Aggarwal Engineering Co. V. The Income Tax Officer-IV

ITA/904/2008

AI Insights

The case involves Aggarwal Engineering Co., a partnership firm engaged in civil construction, which appealed against the penalty imposed by the Income Tax Officer under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was initially set aside by the first appellate authority but was later restored by the Tribunal. The main legal questions revolved around the proper initiation of penalty proceedings and the justification for the penalty given the circumstances of the income assessment, which was done on an estimated basis without mens rea (criminal intent) on the part of the assessee. The High Court's decision to remand the case was influenced by a related decision in the assessee's favor regarding the assessment itself.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 691809 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 06-12-2010
• Assessment Year: misc
• Other Referred Cases: Aggarwal Engineering Co. v. Assistant Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: VIVEK SETHI
• Assessee Lawyers: K L GOYAL; SANDEEP GOYAL
• Keywords: Assessment; Income Tax; Net profit rate; Penalty; Revision
• Section: 271(1)(c); 260A

Judgement Text

"ITA No. 904 of 2008 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 904 of 2008 Date of Decision: 6.12.2010 Aggarwal Engineering Co. ....Appellant. Versus The Income Tax Officer-IV ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. K.L. Goyal, Senior Advocate with Mr. Sandeep Goyal, Advocate for the appellant. Mr. Vivek Sethi, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1. This order shall dispose of ITA Nos. 904 and 948 of 2008 as common questions of law and facts are involved therein. For brevity, the facts are being extracted from ITA No. 904 of 2008. 2. This appeal has been filed by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 25.4.2008 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as “the Tribunal”) in ITA No. 437(ASR)/2006 for the assessment year 1995-96 raising following substantial questions of law:- i) Whether on the facts and circumstances of the case, the Ld. ITAT is justified to ignore the fact that no ITA No. 904 of 2008 -2- proper satisfaction has been recorded by Assessing Officer to initiate proceedings of penalty and therefore as held by different courts, no valid proceedings of penalty were ever initiated? ii) Whether, on the facts and circumstances of the case, the Ld. ITAT is justified to reverse the well-reasoned order passed by the CIT, cancelling the penalty imposed u/s 271(1)(c) of Assessing Officer on the ground that income has been assessed by Assessing Officer on estimate basis and there is no mens rea on the part of assessee? iii) Whether on the facts and circumstances of the case, the penalty imposed by Assessing Officer as upheld by the Tribunal is liable to be set aside taking into consideration the final decision in the matter relating to assessment of the case by this Hon'ble Court? 3. Put shortly the facts for adjudication as narrated in the appeal are that the assessee is a partnership firm doing the business of civil construction and filed its return for the assessment year 1995-96 on 10.1.1997 declaring an income of Rs.47,040/-. The assessee's return was taken up for scrutiny and during the assessment proceedings, the assessee filed revised return on 5.5.1997 declaring total income at Rs.4,01,940/-. Thereafter, the assessee on 26.6.1997 filed another revised return declaring the income at Rs.3,57,295/- by calculating the profit at a flat net profit rate of 6% on the gross receipts of Rs.71,54,922/-. The Assessing Officer finally assessed the income of ITA No. 904 of 2008 -3- the assessee at Rs.4,61,846/- on 26.2.1999. Subsequently, the Commissioner of Income Tax, Jalandhar exercising the powers of revision, cancelled the assessment order and directed the Assessing Officer to make fresh assessment in accordance with law. The Assessing Officer framed the assessment rejecting the books of accounts by applying 10% net profit rate on the gross receipts and on the total receipts of Rs.71,54,922/-, the net profit was assessed at Rs.7,15,492/-. Certain other additions were also made on account of unexplained credits etc. and the assessment was made at Rs.21,30,220/- on 28.2.2002. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”] who vide order dated 26.2.2003 while deleting all the additions, enhanced the net profit rate to 13% by increasing net income by Rs.2,14,647/-. Against the order of the CIT(A), the revenue as well as the assessee filed appeals before the Tribunal who vide order 22.8.2005 dismissed the same. Thereafter, the Assessing Officer vide order dated 29.3.2006 imposed a penalty of Rs.3,47,056/- under Section 271(1)(c) of the Act and the appeal of the assessee against the said order was allowed by the Ist appellate authority vide order dated 21.9.2006. On appeal of the department, the Tribunal vide order dated 25.4.2008 while allowing the appeal restored the order of the Assessing Officer. Hence, the present appeal by the assessee. 4. We have heard learned counsel for the parties. 5. Since the order of quantum has been set aside by this Court vide order of even date passed in ITA No. 478 of 2006 (Aggarwal Engineering Co. v. Assistant Commissioner of Income ITA No. 904 of 2008 -4- Tax), these appeals are disposed of accordingly and the matter is remanded to the CIT(A) to adjudicate the same afresh after decision of the appeals in the assessment case in accordance with law. 6. The parties through their counsel are directed to appear before the CIT(A) on 14.2.2011 for further proceedings in accordance with law. (AJAY KUMAR MITTAL) JUDGE December 6, 2010 (ADARSH KUMAR GOEL) gbs JUDGE ITA No. 904 of 2008 -5- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 948 of 2008 Date of Decision: 6.12.2010 Aggarwal Engineering Co. ....Appellant. Versus The Assistant Commissioner of Income Tax ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. K.L. Goyal, Senior Advocate with Mr. Sandeep Goyal, Advocate for the appellant. Mr. Vivek Sethi, Advocate for the respondent. AJAY KUMAR MITTAL, J. The appeal is disposed of in terms of the order of even date passed in ITA No. 904 of 2008 (Aggarwal Engineering Co. v. the Income Tax Officer-IV). (AJAY KUMAR MITTAL) JUDGE December 6, 2010 (ADARSH KUMAR GOEL) gbs JUDGE "