Case Note & Summary
The dispute arose from penalty proceedings under the Income Tax Act, 1961 for assessment year 1972-73. The Income Tax Officer initiated penalty proceedings against the assessee under Section 271(1)(c) and referred the matter to the Inspecting Assistant Commissioner under Section 274(2) as it then stood. While the matter was pending before the Inspecting Assistant Commissioner, sub-section (2) of Section 274 was omitted by the Taxation Laws (Amendment) Act, 1975 with effect from April 1, 1976. The assessee contended that after the omission, the Inspecting Assistant Commissioner lost jurisdiction to continue the penalty proceedings. The Income Tax Appellate Tribunal accepted this contention and cancelled the penalty. The Karnataka High Court, in a reference under Section 256(1), followed its earlier decision in R. Abdul Azeez v. Commissioner of Income Tax, Karnataka and held that the Inspecting Assistant Commissioner had no jurisdiction after the omission. The Revenue appealed to the Supreme Court. The core legal issue was whether the Inspecting Assistant Commissioner could continue and levy penalty after the deletion of Section 274(2) in respect of proceedings already pending before him. The Supreme Court analysed the general principle that a law bringing about a change of forum does not affect pending actions unless the Legislature clearly indicates a contrary intention. It relied on Commissioner of Income Tax v. Dhadi Sahu, where this Court had held that once a reference was validly made to the Inspecting Assistant Commissioner, he did not lose jurisdiction on account of a subsequent amendment to Section 274(2). The Court also referred to Manujendra Dutt v. Purendu Prasad Roy Chowdhury regarding deletion of a provision not depriving a pending forum of jurisdiction. The Court distinguished between pure procedure and forum of proceedings, stating that the forum of appeal or proceedings is a vested right and not mere procedure. It also invoked Section 6 of the General Clauses Act. The Supreme Court disapproved the view of the Karnataka and Allahabad High Courts and approved the view of other High Courts. It concluded that the reference made to the Inspecting Assistant Commissioner before April 1, 1976 was valid, and he retained seisin over the matter despite the deletion of Section 274(2). Accordingly, the appeal was allowed, the question referred was answered in the negative, i.e., in favour of the Revenue and against the assessee, and the Inspecting Assistant Commissioner was held entitled to continue and pass appropriate orders according to law. No order as to costs was made.
Headnote
A) Income Tax Law - Penalty Proceedings - Jurisdiction of Inspecting Assistant Commissioner after omission of Section 274(2) - Income Tax Act, 1961, Sections 271(1)(c), 274(2) - The reference to the Inspecting Assistant Commissioner was validly made under the law in force on the date of reference; once seized of the matter, he did not lose jurisdiction solely because sub-section (2) of Section 274 was omitted by the Taxation Laws (Amendment) Act, 1975 with effect from April 1, 1976. The Court held that the Inspecting Assistant Commissioner was entitled to continue with pending penalty proceedings and pass appropriate orders according to law, and the High Court's contrary view following R. Abdul Azeez was disapproved (Paras 1-4). B) Interpretation of Statutes - Change of Forum - Vested Right and Pending Proceedings - General Clauses Act, 1897, Section 6 - A law which brings about a change in the forum does not affect pending actions unless a clear intention to the contrary is shown; the forum of appeal or proceedings is a vested right as opposed to pure procedure, and that right becomes vested when proceedings are initiated. The Court relied on the principle underlying Section 6 of the General Clauses Act and the decision in Commissioner of Income Tax v. Dhadi Sahu to hold that omission of a provision does not deprive the authority of jurisdiction over matters already referred (Paras 1-4).
Issue of Consideration
Whether the Inspecting Assistant Commissioner had jurisdiction to continue and levy penalty under Section 271(1)(c) of the Income Tax Act, 1961 after omission of sub-section (2) of Section 274 with effect from April 1, 1976 in respect of penalty proceedings pending before him on March 31, 1976.
Final Decision
Appeal allowed; question referred answered in the negative, i.e., in favour of Revenue and against assessee; Inspecting Assistant Commissioner entitled to continue pending penalty proceedings and pass appropriate orders according to law; no order as to costs.
Law Points
- Change of forum does not affect pending actions unless intention to the contrary clearly shown
- A valid reference confers vested right of forum
- Omission of Section 274(2) did not divest Inspecting Assistant Commissioner of jurisdiction over pending penalty proceedings
- Section 6 General Clauses Act preserves pending proceedings
- No litigant has vested right in procedural law but forum is a vested right
