The Commissioner Of Income-Tax v. Mangat Rai Contractor

ITA No. 664 of 2008 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH The Commissioner of Income-tax Versus Mangat Rai Contractor ITA No. 664 of 2008 Date of Decision: 24.12.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Savita Saxena, Advocate for the appellant. None for the respondent. ADARSH KUMAR GOEL, J. 1.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstorder dated 04.03.2008 passed by the Income Tax Appellate Tribunal,Amritsar Bench, Amritsar (hereinafter referred to as “the Tribunal”) inITA No. 27(ASR)/2008, for the assessment year 2002-03, claimingfollowing substantial question of law:- “Whether on the facts and in the circumstances ofthe case, the judgment of Hon'ble ITAT and the ratioof the judgment of this Hon'ble High Court in the caseof CIT Vs. Munish Iron Store 263 ITR 484 hasbecome erroneous in view of the insertion of sub- section (IB) to section 271 by the Finance Act, 2008with retrospective effect from 01.04.1989?” 2.The assessee is a civil contractor. While makingassessment, the Assessing Officer found that the assessee had claimedinflated expenses to conceal the income. Accordingly, the AssessingOfficer made additions to the declared income and also initiated penaltyproceedings. Satisfaction for initiating penalty proceedings was clearlydiscernible from the observations in the order of assessment as alsodirection at the end of order of the assessment that penalty proceedingsbe initiated separately. The additions were duly sustained by the CIT(A)as well as the Tribunal which became final. Penalty was also affirmedby the CIT(A) but the Tribunal set aside the levy of penalty only on theground that satisfaction had not been duly recorded in the order ofassessment. The observation of the Tribunal is as under:- “7.On considering the rival contentions andappreciating the material on record, we find thegrievance of the assessee in this regard to bejustified. A perusal of the assessment order dated21.2.2005 shows that no satisfaction as requiredunder Section 271(1)(c) of the Act has been recordedtherein by the A.O. It is only by way of last sentenceof the assessment order that the following has beenstated:- “Penalty proceedings u/s 271(1)(c) of theI.T.Act, 1961 have been initiated, separately.”8.In “Munish Iron Store” (supra), it has been observed by the Hon'ble jurisdictional High Court,inter alia, that the jurisdiction to impose penalty flowsfrom recording of satisfaction of the A.O. regardingconcealment of income; and that in case there is adefect in the assumption of jurisdiction, it cannot becured. In the present case, as observedhereinabove, in the assessment order, the A.O. hasno where recorded his satisfaction as required undersection 271(1)(c) of the Act. Therefore, inaccordance with “Munish Iron Store” (supra), there isa defect in assumption of jurisdiction to imposepenalty, which cannot be cured. Therefore, the veryassumption of jurisdiction to impose concealmentpenalty in the present case was bad in law.Therefore, for this sole reason, the penalty order andthe consequent impugned order are bad in law andare hereby quashed.” 3.The appeal was admitted in view of judgment of this Courtdated 25.9.2008 in Commissioner of Income-Tax v. Pearey Lal andSons (EP) Ltd. [2009] 308 ITR 438 (P&H).4.We have heard learned counsel for the appellant. Noneappears for the respondent. 5.It is clear that the matter is covered by the judgment of thisCourt in Pearey Lal's case (supra) wherein after considering thejudgment in Munish Iron Store referred to in the impugned order of theTribunal, other case law and the retrospective statutory amendment, it ITA No. 664 of 2008 3.The appeal was admitted in view of judgment of this Courtdated 25.9.2008 in Commissioner of Income-Tax v. Pearey Lal andSons (EP) Ltd. [2009] 308 ITR 438 (P&H).4.We have heard learned counsel for the appellant. Noneappears for the respondent. 5.It is clear that the matter is covered by the judgment of thisCourt in Pearey Lal's case (supra) wherein after considering thejudgment in Munish Iron Store referred to in the impugned order of theTribunal, other case law and the retrospective statutory amendment, it ITA No. 664 of 2008 by way of addition of sub-section (1B) to Section 271 by Finance Act,2008, it was held that in such circumstances requirement of law forrecording satisfaction will stand complied. Accordingly, the questionhas to be answered in favour of the revenue and against the assessee.6.The appeal is allowed and matter is remitted to the Tribunalfor fresh decision on merits in accordance with law after issuing noticeto the assessee. (ADARSH KUMAR GOEL) JUDGE December 24, 2010gbs (AJAY KUMAR MITTAL)JUDGE