THE COMMR.OF INCOME TAX BHD.` V. MANGAT RAI

ITA/664/2008

AI Insights

The case involves an appeal by the Commissioner of Income-tax against the decision of the Income Tax Appellate Tribunal, Amritsar, which had set aside the penalty imposed on the assessee, Mangat Rai Contractor, for concealing income by inflating expenses. The Tribunal's decision was based on the absence of recorded satisfaction in the assessment order regarding the concealment of income, as required under Section 271(1)(c) of the Income Tax Act, 1961. However, the High Court of Punjab and Haryana, referencing the retrospective amendment to Section 271 by the Finance Act, 2008, found that the legal requirements had been met and thus allowed the appeal, remitting the case back to the Tribunal for a decision on the merits.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 719278 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 24-12-2010
• Assessment Year: misc
• Other Referred Cases: CIT Vs. Munish Iron Store, Commissioner of Income-Tax v. Pearey Lal and Sons (EP) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: SAVITA SAXENA
• Keywords: Concealment of income; Penalty proceedings; Recording of satisfaction; Retrospective amendment
• Section: 271(1)(c); 260A; 271(1B)

Judgement Text

"ITA No. 664 of 2008 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 664 of 2008 Date of Decision: 24.12.2010 The Commissioner of Income-tax ....Appellant. Versus Mangat Rai Contractor ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Savita Saxena, Advocate for the appellant. None for the respondent. ADARSH KUMAR GOEL, J. 1. This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against order dated 04.03.2008 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as “the Tribunal”) in ITA No. 27(ASR)/2008, for the assessment year 2002-03, claiming following substantial question of law:- “Whether on the facts and in the circumstances of the case, the judgment of Hon'ble ITAT and the ratio of the judgment of this Hon'ble High Court in the case of CIT Vs. Munish Iron Store 263 ITR 484 has become erroneous in view of the insertion of sub- ITA No. 664 of 2008 -2- section (IB) to section 271 by the Finance Act, 2008 with retrospective effect from 01.04.1989?” 2. The assessee is a civil contractor. While making assessment, the Assessing Officer found that the assessee had claimed inflated expenses to conceal the income. Accordingly, the Assessing Officer made additions to the declared income and also initiated penalty proceedings. Satisfaction for initiating penalty proceedings was clearly discernible from the observations in the order of assessment as also direction at the end of order of the assessment that penalty proceedings be initiated separately. The additions were duly sustained by the CIT(A) as well as the Tribunal which became final. Penalty was also affirmed by the CIT(A) but the Tribunal set aside the levy of penalty only on the ground that satisfaction had not been duly recorded in the order of assessment. The observation of the Tribunal is as under:- “7. On considering the rival contentions and appreciating the material on record, we find the grievance of the assessee in this regard to be justified. A perusal of the assessment order dated 21.2.2005 shows that no satisfaction as required under Section 271(1)(c) of the Act has been recorded therein by the A.O. It is only by way of last sentence of the assessment order that the following has been stated:- “Penalty proceedings u/s 271(1)(c) of the I.T.Act, 1961 have been initiated, separately.” 8. In “Munish Iron Store” (supra), it has been ITA No. 664 of 2008 -3- observed by the Hon'ble jurisdictional High Court, inter alia, that the jurisdiction to impose penalty flows from recording of satisfaction of the A.O. regarding concealment of income; and that in case there is a defect in the assumption of jurisdiction, it cannot be cured. In the present case, as observed hereinabove, in the assessment order, the A.O. has no where recorded his satisfaction as required under section 271(1)(c) of the Act. Therefore, in accordance with “Munish Iron Store” (supra), there is a defect in assumption of jurisdiction to impose penalty, which cannot be cured. Therefore, the very assumption of jurisdiction to impose concealment penalty in the present case was bad in law. Therefore, for this sole reason, the penalty order and the consequent impugned order are bad in law and are hereby quashed.” 3. The appeal was admitted in view of judgment of this Court dated 25.9.2008 in Commissioner of Income-Tax v. Pearey Lal and Sons (EP) Ltd. [2009] 308 ITR 438 (P&H). 4. We have heard learned counsel for the appellant. None appears for the respondent. 5. It is clear that the matter is covered by the judgment of this Court in Pearey Lal's case (supra) wherein after considering the judgment in Munish Iron Store referred to in the impugned order of the Tribunal, other case law and the retrospective statutory amendment, it ITA No. 664 of 2008 -4- by way of addition of sub-section (1B) to Section 271 by Finance Act, 2008, it was held that in such circumstances requirement of law for recording satisfaction will stand complied. Accordingly, the question has to be answered in favour of the revenue and against the assessee. 6. The appeal is allowed and matter is remitted to the Tribunal for fresh decision on merits in accordance with law after issuing notice to the assessee. (ADARSH KUMAR GOEL) JUDGE December 24, 2010 (AJAY KUMAR MITTAL) gbs JUDGE "