Commissioner Of Income Tax v. Ekta Gupta

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.173 of 2009 Date of decision: 8.4.2011 Commissioner of Income Tax. Vs. Ekta Gupta. -----Appellant. -----Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Ms. Urvashi Dhugga, Sr. Standing Counselfor the appellant. None for the respondent. --- ADARSH KUMAR GOEL, J. This appeal has been preferred by the revenue underSection 260-A of the Income Tax Act, 1961 (for short, “the Act”)against order of the Income Tax Appellate Tribunal, New Delhidated 10.8.2007 in ITA No.485/Del/06 & C.O. No.247/Del/06 forthe assessment year 2001-02 claiming following substantialquestion of law:- “Whether, on the facts and in the circumstances of thecase the Hon’ble ITAT in deleting the penalty leviedby the Assessing Officer u/s 271(1)(c) incontravention of the order of Hon’ble Madras HighCourt in the case of M. Sajjanraj Nahar Vs. CIT (283ITR 230), is correct when the Assessing Officer had recorded initiation of penalty proceedings u/s 271(1)(c) in the assessment order? 2. During the course of assessment, the AssessingOfficer noticed that the assessee had unexplained income. Whilemaking addition on that account, it was directed that penaltyproceedings be initiated under Section 271(1)(c) of the Act forfurnishing inaccurate particulars of income. The addition wasupheld upto the Tribunal. The penalty levied by the AssessingOfficer was upheld by the CIT(A) except for reduction of theamount. On appeal filed by the revenue and cross objectionsfiled by the assessee, the Tribunal held that in absence ofrequirement of recording of satisfaction in the order ofassessment itself, jurisdiction to levy penalty could not beinvoked. Observations of the Tribunal are as follows:- “8.8. In the instant case, as observed above, sincethe AO in the assessment order has not recorded anypositive and categorical satisfaction as required u/s271(1)(c) stands cancelled.” 3. We have heard learned counsel for the appellant. 4. Learned counsel for the appellant submits thatrecording of satisfaction was a matter of substance and not mereof form and if satisfaction was reflected in the order, format ofrecording of satisfaction was not enough to invalidate the action.Reference was also made to statutory amendment clarifying thisposition under explanation to Section 271(1B) of the Act added by the Finance Act, 2008 w.e.f.1.4.1989. Reliance has also beenplaced on the judgment of Madras High Court in M. SajjanrajNaharv. CIT[2006] 283 ITR 230 and judgment of this Court in CITv. Pearey Lal and Sons (EP)_ Ltd. [2009] 308 ITR 438. 5. In view of above, the question has to be answered infavour of the revenue and the matter has to remanded to theTribunal for fresh decision on merits. 6. Accordingly, this appeal is allowed, the impugnedorder is set aside and the matter is remanded to the Tribunal forfresh decision in accordance with law. (ADARSH KUMAR GOEL) JUDGE April 08, 2011ashwani ( AJAY KUMAR MITTAL ) JUDGE