High Court Of Delhi
CIT vs. Ram Commercial Enterprises Ltd.
Sections 256(2), 271(1)(c)
Asst. year 1986-87
R.C. Lahoti & C.K. Mahajan, JJ.
ITC No. 13 of 1996
8th October, 1998
R.D. Jolly with Ms. Prem Lata Bansal, for the Revenue : G.C. Sharma with Anoop Sharma, Talwar & R.L.M. Raghwan, for the Assessee
R.C. LAHOTI, J. :
By this petition under s. 256(2) of the IT Act, 1961, the Revenue seeks a mandamus to the Tribunal for drawing up the statement of case and referring the following question of law for the opinion of the High Court : “Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in having failed to appreciate that the assessee-company had furnished inaccurate particulars of income in its return and also in deleting the penalty under s. 271(1)(c) imposed by the AO ?”
2. The assessment year in question is 1986-87. The assessee filed a return declaring an income of Rs. 15,700. During the course of survey it was found that the assessee had additional income. On 9th Dec., 1987, the assessee filed a revised return surrendering an income of Rs. 5,50,000 over and above what was declared earlier. On 29th Dec., 1987, the assessee made yet another communication to the AO stating it to be in continuation of his earlier revised voluntary return of income surrendering yet another amount of Rs. 8,99,000 as income. There was another figure of Rs. 1,000 which was not explained by the assessee and, therefore, added as income. Thus, in all there was an addition made to the income of the assessee by the figure of Rs. 24,50,000 over and above the income already returned. The assessment was finalised on 17th Feb., 1981 (sic). By the assessment order, the AO also directed penalty proceedings under s. 271(1)(c), amongst others, to be initiated against the assessee separately. After affording the assessee an opportunity of hearing, by order dt. 22nd March, 1990, the assessing authority imposed a penalty of Rs. 9,77,100 on the assessee forming an opinion that the assessee had deliberately concealed its income by filing inaccurate particulars of income to the tune of Rs. 15,51,000. The penalty was confirmed in appeal by the CIT(A) but has been set aside by the Tribunal. The Revenue sought for the question referred to hereinabove being referred to the High Court by moving a petition under s. 256(1) of the IT Act which has been rejected by the Tribunal.
It was submitted by learned senior standing counsel for the Revenue that on the facts available on record was made out and, therefore, the Tribunal was not justified in deleting the penalty. Learned counsel also submitted that all such relevant facts though available on record were not kept in view by the Tribunal and, therefore, the findings arrived at by it are perverse and not binding on this Court and hence a referable question of law does arise from the order of the Tribunal. Reliance has been placed on Mahavir Metal Works vs. CIT (1973) 92 ITR 513 (P&H) : TC 50R.618 a Division Bench judgment of the Punjab & Haryana High Court. Learned senior counsel for the assessee has submitted that the satisfaction as to the assessee having concealed the particulars of his income or furnished inaccurate particulars of such income is to be arrived at by the AO during the course of any proceedings under the Act, which would mean the assessment proceedings, without which, the very jurisdiction to initiate the penalty proceedings is not conferred on the assessing authority by reference to cl. (c) of sub-s. (1) of s. 271 of the Act. Reliance has been placed on the Supreme Court decision in D.M. Manasvi vs. CIT 1972 CTR (SC) 467 : (1972) 86 ITR 557 (SC) : TC 49R.1199, wherein their Lordships have reiterated the view of the law taken in CIT vs. S.V. Angidi Chettiar (1962) 44 ITR 739 (SC) : TC 49R.793, stated in the following terms : “The power to impose penalty under s. 28 depends upon the satisfaction of the ITO in the course of proceedings under the Act.; it cannot be exercised if he is not satisfied about the existence of conditions specified in cl. (a), (b) or (c) before the proceedings are concluded. The proceedings to levy penalty has, however, not to be commenced by the ITO before the completion of the assessment proceedings by the ITO. Satisfaction before conclusion of the proceeding under the Act, and not the issue of a notice or initiation of any step for imposing penalty is a condition for the exercise of the jurisdiction.”
5. Learned counsel further pointed out by reading the appellate order of the Tribunal that the findings of factarrived at by any of the authorities below were not a subject-matter of challenge before the Tribunal; what was contended before and what actually prevailed with the Tribunal is the absence of any finding recorded by the assessing authority in the order of assessment conferring jurisdiction for initiation of penalty proceedings. The Supreme Court judgment in D.M. Manasviâs case (supra) was relied on by the Tribunal while setting aside the penalty. Learned counsel also carried the Court through the order of assessment, dt. 17th Feb., 1988, to demonstrate that the requisite satisfaction is not to be found arrived at in the order of the assessment.
6. Learned senior standing counsel for the Revenue, on the other hand, submitted that all the facts available on record and as pointed out by him coupled with the fact that by the assessment order itself the assessing authority has chosen to initiate proceedings under s. 271(1)(c) of the Act leads to an inference that the requisite satisfaction was arrived at by the assessing authority. Therefore, the initiation of penalty proceedings cannot be found fault with and hence a question of law does arise.
7. Having heard learned counsel for the parties and having given our anxious consideration to the materialavailable on the record, in the light of the law laid down by their Lordships of the Supreme Court, we are of the opinion that no fault can be found with the judgment of the Tribunal and, therefore, the question suggested by the Revenue does not arise as a question of law from the order of the Tribunal. The law is clear and explicit. Merely because this Court while hearing this application may be inclined to from an opinion that the material available on record could have enabled the initiation of penalty proceedings that cannot be a substitute for the requisite finding which should have been recorded by the assessing authority in the order of assessment but has not been so recorded.
8. A bare reading of the provisions of s. 271 and the law laid down by the Supreme Court makes it clear that it is the assessing authority which has to form its own opinion and record its satisfaction before initiating the penalty proceedings. Merely because the penalty proceedings have been initiated, it cannot be assumed that such a satisfaction was arrived at in the absence of the same being spelt out by the order of the assessing authority. Even at the risk of repetition we would like to state that the assessment order does not record the satisfaction as warranted by s. 271 for initiating the penalty proceedings. As we have already held that the question suggested by the Revenue does not arise as a question of law from the order of the Tribunal, no fault can be found with the Tribunal rejecting the Departmentâs application under s. 256(1) of the Act. The present petition under s. 256(2) is rejected though without any order as to costs.
[Citation : 246 ITR 568]