Ita/446/2008 Of Commissioner Of Income Tax v. Shyam Raj Singh

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH Commissioner of Income Tax, Faridabad. ....-- Appe Vs, Shri Shyam Ra] Singh(through legal heir Shri Deepak Singh) ..... Respond CORAM: HON’?BLE MR. JUSTICEK AJAY KUMAR MITTHON BLE MS. JUSTICEK ANITA CHAUDHRY Present:Mr. Tejyinder K.Joshi, Advocate for the appellantNone for the respondent. Ajay Kumar Mittal,J, 1]This appeal has been preferred by the revenue under Section260A of the Income Tax Act, 1961 (in short, “‘the Act’) against the ordedated 31.8.2007, Annexure A.4 passed by the Income Tax AppellateTribunal, Delhi Bench “I? New Delhi in ITA No.4601/DEL/2005 for theassessment year 2001-02. It was admitted on 18.8.2008 to consider thefollowing substantial questions of law:- 1)Whether in the facts and circumstances of the case, byvirtue of the amendment inserted by Finance Act, 2008w.e.f 1.4.1989, issuance of notice for imposition ofpenalty is sufficient compliance for initiation of penaltyproceedings under section 271(1) (c)?virtue of the amendment inserted by Finance Act, 2008w.e.f 1.4.1989, issuance of notice for imposition ofpenalty is sufficient compliance for initiation of penaltyproceedings under section 271(1) (c)? 11)Whether on the facts and circumstances of the case, theHon’ble Income Tax Appellate Tribunal 1s right 1n law indeleting the penalty levied by the Commissioner ofIncome Tax Appeals on different grounds, than what waslevied by the Assessing Officer?Hon’ble Income Tax Appellate Tribunal 1s right 1n law indeleting the penalty levied by the Commissioner ofIncome Tax Appeals on different grounds, than what waslevied by the Assessing Officer? IITA No.446 of 2008 ? ) -A few facts relevant for the decision of the controversyinvolved, as narrated in the appeal may be noticed. The assessee filed returnon 31.10.2001 declaring income of=a2,67,640/-. The assessment undersection 143(3) of the Act was completed on 26.2.2004 at total income of44,43,780/-. The assessee did not prefer any appeal before the Commissionerof Income Tax (Appeals) [the CIT(A)] against the assessment order. TheAssessing Officer levied a penalty of <a46,072/- under section 271(1)(c) ofthe Act on account of furnishing of inaccurate particulars of his income inrespect of addition amounting to-1,31,262/- on account of cessation ofhability as the assessee was not able to explain the difference of|=1,31,262/- in the account of Bharat Petroleum Corporation Limited(BPCL). The CIT(A) vide order dated 13.10.2005, Annexure A.3 dismissedthe appeal filed by the assessee holding that the amount of a1,31,262/- wasnot on account of cessation of liability but represented the difference in thefigure recorded in the assessee’s books of account. Aggrieved by the order,the assessee filed appeal before the Tribunal. The Tribunal vide order dated31.8.2007, Annexure A.4 partly allowed the appeal and cancelled thepenalty levied by the Assessing officer on the ground that the Assessingofficer had not recorded satisfaction in the assessment order. [t was alsoobserved by the Tribunal that CIT(A) had no power to change the basis ofpenalty and reinitiate penalty proceedings in the course of hearing ofpenalty appeal itself. Hence the present appeal. 3]We have heard learned counsel for the appellant and perusedthe record. IITA No.446 of 2008 4 Learned counsel for the appellant contended that in view of theinsertion of sub section (1B) in Section 271 of the Act by Finance Act, 2008with effect from |.4.1989, question No.1 deserves to be decided in favour ofthe revenue. As regards question No.2, it was urged that the Tribunal haderred in law in deleting the penalty levied under Section 271(1) (c) of theAct. 3]We have heard learned counsel for the appellant and perusedthe record. IITA No.446 of 2008 4 Learned counsel for the appellant contended that in view of theinsertion of sub section (1B) in Section 271 of the Act by Finance Act, 2008with effect from |.4.1989, question No.1 deserves to be decided in favour ofthe revenue. As regards question No.2, it was urged that the Tribunal haderred in law in deleting the penalty levied under Section 271(1) (c) of theAct. 5.Taking up question No.l, we find that the Tribunal afterexamining the entire material before it came to the conclusion that theAssessing officer had not recorded any satisfaction while initiating thepenalty proceedings and thus he had no jurisdiction to levy penalty underSection 271(1) (c) of the Act. Finance Act, 2008 effective retrospectivelyfrom 1.4.1989 had inserted sub section 1B in Section 271 of the Act, whichreads thus:- *'(1B) Where any amount 1s added or disallowed 1n computinthe total income or loss of an assessee in any order ofassessment or reassessment and the said order contains adirection for initiation of penalty proceedings under clause(c) of sub section (1), such an order of assessment orreassessment shall be deemed to constitute satisfaction of theAssessing Officer for initiation of the penalty proceedingsunder the said clause.’ The aforesaid provision came up for consideration before this Court in Commissioner of Income Tax vy. Pearey Lal and Sons (EP) Limtite(2009) 308 ITR 438, wherein it was held as under:- “13. We are in agreement with above observations. Whethersatisfaction existed and was not recorded during assessment 1snot a matter of form but of substance and the issue has to begone into from case to case. Absence of satisfaction could not be inferred from the fact that only words used in theassessment order are that proceedings were being separatelyinitiated. In fact,this coupled with the findings of assessmentshowed that satisfaction existed in the course of assessmentitself. Accordingly, we hold that the view taken by theTribunal that mere making of mention that penaltyproceedings were being separately initiated in the order ofassessment did not justify initiation of penalty proceedings,cannot be upheld and 1s set aside...” Accordingly, question No.| is answered in favour of the revenue. TheInitiation of penalty proceedings are held to be valid. 6.Adverting to question No.2, we proceed to examine whetherthe levy of penalty ofLv46,072/- by the Assessing Officer and upheld byCIT(A) in the facts and circumstances was justified. From the perusal of theorder passed by the Assessing Officer, it 1s discernible that the Assessingofficer imposed penalty under Section 271(1) (c) of the Act on the groundthat amount of=a1,31,262/- represented the cessation of liability underSection 41(1) of the Act and wrong disclosure of the balance payable toBPCL amounted to furnishing of inaccurate particulars of income. The CIT(A) held that the amount ofa1,31,262/- was not on account of cessation ofhability. However, he levied penalty under Section 271(1) (c) of the Act forfurnishing of inaccurate particulars of income as there was difference ofL1,31,262/- in the account of the BPCL. The Tribunal cancelled the penaltyon the ground as noticed hereinabove. 7 It was not disputed that the Assessing Officer had primarily levied penalty by treating the amount ofL1,31,262/- as cessation of liability IITA No.446 of 2008 7 It was not disputed that the Assessing Officer had primarily levied penalty by treating the amount ofL1,31,262/- as cessation of liability IITA No.446 of 2008 showed less balance and, therefore, there was inaccurate furnishing ofparticulars of income. The amount of v1,31,262/- was shown payable toBPCL as on 31.3.2000 and 31.3.2001 and, therefore, it would not amount tocessation of liability. The assessee in ground No.4 before the Tribunal hadpleaded that the account of BPCL could not be reconciled as they were notsupplying copy of the account. It was only after getting a copy of accountfrom BPCL that the discrepancy 1n the account was added as income. It wasclaimed that there was no intentional understatement of income ordeliberate furnishing of inaccurate particulars on the part of the assessee,The plea of the assessee 1s plausible and 1t cannot be held to be without anysubstance. Thus, under the circumstances, the levy of penalty of.a46,072/-by the Assessing Officer and CIT(A) was not justified. |In view of the above, the appeal stands disposed ofaccordingly. (AJAY KUMAR MITTAL)JUDGE March 21, 2014<3!< (ANITA CHAUDHRY)JUDGE