Punjab & Haryana H.C : penalty based on facts found during survey u/s 133A can not be set aside by CIT(A) without going into merit of the case

High Court Of Punjab & Haryana

CIT vs. Rajesh Rana

Assessment Year : 1994-95

Section : 271(1)(C)

Adarsh Kumar Goel And Mrs. Daya Chaudhary, JJ.

IT Appeal No. 133 Of 2008

July  7, 2009

JUDGMENT
 
1. This appeal has been preferred by the Revenue under section 260A of Income-tax Act, 1961 (for short, “the Act”), against the order of the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar, dated August 3, 2007, passed in I. T. A. No. 381 (ASR)/2006, assessment year 1994-95, proposing to raise the following substantial questions of law :

“1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in upholding the order of the Commissioner of Income-tax (Appeals) deleting the penalty of Rs. 1,14,770 imposed under section 271(1)(c) of the Income-tax Act, 1961 ?

2. Whether, on the facts and in the circumstances of the case, the ratio of the judgment of the hon’ble Punjab and Haryana High Court in the case of CIT v. Munish Iron Store  reported in [2003] 263 ITR 484 is applicable in the present case when the finding regarding furnishing of inaccurate particulars of income have been given in the assessment order in a detailed manner ?”

2. During the assessment for the assessment year in question, the Assessing Officer on the basis of survey under section 133A found that the assessee had stocks in excess of stock entered in the books of account. The assessee surrendered some of the amounts as additional income to cover up the discrepancies. However, the Assessing Officer made additions to the declared amount. Notice for imposition of penalty was also issued and order of penalty was separately passed.

3. The quantum matter is the subject-matter of I. T. A. No. 344 of 2005 at the instance of the assessee.

4. On appeal, the Commissioner of Income-tax (Appeals) set aside the penalty only on the ground that from the proceedings recorded by the Assessing Officer, the requirement of section 271(1)(c) of the Act was not met as it was not recorded that a case of penalty was made out while mentioning that notice for penalty proceedings had been separately issued.

5. Learned counsel for the Revenue points out that this issue was considered by this court in CIT v. Pearey Lal and Sons (EP) Ltd. [2009] 308 ITR 438 and it was held that the order of this nature could not be set aside on the ground that requirement of section 271(1)(c) of the Act was not made. Existence or otherwise of satisfaction was not a matter of form but of substance.

6. Learned counsel for the assessee submitted that even if the requirement of section 271(1)(c) was met, the assessee was entitled to be heard on the merits of justification for levy of penalty. The Commissioner of Income-tax (Appeals) has set aside the penalty, without going into the merits of the issue.

7. In view of the above, though the matter may have been liable to be remitted to the Commissioner of Income-tax (Appeals) for deciding the issue afresh after considering the view point of the assessee on the merits, but since it is pointed out that the quantum case is pending in this court, we consider it appropriate to direct that this appeal be listed along with I.T. A. No. 344 of 2005.

[Citation : 335 ITR 207]

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