JUDGMENT R K. Gulati, J.
1. This reference relates to the assessment year 1973-74.
2. The brief facts are these. One Lal Chand Jain, the respondent-assessee, carried on business in iron goods under different names. He initially filed a return of his income on September 7, 1973, showing an income of Rs. 33,965. The business and residential premises of the assessee as well those of his son, Indra Chand Jain, were searched on April 22, 1974, by the income-tax officials. In the search operations, certain cash, stocks and books of account pertaining to the assessee were seized. The assessee-along with other members of his family made a combined petition dated April 2, 1974, under Section 271(4A) of the Income-tax Act, 1961 (for short "the Act"), to the Income-tax Commissioner, offering a sum of Rs. 80,000 to be taxed.
3. Subsequently, this petition was withdrawn and another petition was filed on April 15, 1975, in which different amounts were offered for the assessment years 1973-74 to 1975-76 to be taxed being the amounts of unexplained income. It is not necessary to give the details of the amounts for each year. The assessee also filed a revised return for the assessment year in question on May 21, 1975, declaring a total income of Rs. 57,840. However, the assessment was completed on a total income of Rs. 61,388 by an assessment order dated September 6, 1975. While framing the assessment, the Income-tax Officer also recorded a finding to the effect that the assessee had filed incorrect particulars of his income in the original return and had failed to disclose correct particulars of certain deposits with certain companies which were detected on account of search in the business and residential premises of the assessee. Therefore, it was observed :
"This clearly shows that the assessee has concealed his income. Penalty proceedings are initiated for imposition of penalty for concealment of income for which a show-cause notice under Section 274 is being issued separately. As the amount of penalty imposable is above Rs. 25,000, the case has been referred to the Inspecting Assistant Commissioner, Agra, before whom the penalty proceedings will be concluded."
4. The assessee was subjected to a penalty of Rs. 30,000 under Section 271(1)(c) read with Sub-section (2) of Section 274 of the Act by the Inspecting Assistant Commissioner by his order dated March 13, 1978. On appeal, the Income-tax Appellate Tribunal vacated the penalty order on the ground that on the date the Inspecting Assistant Commissioner passed the said order, he had no jurisdiction as he was divested of it, inasmuch as Sub-section (2) of Section 274 of the Act was deleted with effect from April 1, 1976, by Section 66 of the Taxation Laws (Amendment) Act, 1975. In this view of the matter, the Tribunal did not address itself, on merits, to the question whether any penalty was leviable or not, on facts.
5. At the instance of the Revenue, the Income-tax Appellate Tribunal, B-Bench, New Delhi, has referred the following question under Section 256(1) of the Act for the opinion of this court:
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the Inspecting Assistant Commissioner had no jurisdiction to levy penalty of Rs. 30,000 under Section 271(1)(c) of the Income-tax Act, 1961, for the assessment year 1973-74 on March 13,1978 ?"
6. The assessee is not represented in this case. We have heard learned counsel for the Revenue. In our opinion, the question referred is to be answered in the affirmative.
7. Section 274(2), before the Amendment Act, was in the following terms :
"(2) Notwithstanding anything contained in Clause (iii) of Sub-section (1) of Section 271, if in a ease 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 exceeds a sum of twenty-five thousand rupees, the Income-tax Officer shall refer the ease to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty."
8. Before the omission of the above provision, the position in law was that in cases to which Section 271(1)(c) applied and where on prima facie consideration about the minimum penalty imposable it was more than rupees twenty-five thousand, though the Income-tax Officer was entitled to initiate penalty proceedings by recording his satisfaction or issuing notice or directing the issue of a show-cause notice during the course of assessment, he was not empowered to impose penalty but was obliged to refer the matter to the concerned Inspecting Assistant Commissioner who alone was empowered to impose penalty in such matters.
9. By Section 61 of the Amending Act with effect from April 1, 1976, a corresponding amendment was also made in Section 271(1)(c) and a proviso to Section 271(1)(iii) was added to the effect that in a case falling under Clause (c), 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, exceeds the sum of Rs. 25,000, the Income-tax Officer shall not issue any direction for paymerit by way of penalty without the previous approval of the Inspecting Assistant Commissioner. The effect of the aforesaid proviso was that under the amended provisions, the Income-tax Officer is empowered to levy penalty for concealment irrespective of the quantum of penalty or concealed income, subject to the restriction that in a case where the concealment exceeds a sum of Rs. 25,000, the Income-tax Officer is to take the previous approval of the Inspecting Assistant Commissioner. By Sections 48 and 60 of the Amending Act, two more amendments were simultaneously brought about in Sections 154 and 253 of the Act, in so far as these provisions concerned Section 274(2) of the Act. Clause (bb) of Section 154(1) was deleted by Section 48 of the Amending Act. The said clause dealt with the power of rectification of the Inspecting Assistant Commissioner to correct his orders under Section 274(2) with a view to rectify any mistake apparent from the record. By Section 60 of the Amending Act, Clause (b) of Section 253(1) which conferred a right of appeal against the penalty order passed under Section 274(2) was also deleted.
10. The only question which falls for consideration is as to whether it was open to the Inspecting Assistant Commissioner to impose penalty even after April 1, 1976, in a case which had been validly referred to him earlier, i.e., before Sub-section (2) of Section 274 was deleted. There is a cleavage of judicial opinion on this question.
11. One view is that the jurisdiction of the authority who can pass the penalty order has to be looked into with reference to the law as on the date of initiation of proceedings and not with reference to subsequent events unless the amendment so made is with retrospective effect The other view is that the jurisdiction must not only be possessed by the authority initially, but the authority must continue to be clothed with that power throughout the period the matter is pending before it. In other words, in order to justify the penalty order, it is not enough to show that the officer imposing the penalty was possessed of that jurisdiction when the proceedings were initiated, but it must also be shown that he continued to have that jurisdiction during the pendency of the proceedings and also on the date the final order was passed. According to the second view, if at any time subsequent to the initiation of the proceedings by an amendment made to the law under which the power conferred on an officer to initiate the proceedings, the said officer is divested of such power without any reservation and the same is vested in another officer, the former loses the power to deal with the case and the latter alone can exercise the statutory power vested in him. So far as this court is concerned it has approved of the latter view in CIT v. Om Sons, [1979] 116 ITR 215 (All), and the same is being consistently followed by this court as shall be shown presently:
In Om Sons' case [1979] 116 ITR 215 (All) the proceedings for levy of penalty on the assessee for the assessment year 1969-70 were initiated by the Income-tax Officer. The same were referred to the Inspecting Assistant Commissioner who passed an order of penalty on November 29, 1971. Meanwhile, as Section 274(2) of the Act had been amended by the Taxation Laws (Amendment) Act of 1970 with effect from April 1, 1971, the Inspecting Assistant Commissioner did not have jurisdiction to impose the penalty in such a matter. On the question whether the Inspecting Assistant Commissioner had jurisdiction to pass the order of penalty, a Division Bench of this court held that as, on the date when the Inspecting Assistant Commissioner passed his final order, his jurisdiction to do so had been taken away by the amendment of Section 274(2), the order passed by him was without jurisdiction. This decision was followed by another Division Bench in CIT v. Smt. Raj Rani Devi, [1979] 116 ITR 358 (All). A similar view was also expressed in CIT v. Ram Lal Vohra, [1981] 129 ITR 473 (All).
12. The decisions referred to above dealt with a problem similar to the one with which we are concerned, but resulting from the amendment in Sub-section (2) of Section 274, by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971, to provide for reference to the Inspecting Assistant Commissioner only in such cases in which the concealed income, as determined by the Income-tax Officer on assessment, exceeded Rs. 25,000. The principle enunciated in the case of Om Sons [1979] 116 ITR 215 (All) was followed and applied by this court to the controversy as arising in the instant case in Ganesh Dass Ram Gopal v. IAC of I.T., [1983] 142 ITR 101 (All) and Mohd. Oais and Co. v. CIT, [1983] 142 ITR 104 (All), where the amendment made by the Taxation Laws (Amendment) Act, 1975, omitting Sub-section (2) of Section 274 was considered.
13. We are in respectful agreement with the enunciation of the law by the decisions referred to above.
14. In R. Abdul Azeez v. CIT, [1981] 128 ITR 547, a Division Bench of the Karnataka High Court, after analysing the various amendments simultaneously made (referred to earlier) and the omission of Sub-section (2) of Section 274 of the Act, held that the legislative intention was to destroy the continuance of the power of the Inspecting Assistant Commissioner even in respect of matters which had already been referred to him by the Income-tax Officer prior to April 1, 1976, and the Inspecting Assistant Commissioner had no authority to pass orders imposing penalty under Section 271(1)(c) of the Act on and after April 1, 1976.
15. In view of the above, we hold that the Inspecting Assistant Commissioner who had assumed jurisdiction on the footing that the minimum penalty imposable was over Rs. 25,000, but on the date when he passed the order, his jurisdiction was lost, the proper authority who had jurisdiction to deal with the matter of imposition of penalty was the Income-tax Officer and not the Inspecting Assistant Commissioner.
16. Accordingly, we answer the question in the affirmative, in favour of the assessee and against the Department.
17. There shall be no order as to costs.