LEILA SETH ( 1 ) THESE are two income-tax references pertaining to two individual partners of the firm known as M/s. Kundan Lal-Madan Lal. The said firm was doing business in coal. The assessment year with which we are concerned is 1966-67, the accounting period ending on 24th October, 1965. Kundan Lal filed his return for this year on 26th February, 1971 and indicated therein an income of Rs. 6,318. 00. Madan Lal also filed his return on 26th February, 1971 and showed an income of Rs. 5,8181| -. ( 2 ) ON 29th March, 1971, the Income-tax Officer completed the assessments of both the partners and computed a total income of Rs. 17,601 for Kundan Lal and Rs. 15. 101 for Madan Lal. In these sums he included a capital gain of Rs. 5,190 in the case of each partner. This was as a result of an enquiry made by the Income-tax Officer. This enquiry had revealed that a property at Chandigarh, which stood in the joint names of the partners of the firm M/s. Kundan Lal Madan Lal, had been sold for the sum of Rs. 30,000. This property had been originally purchased tor Rs. 7,700 and the taxable capital gain after deduction was R. s. 10,380. ( 3 ) AS neither of the assessees had declared their proportionate capital gain in their respective returns, the Income-tax Officer initiated penalty proceedings under section 271 (l) (c) of the Income-tax Act. 1961 (in short, "the Act" ). The cases were REFERRED TO to the Inspecting Assistant Commissioner on 1st March, 1973 by the Income-tax Officer as in his view the minimum penalty imposable exceeded Rs. 1,000. 4. ( 5 ) THE assessees being aggrieved appealed to the Income-tax Appellate Tribunal. The main point urged before the Tribunal was that the Inspecting Assistant Commissioner had no jurisdiction to impose the penalties in these cases in view of the amendment to section 274 (2) of the Act by the amending Act (42 of 1970 ). By the said amendment, which came into force on 1st April, 1971, the matter had to be REFERRED TO by the Income-tax Officer to the Inspecting Assistant Commissioner only if the income concealed exceeded Rs. 25,000. As this was not the case herein, the Inspecting Assistant Commissioner could not assume jurisdiction which he did not have the relevant date being the date of the reference. 25,000. As this was not the case herein, the Inspecting Assistant Commissioner could not assume jurisdiction which he did not have the relevant date being the date of the reference. Further, on merits, it was urged that there was no concealment of income and the capital gain was not shown in the returns under a "misapprehension of law". ( 6 ) THE Tribunal allowed the assessees appeal and cancelled the penalty. It held that the Inspecting Assistant Commissioner had no jurisdiction to impose any penalty in view of the amendment to section 274 (2 ). ( 7 ) THE Commissioner of income-tax being aggrieved prayed for a reference and as a result the following question of law has been REFERRED TO for our opinion : "whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the Inspecting Assistant Commissioner of Income-tax did not have the jurisdiction to impose the penalty in this case and thus. cancelling the penalty of Rs. 3. 500 levied by the Inspecting Asstt. Commissioner under section 271 (l) (c) of the Income-tax Act. 1961?" ( 8 ) MR. Wazir Singh appearing for the revenue has argued that the jurisdiction which had already been vested in the Inspecting Assistant Commissioner by virtue of the assessment order dated 20th March, 1971 could not be divested by the amendment which came into force thereafter on 1st April. 1971. He contends that it is the date of the initiation of the penalty proceedings which is relevant and not the date of the reference. ( 9 ) M|s. Meera Bhatia appearing for the assessee. however, contends to the contrary. She submits that the show- cause notice was admittedly only issued in March, 1973 under section 271 (l) (c) and on that date the Inspecting Assistant Commissioner had no jurisdiction. According to her it is the date of the reference which is relevant for the determination of the Inspecting Assistant Commissioner s jurisdiction, she contends that if a reference is not validly made then the Inspecting Assistant Commissioner cannot proceed with the matter. ( 10 ) IN order to appreciate the contentions of the parties and ascertain the correct position, it is necessary to examine the relevant provisions of the Act. ( 10 ) IN order to appreciate the contentions of the parties and ascertain the correct position, it is necessary to examine the relevant provisions of the Act. ( 11 ) SECTION 271 provides for imposition of penalty on an assessee for failure to furnish returns and comply with certain notices without reasonable cause: as also for con- cealment of income. Section 271 (1x0 as it stood at the relevant time reads : "if the Income-tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act, is satisfied that any person (c) has concealed the particulars of his income or furnished inaccurate particulars of such income he may direct that such person shall pay by way of penalty, (iii) in the cases REFERRED TO to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income. ( 12 ) THE question whether an act or an omission is an offence has to be examined with relevance to the law as it stands on the date of commission or omission. That is the date when the default takes place: namely. when an incorrect return is filed involving concealment of income; and not with regard to the year of assessment or the making of the assessment or the initiation of penalty proceedings. The quantum of the penalty has to be arrived at with regard to the law as on that date i. e. the date of default. ( 13 ) IN Brij Mohan v. Commissioner of Income-tax, New Delhi, (1979) 120 I. T. R. I (1 ). the assessee a partner in two firms filed his return of income for the assessment year 1964-65 on 24th April. 1968 and disclosed there only his share of profits in one of the two firms. As a result the Income-tax Officer initiated panalty proceedings under clause (iii) of section 271 (1) of the Act as amended by Finance Act, 1968. Having regard to the minimum penalty leviable the matter was REFERRED TO to the Inspecting Assistant Commissioner, who levied the penalty of a sum equal to the income concealed. As a result the Income-tax Officer initiated panalty proceedings under clause (iii) of section 271 (1) of the Act as amended by Finance Act, 1968. Having regard to the minimum penalty leviable the matter was REFERRED TO to the Inspecting Assistant Commissioner, who levied the penalty of a sum equal to the income concealed. The assessee appealedand argued that the amended provisions could not be invoked and the operative law was as it stood in the assessment year 1964-65. ( 14 ) THE Supreme Court set out the amended and unamended clause (iii) and noted that the quantum of tax leviable under the substituted clause (iii) was greater than that imposable in terms of the original clause (iii ). Pathak. J. speaking for the court, while dealing with section 271 (1) (c) (iii) opined: "in our opinion, the assessment of the total income and the computation of tax liability is a proceeding which, for that purpose, is governed by entirely different considerations from a proceeding for penalty imposed for concealment of income. And this is so notwithstanding that the income concealed is the income assessed to tax. In the case of the assessment of income and the determination of the consequent tax liability, the relevant law is the law which rules during the assessment year in respect of which the total income is assessed and the tax liability determined. The rate of tax is determined by the revant Finance Act. In the case of a penalty, however, we must remember that a penalty is imposed on account of the commission of a wrongful act, and plainly it is the law operating on the date on which the wrongful act is committed which determines the penalty. Where penalty is imposed for concealment of particulars of income, it is the law ruling on the date when the act of concealment takes place which is relevant. It is wholly immaterial that the income concealed was to be assessed in relation to an assessment year in the past. It is, therefore, clear to us that an assessee who has concealed the particulars of his income would be liable to penalty under clause (iii) of section 271 (1) as it stood on the date of concealment. In the present case, that was on 26th February, 1971, when the returns were filed. It is, therefore, clear to us that an assessee who has concealed the particulars of his income would be liable to penalty under clause (iii) of section 271 (1) as it stood on the date of concealment. In the present case, that was on 26th February, 1971, when the returns were filed. ( 15 ) BUT the query that immediately arises for consideration, is who has the jurisdiction to impose tile penalty, the Income-tax Officer or the Inspecting Assistant Commissioner ? ( 16 ) SECTION 271 confers power on the income-tax officer or the Appellate Assistant Commissioner to impose penalty. But this is subject to section 274. ( 17 ) SECTION 274 before its amendment by the Taxation Laws Amendment Act, 1970 read : "274. Procedure (1) No order imposing a penalty under this Chapter shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard. (2) Notwithstanding anything contained in clause (iii) of sub-section (1) of section 271, if in a case falling under clause (c) of that sub-section. the minimum penalty imposable exceeds a sum of rupees one thousand, the Income-tax Officer shall refer the case to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty. (3) An Appellate Assistant Commissioner on making an order under this Chapter imposing a penalty, shall forthwith send a copy of the same to the Income-tax Officer. " ( 18 ) AS a result of section 49 of the Taxation Laws Amendment Act, 1970, which came into force on 1st April 1971, section 274 (2) was amended to read as follows : " (2) Notwithstanding anything contained in clause (iii) of sub-section (1) of section 271, if in a case 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 case to the Inspecting Assistant Commissioner who shall, for the purpose, have all the powers conferred under this Chapter for the imposition of penalty. " ( 19 ) IT is apparent from the above that till 1st April. " ( 19 ) IT is apparent from the above that till 1st April. 1971 the Income-tax Officer had no jurisdiction to impose the penalty under section 271 (l) (c) if the minimum penalty was more than Rs. 1,000. In such a case he had no choice but to make a reference to the Inspecting Assistant Commissioner who would exercise the power. However, after 1st April. 1971, the Income-tax Officer had jurisdiction to impose a penalty, if the concealed income (or of which inaccurate particulars had been furnished) was less than Rs. 25,000. ( 20 ) IN the present case. before 1st April. 1971. as the minimum penalty imposable exceeded Rs. 1,000 it was the Inspecting Assistant Commissioner who had jurisdiction: but after 1st April, 1971, as the income concealed did not exceed Rs. 25,000 it would be the Income-tax Officer who would have jurisdiction. ( 21 ) SECTION 274 as it was before 1st April, 1971 required the Income-tax Officer to refer the case to the Inspecting Assistant Commissioner if the minimum penalty imposable exceeded a sum of Rs. 1,000. On a reference being made by the Income-tax Officer, the Inspecting Assistant Commissioner got jurisdiction to impose the penalty. ( 22 ) BUT what happens to pending mutters as on 1st April, 1971 ? Do they have to be transferred from one to the other ? Is the amendment purely procedural affecting only the machinery for imposing and collecting the penalty ? Is the extension of the time limit for imposition of penalty a procedural or a substantive matter ? These and a host of connected, questions can arise "or consideration. ( 23 ) THERE are two streams of thought on these aspects as is apparent from the various decisions of the High Courts. With regard to pending matters, in a recent decision in Commissioner of Income-tax, M. P. v. A. N. Tiwari, (1980) 124 I. T. R. 680, (2) the Madhya Pradesh High Court has held, following the decisions of the Gujarat High Court in Commissioner of Income-tax v. Royal Motor Car Co. , (1977) 107 I. T. R. 753 (3) and Commissioner of Income-tax, Gujarat-III v. Manu Engineering Works, (1980) 122 I. T. R. 306 (4) as also the decisions of the Andhra Pradesh High Court in Addl. Commissioner of Income-tax v. Dr. , (1977) 107 I. T. R. 753 (3) and Commissioner of Income-tax, Gujarat-III v. Manu Engineering Works, (1980) 122 I. T. R. 306 (4) as also the decisions of the Andhra Pradesh High Court in Addl. Commissioner of Income-tax v. Dr. Khaza Khutabuddinkhan, (1978)114 I. T. R. 905 (5) and dissenting from the decisions in Commissioner of Income-tax v. Ohadi Sahu, (1976) 105 I. T. R. 56 (6) and Commissioner of Income-tax v. Om Sons, (1979) 116 I. T. R. 215 (7), that the Inspecting Assistant Commissioner continues to have jurisdiction to impose a penalty with regard to a valid reference pending before it on 1st April, 1971. even if the amount of income concealed does not exceed Rs. 25,000. Therefore, the two views that emerge are : (i) that penalty proceedings pending with the Inspecting Assistant Commissioner since before 1st April, 1971, cannot be continued unless the conditions of the amended law with regard to jurisdiction have been fulfilled, and (ii) that the change of forum brought about by the amended law does not affect pending matters, unless an intention to the contrary is clearly indicated; since there is no requirement or provision for transfer of the matters from one authority to the other and no other indication of any such intention, the matters validly pending before the Inspecting Assistant Commissioner will not be invalidated by the amendment. ( 24 ) HOWEVER, we do not propose to examine the correctness of these two views as it is not necessary for the purpose of this case. Even assuming that a reference validly made by the Income-tax Officer to the Inspecting Assistant Commissioner before 1st April, 1971 would not be invalidated by virtue of the above mentioned amendment to section 274 (2), this would not help the revenue, as it is apparent to us that, in fact, no such reference has been made, a reference can only be said to have been made on the date of the reference; and in the present case. that is 1st March, 1973, being after the amendment. It is not possible to hold that the reference was made at an earlier date, e. g. when a penalty notice was issued by the Income-tax Officer or the assessment order passed. An example will clinch this matter. that is 1st March, 1973, being after the amendment. It is not possible to hold that the reference was made at an earlier date, e. g. when a penalty notice was issued by the Income-tax Officer or the assessment order passed. An example will clinch this matter. An Income-tax Officer may issue a penalty notice thinking that several additions made by him attract penalty; but the assessee s reply to the show-cause notice may convince him that only some, and not all the additions warrant the penalty. If such consideration is made by him and he finds, that the concealed income is less than Rs. 25,000 he cannot at all refer the case to the Inspecting Assistant Commissioner even though when he sent the initial notice. the test was different. There is, therefore, logic in concluding that the Inspecting Assistant Commissioner is seized of the proceedings only when a reference is made to him by the Income-tax Officer. ( 25 ) SINCE there was no validly pending reference betore the Inspecting Assistant Commissioner on 1st April, 1971, would he still have been entitled to impose a penalty with regard to a matter where the minimum penalty imposable is in excess of Rs. 1,000 but the concealment of income is less than Rs. 25,000 ? It would appear not. Though the assessment was made by the Income-tax Officer as far back as 20th March, 1971, he made the reference only on 1st March. 1973. In the assessment order he indicates "penalty notice u|s. 274 read with 271 (1) (a) and 271 (l) (c) has already been issued". But it is only on 1st March, 1973 that he makes the orders of reference and informs the assessees that the case for leavy penalty under section 27l (l) (e) is being REFERRED TO to the Inspecting Assistant Commissioner of Income-tax, Range-11, New Delhi under section 274 (2 ). But by that date the law had changed and it was really the Income-tax Officer who had jurisdiction to impose penalty as the income concealed was less than Rs. 25,000. On 1st March. 1973 the Income-tax Officer could have made a valid reference to the Inspecting Assistant Commissioner only if the concealed income or of which inaccurate particulars had been furnished exceeded Rs. 25,000. This not being the case no valid reference could be made. 25,000. On 1st March. 1973 the Income-tax Officer could have made a valid reference to the Inspecting Assistant Commissioner only if the concealed income or of which inaccurate particulars had been furnished exceeded Rs. 25,000. This not being the case no valid reference could be made. The source of the Inspecting Assistant Commissioner s jurisdiction is a reference validly made. It is the condition precedent for the assumption of jurisdiction by the Inspecting Assistant Commissioner. If the Income-tax Officer fails to make a reference to the Inspecting Assistant Commissioner, he cannot proceed, similarly if the Income-tax Officer makes an invalid reference, the Inspecting Assistant Commissioner is not conferred with any jurisdiction. It would, therefore, appear to us that the date of the reference is very material. ( 26 ) THE language of section 274 (2) also seems to support this synthesis. The direction that the Income tax Officer "shall" refer the case to the Inspecting Assistant Commissioner, if the condition indicated therein is satisfied, and the conferment on the Inspecting Assistant Commissioner of the powers under Chapter XXI for the imposition of penalty are relevant. This is clearly indicative of the fact that the jurisdiction of the Inspecting Assistant Commissioner, for the purpose of imposition of the penalty is derived on a reference made to him by the Income-tax Officer. If the reference accords to the provisions of section 274 (2.) as on the date of the reference, it will be valid. ( 27 ) THEREFORE, we are of the opinion that the law that determines the questi on of jurisdiction of the authority concerned is the law prevalent on the date of conferment of power to that authority. In this case the date of reference; with respect we do not agree with the view expressed by the Madras High Court in Continental Commercial Corporation v. Income-tax Officer, (1975) 100 I. T. R. 170 (8) that the jurisdiction is dependent on the date of concealment, that is the date of filing of the return. The Karnataka High Court in Addl. Commissioner of Income-tax, Karnataka v. M. V. Chandpool, (1981) 128 I. T. R. 256, (9) has also not agreed with the view of the Madras High Court. ( 28 ) THE decision of the Supreme Court in Bri) Mohan (supra), according to us. does not cover the point in issue. Section 271 (l) (c) (iii) was being examined. Commissioner of Income-tax, Karnataka v. M. V. Chandpool, (1981) 128 I. T. R. 256, (9) has also not agreed with the view of the Madras High Court. ( 28 ) THE decision of the Supreme Court in Bri) Mohan (supra), according to us. does not cover the point in issue. Section 271 (l) (c) (iii) was being examined. Sections 273, 274 and 275 were not considered there. As such, it would perhaps not be proper to stretch the decision to bring 274 (2) within its ambit. Though the Supreme Court holds that "plainly it is the law operating on the date on which the wrongful act is committed which determines the penalty", it does not suggest that the authority which shall impose the penalty will be determined by the law as on the date of concealment. It would, therefore, appear to us that though the relevant date for determining the question of penalty is the date of concealment; the relevant date for determining the authority, who in entitled to impose the penalty is the date of reference. The condition precedent for exercise of the power to confer jurisdiction on the Inspecting Assistant Commissioner by referring the matter to him is lacking on the relevant date, due to the enlargement of the powers of the Income-tax Officer, the Inspecting Assistant Commissioner cannot be validly clothed with power. With respect, we do not accept the view of the Punjab and Haryana High Court in Commissioner of Income-tax Amritsar v. Mela Ram Jagdish Rai and Co. , (1981) 132 I. T. R. 897 (10), that the act of reference is a ministerial act. ( 29 ) TO sum up, the question whether an act as omission is an offence is to be determined by the law as on the date of the offence. The quantum of penalty must also be determined in accordance with the law as it stands on the date of infringement. But when an authority has to be empowered to impose the penalty, then the relevant date becomes the date of empowerment, i. e. the date of reference to the Inspecting Assistant Commissioner. ( 30 ) IN the result and for the reasons outlined above, the question is answered in the affirmative and in favour of the assessees. As the assessees have succeded, they will be entitled to costs; Counsel s fee Rs. 350.