proceedings regarding matters mentioned in the clauses of that sub-section......order was rectified and the income was reduced to rs. 40,592.2. for concealing its income, penalty proceedings were initiated against the assessee by an order of the ito on 20th february, 1971. since the minimum penalty imposable exceeded rs. 1,000, the ito referred the case to the iac on 29th december, 1972, under section 274(2) of the act. the iac, vide his order dated 15th march, 1973, levied a penalty of rs. 10,000 on the assessee under section 271(1)(c) of the act.3. aggrieved by the order of the iac, the assessee preferred an appeal before the income-tax appellate tribunal, amritsar (hereinafter referred to as ' the tribunal '). the tribunal accepted the appeal. the provisions of section 274(2) of the act were amended by the t.l. (amend.) act, 1970, with effect from 1st.....
Judgment:

B.S. Dhillon, J.

1. The original assessment of the assessee for the assessment year 1965-66 was completed on a total income of Rs. 25,592. Later on, it came to light that there were two cash credits to the tune of Rs. 15,000. The assessment was, therefore, reopened tinder Section 147 of the I.T. Act, 1961 (hereinafter referred to as 'the Act'). The assessee surrendered the cash credit of Rs. 15,000 and, consequently, the assessment was refrained on 20th February, 1971, on a total income of Rs. 49,592. Later on, the assessment order was rectified and the income was reduced to Rs. 40,592.

2. For concealing its income, penalty proceedings were initiated against the assessee by an order of the ITO on 20th February, 1971. Since the minimum penalty imposable exceeded Rs. 1,000, the ITO referred the case to the IAC on 29th December, 1972, under Section 274(2) of the Act. The IAC, vide his order dated 15th March, 1973, levied a penalty of Rs. 10,000 on the assessee under Section 271(1)(c) of the Act.

3. Aggrieved by the Order of the IAC, the assessee preferred an appeal before the Income-tax Appellate Tribunal, Amritsar (hereinafter referred to as ' the Tribunal '). The Tribunal accepted the appeal. The provisions of Section 274(2) of the Act were amended by the T.L. (Amend.) Act, 1970, with effect from 1st April, 1971, and it was provided that the IAC could have jurisdiction to levy the penalty only if the concealed income exceededRs. 25,000. The Tribunal accepted the contention of the assessee that since, in the present case, the concealed income of the assessee was below Rs. 25,000, the ITO and not the IAC had the jurisdiction to levy penalty on the assessee. The Tribunal further observed that even though the assessment order was passed on 20th February, 1971, the reference under Section 274(2) was made by the ITO to the IAC only on 29th December, 1972, when Section 274(2) stood amended with effect from 1st April, 1971. The Tribunal held that on 29th December, 1972, when the case was referred by the ITO to the IAC, on that date the IAC, in view of the amendment, had no jurisdiction to pass the order levying penalty. The order levying penalty was thus set aside by the Tribunal.

4. On the application made by the revenue, the following questions of law have been referred by the Tribunal to this court for its opinion :

' 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provisions of Section 271(1)(c) read with section 274(2) as amended with effect from 1st April, 1971, by the Taxation Laws (Amendment) Act, 1970, were applicable to this case ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Inspecting Assistant Commissioner had no jurisdiction to impose the penalty in this case '

5. As is clear, the primary question of law which arises for determination in this case as to what is the effect of the amendment of Section 274(2) of the Act or, in other words, is the amendment retrospective The matter is res Integra. A Division Bench of this court in CIT v. Raman Industries considered this question at length and came to the conclusion that there is no provision in the T.L. (Amend.) Act, 1970, to indicate that the amendment of Section 274 of the Act is retrospective. It was held that the section deals with vested rights and, therefore, the amendment is prospective in operation. We are entirely in agreement with the view taken in this case. It is well settled that a statute dealing with procedure is retrospective and its provisions also apply to the proceedings pending at the time of its enactment, but where the provisions of the statute affect vested rights the said provisions are prospective in operation unless there is an indication in the statute to the contrary. The jurisdiction of a Tribunal to try a case is a vested right and has to be determined according to law in force at the time of its institution.

6. As regards the question as to when the penalty proceedings under Section 271(1) of the Act stand initiated, it has been authoritatively held by their Lordships of the Supreme Court in D. M. Manasvi v. CIT : [1972]86ITR557(SC) , that Section 271(1) contemplates that the ITO should have been satisfied in the course of assessment proceedings regarding matters mentioned in the clauses of that sub-section. It is the satisfaction of the ITO in thecourse of assessment proceedings regarding the concealment of income which constitutes the basis and foundation of the proceedings for the levy of penalty. Satisfaction, in the very nature of things, precedes the issue of notice and it would not be correct to equate the satisfaction of the ITO with the actual issue of notice. It is, therefore, obvious that the issuance of notice or making a reference under Section 274(2) of the Act by the ITO to the IAC are ministerial acts. The moment penalty proceedings stand initiated by the ITO, the question would immediately arise as to who has the jurisdiction to pass an order for levying the penalty. It is at that point of time that the question of jurisdiction has to be determined keeping in view the prevailing provisions of law. It, of course, goes without saying that the Legislature has the power to make a particular statute applicable with retrospective effect but till that has not been done, the law which concerns the jurisdiction, has to be taken to be prospective. In the present case, as is clear from the order of the ITO dated 29th February, 1971, the ITO applied his mind and initiated the proceedings for levy of penalty against the assessee as observed by him in the order. It is at that point of time that the question of jurisdiction in accordance with the law then prevailing, has to be determined. It is immaterial that the ITO made the reference to the IAC on 29th December, 1972, after the provisions of Section 274(2) of the Act had been amended with effect from 1st April, 1971. Therefore, the contention of Shri Gupta, the learned counsel for the assessee, that the decision of this court in Raman Industries' case is distinguishable, is without any merit. It is no doubt true that, in that case, the initiation of the penalty proceedings and the reference made by the ITO was before 1st April, 1971, but that will not make any difference on principle as has been held in the earlier part of the judgment.

7. A Bench of this court followed the decision in Raman Industries' case , in I.T. Ref. No. 58 of 1975 (CIT v. Sadhu Ram) decided on 8th February, 1980 . The Gujarat. High Court in CIT v. R. Ochhavlal & Co. : [1976]105ITR518(Guj) has also taken the same view as has been taken by this court with regard to the effect of the amendment of the provisions of Section 274(2) of the Act.

8. Shri Gupta, the learned counsel for the assessee, relies on the decisions of the Orissa High Court in CIT v. Dhadi Sahu : [1976]105ITR56(Orissa) and Radheshyam Agarwalla v. CIT : [1978]113ITR196(Orissa) and also that of the Allahabad High Court in CIT v. Om Sons : [1979]116ITR215(All) , in support of the contention that the jurisdiction of the authority to levy penalty is a matter of procedure and since the procedural law is retrospective, the view taken by the Tribunal in this case should hold the field. We are unable to agree with the view taken by the Orissa High Court andthe Allahabad High Court in the cases referred to above. In Dhadi Sahu's case : [1976]105ITR56(Orissa) , it was held that Sub-section (2) of Section 274 is admittedly a provision relating to procedure. This finding, in our considered opinion, has been arrived at on wrong premises. After having recorded the finding that Sub-section (2) of Section 274 of the Act relates to procedure, the learned judges of the Orissa High Court then proceeded to rely on a decision of their Lordships of the Supreme Court in Anant Gopal Sheorey v. State of Bombay, AIR 1958 SC 915, to hold that the procedural laws are retrospective. There is no dispute with this proposition, but the main question to be determined is as to whether the provisions of Sub-section (2) of Section 274 of the Act relate to procedure or to a question of jurisdiction. In our view, the moment penalty proceedings are initiated by the ITO, the question of jurisdiction immediately arises and, in that context, the provisions of Sub-section (2) of Section 274 cannot be held to be a provision relating to procedure. We are, therefore, unable to agree with the view taken in the authorities relied upon by Shri Gupta, referred to above.

9. We are unable to agree with the contention of Shri Gupta that when a reference is made by the ITO under Section 274(2) of the Act, only then, the penalty proceedings stand initiated. As already observed, reference under Section 274(2) of the Act is only a ministerial act. The moment the ITO passes an order for initiating the penalty proceedings, the proceedings stand initiated and at that point of time the jurisdiction of the authority, who can pass the penalty order, has to be looked into in accordance with the prevailing provisions of law until and unless the amendment so made is with retrospective effect.

10. No other argument has been pressed.

11. For the reasons recorded above, we are of the opinion that both the questions referred to us have to be answered in the negative with costs, i. e., against the assessee and in favour of the revenue. We order accordingly.

G.C. Mittal, J.

12. I agree.


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