JUDGMENT
N.V. Balasubramanian, J.
1. This reference arises out of the order of the Tribunal passed in ITA 2004/Mds/1979 relating to the asst. yr. 1971-72. The Tribunal referred the following question of law under s. 256(1) of the IT Act for our opinion :
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the IAC had no jurisdiction to levy penalty under s. 271(1)(c) r/w s. 274(2) or the IT Act after 1st April, 1976 even though reference was made to him prior to 1st April, 1976, and thus cancelling the penalty levied in the assessee’s case for the asst. yr. 1971-72” ?
2. The ITO before completing the assessment on 23rd March, 1974, initiated the proceedings for penalty under s. 27(1)(c) of the Act for imposition of penalty for concealment of income and referred the matter to the IAC on the same day for the levy of penalty. The IAC by his order dt. 29th August, 1979, imposed the penalty under s. 27(1)(c) of the Act. In the meantime, the Taxation Laws (Amendment) Act, 1975 came into effect from 1st April, 1976, and according to the assessee after the enactment of the Taxation Laws (Amendment) Act, 1975, the IAC alone has no jurisdiction to levy the penalty. The Tribunal also accepted the contention of the assessee and held that the IAC had no jurisdiction to levy penalty in view of the intervening amendment made by the Taxation Laws (Amendment) Act, 1975. Against this order of the Tribunal, the Revenue has sought for and obtained the reference on the question of law stated supra.
3. During the pendency of the reference, the first respondent was reputed to be dead and his legal representative was brought on record. Though the notice was served on the legal representative there was no representation on behalf of the second respondent.
4. A similar question whether the IAC would have jurisdiction even after the amendment of the Taxation Laws (Amendment) Act, 1975, was the subject-matter for consideration before the Supreme Court in the case of CIT vs. Sharadamma (1996) 219 ITR 671 (SC) : TC 49R.1194 and the Supreme Court held that where the reference was made to the IAC before the enactment of the Taxation Laws (Amendment) Act, 1975, he would be entitled to continue with those proceedings and pass appropriate orders according to law. The above view of the Supreme Court was followed by this Court in the case of CIT vs. Star Oil Mills (1997) 228 ITR 26 (Mad) : TC S49.3948 wherein this Court has held that the IAC did not lose the jurisdiction to continue the proceedings pending before him on 31st March, 1976, and was entitled to continue with those proceedings and pass appropriate orders according to law.
5. Accordingly, following the said judgments, we are of the view that the Tribunal was not correct in holding that the IAC had no jurisdiction to levy the penalty under s. 271(1)(c) of the Act in view of the intervening amendment made by the Taxation Laws (Amendment) Act, 1975. Accordingly, we answer the question of law referred to us in the negative and in favour of the Revenue.
6. However, when the Tribunal cancelled the penalty on the ground that the IAC had no jurisdiction to levy penalty it did not go into the merits of the case as it was found unnecessary to express any opinion on merits of the case. Since we have held that the view of the Tribunal is not correct, in view of the subsequent decision of the Supreme Court, it is necessary that the Tribunal should go into the merits of the case as regards the levy of penalty and decide the matter accordingly. No costs.