JUDGMENT R.M. Sahai, J.
1. Income-tax Appellate Tribunal, Allahabad Bench 'A', has referred the following question of law for opinion of this court :
"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in confirming the levy of penalty under Section 271(1)(c) of the Act?"
2. On the submission advanced by learned counsel for the assessee, which we are inclined to accept, we do not consider it necessary to set out facts in detail. Penalty was levied on the assessee by IAC on March 30, 1977, under Section 274 of the IT. Act. Sub-section (2) of this section required an ITO to refer the case to the IAC if the penalty imposable exceeded Rs. 25,000. The ITO, after computing a total income of Rs. 98,880 against the returned income of Rs. 52,148, initiated proceedings under Section 271(1)(c) of the Act on February 28, 1975, and referred the matter to the IAC because the minimum penalty imposable exceeded Rs. 25,000. By the time, however, the order was passed on March 30, 1977, the sub-section was amended by the T.L. (Amend.) Act, 1975, with effect from April 1, 1976, the effect of which was that jurisdiction to levy penalty vested in the ITO irrespective of the amount leviable as penalty. According to the learned counsel for the assessee the IAC having imposed a penalty on March 30, 1977, when he ceased to have jurisdiction, the order passed by him was a nullity.
3. In CIT v. Om Sons [1979] 116 ITR 215 (All), a similar controversy came up for consideration before this court. By the T.L. (Amend.) Act, 1970, with effect from April 1, 1971, Sub-section (2) of Section 274 was amended and, in cases where minimum the penalty imposed exceeded Rs. 25,000, the ITO was bound to refer it to the IAC. Prior to this date the ITO had referred the case to the IAC who imposed penalty of Rs. 15,000 on November 29, 1971. i. e., after the date of amendment of Section 274(2) by the Amending Act of 1970. It was held by the Division Bench (p. 217) :
"We, however, think that it is not necessary to examine the correctness of the principles applied by the other High Courts for placing a particular interpretation on the amendment of Section 274(2), for this court is committed to the view that a court or Tribunal deciding a matter must not only be possessed of jurisdiction initially, but also be clothed with the power to decide the matter when the final order is passed."
4. This decision was followed in Ganesh Dass Ram Gopal v. IAC [1983] 142 ITR 101 (All) (supra), where the T.L. (Amend.) Act, 1975, itself was considered.
5. We are in respectful agreement with the enunciation of law by the two Division Benches and are of opinion that although proceedings for levy of penalty were validly referred by the ITO to the IAC, its continuance after April, 1976, and the ultimate order on March, 1977, by the IAC were without jurisdiction.
6. Learned counsel for the Department vehemently argued that the question having not been raised before the Tribunal it did not arise out of the order passed by it, therefore, this court was precluded in its advisory jurisdiction from going into it. We do not find any merit in this submission. The decision in Om Sons [1979] 116 ITR 215 (All) was reported after the dismissal of the appeal by the Tribunal. The assessee, therefore, raised an additional question in the application filed under Section 256(1) of the Act, apart from six. questions, which had already been raised. The Tribunal keeping the decision in Om Sons in view appears to have referred a general and wide question.
7. Apart from it a change of law can be considered in a reference also. In view of the interpretation put by this court, the order of the IAC, as we have held above, was a nullity. That which is a nullity is non est in law. It could not have, therefore, been confirmed by the Tribunal. Nor can this court answer the reference by saying that the Tribunal was justified in confirming the penalty when the order was without jurisdiction. Then the question whether the Tribunal should not have confirmed the penalty embraces in it all possible aspects of a challenge to it.
8. In the result, we answer the question referred to us in the negative, in favour of the assessee and against the Department. The assessee shall be entitled to its costs which are assessed at Rs. 250.