High Court Of Punjab & Haryana
CIT vs. Munish Iron Store
Sections 260A, 271(1)(c)
Asst. Year 1992-93
G.S. Singhvi & S.S. Grewal, JJ.
IT Appeal No. 230 of 2002
22nd April, 2003
Counsel Appeared
R.P. Sawhney with V.P. Malik, for the Appellant
JUDGMENT
G.S. SINGHVi, J. :
In this appeal, the Revenue has prayed for determination of the following question : “Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in cancelling the penalty of Rs. 4,38,172 levied under s. 271(1)(c) of the IT Act, 1961, holding that the penalty imposed was not valid and jurisdiction to impose the same was illegally assumed without recording a proper satisfaction, whereas the AO passed a speaking order under s. 271(1) (c) of the IT Act establishing that the assessee had wilfully and deliberately concealed the true and correct particulars of its income, a reference to which was duly made in the assessment order by way of initiating penalty proceedings under s. 271(1)(c) of the Act ?” The facts necessary for deciding the appeal are that the assessee filed a return on 29th Oct., 1992, for the asst. yr. 1992-93 disclosing an income of Rs. 74,155. During the pendency of the assessment proceedings, the concerned authority got the information that the assessee had purchased drafts from the bank and had cash which was unaccounted. In this connection, a statement of the father of the assessee’s partner—Shri Roop Chand, was recorded on 16th March, 1993. Upon this, books of account of the assessee were impounded under s. 131 of the IT Act, 1961 (for short, “the Act”). Thereafter, the assessee filed a revised return showing an income of Rs. 9,43,155. By an order dt. 30th March, 1994, the Asstt. CIT, Circle II, Chandigarh, finalised the assessment under s. 143(3) on the basis of the revised return filed by the assessee. He also ordered initiation of proceedings under s. 271(1)(c) of the Act for levy of penalty. After considering the reply of the assessee, the AO levied penalty of Rs. 4,38,172. The CIT(A), Chandigarh, dismissed the appeal of the assessee and upheld the order of penalty. The ITAT, Chandigarh (for short, “the Tribunal”), rejected the assessees’ plea that it had filed the revised return voluntarily but upheld its challenge to the penalty on the ground that while finalising the assessment, the AO did not record satisfaction in terms of s. 271(1)(c) of the Act. Shri Sawhney argued that failure of the assessee to file a correct return was by itself sufficient for levy of penalty under s.271(1)(c) of the Act and the Tribunal committed a serious error by setting aside the orders of the assessing authority and the CIT(A) only on the ground of non-recording of satisfaction by the AO in the order of assessment.
In our opinion, there is no merit in the argument of learned counsel. A reading of the order passed by the Tribunal shows that after making a reference to the judgments of the Supreme Court and some High Courts in Jain Bros. vs. Union of India & Ors. (1970) 77 ITR 107 (SC), D.M. Manasvi vs. CIT (1972) 86 ITR 557 (SC), CIT vs. Ram Commercial Enterprises Ltd. (2001) 167 CTR (Del) 321 : (2000) 246 ITR 568 (Del) and Diwan Enterprises vs. CIT & Ors. (2001) 167 CTR (Del) 324 : (2000) 246 ITR 571 (Del), the Tribunal culled out the proposition of law in the following words : “It is clear from above that jurisdiction to impose penalty flows from recording of the satisfaction and in case there is a jurisdictional defect in the assumption of jurisdiction, it cannot be cured. With the aforesaid legal quoting, we are to examine the question whether the AO assumed proper jurisdiction. It is again to be noted that from the issue of notice under s. 271(1)(c), the recording of legal and valid satisfaction cannot be assumed.”
5. The Tribunal then referred to the order of assessment passed by the AO and observed : “It is clear from the above that not a word has been written about concealment of income. The AO quietly accepted the revised return and the income disclosed therein. He did not record how and why the revised return was submitted. The statement of the partner on pp. 14-16 of the paper book, Shri Ramesh Kumar was recorded and in that statement, he did explain the reasons which led to filing of the revised return. Learned counsel for the assessee contended that those reasons were impliedly accepted by the AO. Looking at the assessment order, one cannot challenge the above assertion of learned counsel for the assessee. At any rate, the satisfaction about the concealment of income of furnishing of inaccurate particulars of income to assume jurisdiction to initiate and levy penalty is clearly not recorded as enjoined by law. The above jurisdictional defect in our view cannot be cured. Accordingly, we hold that penalty imposed is not valid and jurisdiction to impose the same was illegally assumed without recording a proper satisfaction. Penalty imposed is cancelled for the above reasons”
6. In our opinion, the reasons assigned by the Tribunal for cancellation of the penalty are legally correct and the order passed by it does not give rise to any question of law, much less a substantial question of law requiring determination by this Court under s. 260A of the Act. Hence, the appeal is dismissed.
[Citation : 263 ITR 484]
