Punjab-Haryana High Court
The Commissioner Of Income Tax-I vs M/S Bansal Iron Scrap Co on 1 August, 2012
Author: Ajay Kumar Mittal
Bench: Ajay Kumar Mittal, G.S. Sandhawalia
ITA No. 832 of 2008 -1-
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
ITA No. 832 of 2008 (O&M)
Date of Decision: 1.8.2012
The Commissioner of Income Tax-I, Chandigarh
....Appellant.
Versus
M/s Bansal Iron Scrap Co.
...Respondent.
CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.
HON'BLE MR. JUSTICE G.S. SANDHAWALIA.
PRESENT: Ms. Urvashi Dhugga, Advocate for the appellant.
None for the respondent.
AJAY KUMAR MITTAL, J.
1. Delay in refiling the appeal is condoned.
2. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short "the Act") against the order dated 30.3.2007 passed by the Income Tax Appellate Tribunal, Chandigarh Bench "A", Chandigarh (hereinafter referred to as "the Tribunal) in ITA No. 162/CHANDI/2006, for the assessment year 1999- 2000, claiming the following substantial question of law:-
"Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was justified in deleting the penalty levied under Section 271(1)(c) holding that no satisfaction was recorded by the Assessing ITA No. 832 of 2008 -2- Officer, whereas a perusal of the assessment order dated 14.3.2002 would objectively satisfy any person examining the same, that the AO had applied his mind to the facts of the case and had only thereafter simultaneously issued the show cause notice under Section 271(1)(c) of the Act?"
3. The facts giving rise to the present appeal as narrated therein are that the assessee derives income from trading of metal scrap and wastes. A survey under Section 133A of the Act was conducted at the business premises of the assessee on 9.9.1998. During the course of survey, the assessee surrendered an additional income of ` 6,50,000/- for the assessment year in question i.e. 1999- 2000 and another ` 6,00,000/- for the immediately preceding year. The assessee filed its return on 9.11.2009 declaring an income of ` 6,83,883/- which included the surrendered amount of ` 6,50,000/-. However, the assessment was framed by the Assessing Officer vide order dated 14.3.2002 (Annexure A-1) at an income of ` 21,05,400/- including an addition of ` 11,31,601/- on account of understatement of value of closing stock. Penalty proceedings under Section 271(1)(c) of the Act were also initiated. The Assessing Officer levied penalty of ` 5,00,000/- under Section 271(1)(c) of the Act vide order dated 15.9.2004 (Annexure A-2) against which the assessee approached the Commissioner of Income Tax (Appeals) [in short "the CIT(A)"] who vide order dated 23.12.2005 (Annexure A-3) confirmed the penalty of ` 5,00,000/-. Against the order of the CIT(A), the assessee filed appeal ITA No. 832 of 2008 -3- before the Tribunal who vide order dated 30.3.2007 (Annexure A-4) deleted the penalty holding that the penalty proceedings had been initiated by the Assessing Officer without recording his 'satisfaction' in the assessment order in respect of the alleged concealment and furnishing of inaccurate particulars of income. Hence, the present appeal by the revenue.
4. Despite service, no one has appeared on behalf of the assessee to contest the appeal.
5. Learned counsel for the revenue-appellant submitted that sub-section 1B to Section 271 which was inserted by Finance Act, 2008 retrosepctively w.e.f. 1.4.1989 whereby an order containing direction for initiation of penalty proceedings under Clause (c) of sub-section (1) was to constitute satisfaction of the Assessing Officer for initiation of penalty proceedings therein. Thus, it was submitted that the order of the Tribunal holding that there was no satisfaction recorded by the Assessing Officer while initiating penalty proceedings for concealment of income was vitiated. Reliance was also placed upon the decision of a Division Bench of this Court in Commissioner of Income-Tax v. Pearey Lal and Sons (EP) Ltd. (2009) 308 ITR 438 (P&H) in support of her contentions. The similar view had also been taken by this Court in CIT v. Munish Iron Store (2003) 263 ITR 484 (P&H).
6. After having heard learned counsel for the revenue, we find force in the submissions made by learned counsel for the revenue. Sub-section 1B of Section 271 of the Act reads thus:-
"(1B) Where any amount is added or disallowed in computing the total income or loss of an assessee in ITA No. 832 of 2008 -4- any order of assessment or reassessment and the said order contains a direction for initiation of penalty proceedings under clause (c) of sub-section (1), such an order of assessment or reassessment shall be deemed to constitute satisfaction of the Assessing Officer for initiation of the penalty proceedings under the said clause (c)."
7. The said provision has been introduced retrospectively from 1.4.1989. A plain reading of the aforesaid provision clearly spells out that wherever an Assessing Officer during the course of assessment or reassessment proceedings records a direction for initiation of penalty proceedings under Clause (c) of sub-section (1) of Section 271 of the Act, the same shall be deemed to be satisfaction recorded by the Assessing Officer for initiation of penalty proceedings. Further, this Court in Pearey Lal and Sons (EP) Ltd's case (supra) dealing with a similar issue had noticed as under:-
"We are in agreement with above observations. Whether satisfaction existed and was not recorded during assessment is not a matter of form but of substance and the issue has to be gone into from case to case. Absence of satisfaction could not be inferred from the fact that only words used in the assessment order are that proceedings were being separately initiated. In fact, this coupled with the findings of assessment showed that satisfaction existed in the course of assessment itself. ITA No. 832 of 2008 -5-
Accordingly, we hold that the view taken by the Tribunal that mere making of mention that penalty proceedings were being separately initiated in the order of assessment did not justify initiation of penalty proceedings, cannot be upheld and is set aside. The Tribunal has not discussed the issue whether case for imposition of penalty under sections 271(1)(c) and 273(2)(a) of the Act was made out, which issue may now be gone into by the Tribunal. The question is answered in favour of the revenue."
8. In view of the above, the present appeal is allowed. The order of the Tribunal dated 30.3.2007 is set aside and the matter is remitted to the Tribunal to adjudicate the same on merits in accordance with law.
(AJAY KUMAR MITTAL)
JUDGE
August 1, 2012 (G.S. SANDHAWALIA)
gbs JUDGE