The Principal Commissioner Of Income Tax I, Patna v. R.a. Himmatsingka And Co., Patna

IN THE HIGH COURT OF JUDICATURE AT PATNAMiscellaneous Appeal No.626 of 2016 ====================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX I, PATNA. ... ... Appellant/s Versus R.A. HIMMATSINGKA AND CO., PATNA. ... ... Respondent/s ======================================================Appearance :For the Appellant/s: Mrs. Archana Sinha, Sr. SC, Income Tax Mr. Alok Kumar, Advocate For the Respondent/s: Mr. D.V. Pathy, Advocate Mr. Sadashiv Tiwary, Advocate ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE HARISH KUMARCAV JUDGMENT(Per: HONOURABLE THE CHIEF JUSTICE) Date : 27-02-2024 The appeal is by the assessee against an order ofthe Income Tax Appellate Tribunal in an appeal by theRevenue and a cross objection filed by the assessee. Thequestion of law arising in the above case is framed asfollows:- Whether the Tribunal misdirected itself infinding, no satisfaction in initiation of penaltyproceedings having been recorded in theassessment order; when the satisfaction wasrecorded and a penalty proceeding initiated, whichwas dropped on the modifications made in the firstappeal against the assessment order, which order of dropping the penalty proceeding was revisedunder Section 263 of the Income Tax Act, 1961. 2. We heard learned counsel for the assessee Sr.D.V. Pathy and the learned Standing Counsel for theDepartment Smt. Archana Sinha. 3. The facts leading to the above appeal arisefrom the assessment order of 2004-05. The assessee, who isthe appellant herein, was a firm engaged in the dealership ofvehicles and its servicing, as also a dealership of BharatPetroleum Corporation Limited. The assessment order wasframed for the subject assessment year and a proceedingunder Section 261(1)(c) of the Act was initiated. 4. The assessee filed an appeal before the FirstAppellate Authority against the assessment order, which wasrejected. A further appeal to the Tribunal saw certainmodifications being made to the assessment order; when theTribunal allowed the appeal in party. Thereafter, the AssessingOfficer found that there was only a mere omission and that itwas not intentional or attributable to a desire on the part of theassessee to conceal the income, so as to avoid payment of tax. 5. The Commissioner of Income Tax issued anotice under Section 263 of the Act on the ground that the order of the Assessing Officer dropping the penaltyproceedings is erroneous and results in prejudice to theinterest of the revenue. After hearing the assessee, theCommissioner of Income Tax interfered with the order by theAssessing Officer, dropping the proceedings and directed theAssessing Officer to consider the matter afresh on restorationof the penalty proceedings. 6. The assessee took the matter to this Court by achallenge under Article 226 of the Constitution of India,wherein a Division Bench of this Court in R.A.Himmatsingka & Co. v. Commissioner of Income Tax &Others reported in (2012) 340 ITR 253 rejected thecontentions of the assessee. The grounds raised to challengethe order under Section 263 was that the Commissioner couldnot have interfered with the dropping of proceedings, since itis not an assessment order and hence it is not an orderrevisable under Section 263. The Division Bench afterconsidering a host of decisions of this Court and various HighCourts found that dropping of the penalty proceedings by anorder, is definitely revisable under Section 263. It was foundthat Section 263 employs the word ‘any order’ and ‘in anyproceeding under the Act’ which was held to have a wide connotation. The ambit and sweep of Section 263 includes theorders of either dropping the proceedings or initiating anyproceedings, which could be revised. Revising the order anddropping the proceedings of penalty, was upheld by the HighCourt. connotation. The ambit and sweep of Section 263 includes theorders of either dropping the proceedings or initiating anyproceedings, which could be revised. Revising the order anddropping the proceedings of penalty, was upheld by the HighCourt. 7. Even at that point of time, the petitioner did not have a case that the assessment order did not record thesatisfaction regarding the initiation of penalty proceedings.The penalty proceedings were initiated and then dropped;which later order was revised under Section 263. 8. As is evident from the order impugned in the appeal, the assessment order contained the following words‘penalty under Section 271(1)(c) is being initiated forfurnishing inaccurate particulars of the income and therebyconcealment of income’(sic). The Tribunal, however, foundthat the specific heads under which the penalty was imposedwas not referred to by the Assessing Officer, which is notnecessary, even going by the decisions cited by the Tribunal. 9. Chandra Prakash Bubna v. ITO reported in (2015) 64 Taxman 155 (Kolkata Tribunal) was a proceedingunder Section 271(1)(c), where there was no specific chargesraised against the assessee. In recording the satisfaction at the time of pendency of the assessment proceedings, such specificallegations are not warranted, was the finding. 10. Another decision referred to was of theKarnataka High Court in Commissioner of Income Tax v.Manjunatha Cotton & Ginning Factory reported in (2013)359 ITR 565 (Kar). Therein, the dictum clearly discernible isthat the Assessing Officer will only have to arrive at a primafacie satisfaction during the course of assessment proceedingswith regard to the assessee having concealed particulars ofincome or furnished inaccurate particulars, before he initiatespenalty proceedings. The cited decision also referred to thedecision of the Hon’ble Supreme Court in MAK Data PrivateLtd. v. Commissioner of Income Tax reported in (2013) 358ITR 593, wherein it was held that the Assessing Officer inrecording such prima facie satisfaction, is not obliged to do itin a particular manner or even reduce it into writing. Evenfrom a mere reading of the assessment order, satisfaction ifclearly discernible that would be sufficient. There can be noflaw found in the subsequent initiation of penaltyproceedings. That satisfaction has to be arrived at when theassessment is pending, is undisputed, which admittedly wasrecorded by the Assessing Officer in the present case. The Assessing Officer later dropped the proceedings, which wasrevised under Section 263 by the Commissioner of IncomeTax, upheld by a Division Bench of this Court; at which stageno contention regarding prima facie satisfaction having notbeen recorded was raised before the authority or before thisCourt. 11. As of now, the penalty proceedings havebeen initiated based on the order of the Commissioner ofIncome Tax under Section 263, approved by this Court. Therecan be no contention taken regarding the prima faciesatisfaction having not been recorded in the assessment order;which was never taken up earlier and which demonstrablywas recorded in the assessment order. We find absolutely noreason to sustain the order of the Tribunal. The question oflaw is answered in favor of the revenue and against theassessee. 12. We see that the First Appellate Authority hadlooked at the penalty order, on the quantum and interferedwith the same. It is only proper that a factual adjudication isconducted by the Tribunal for which we remand the matter tothe Tribunal. 13. Both the appeal and the cross objection stands restored to the files of the Tribunal. The question ofsatisfaction having been found by us, the legality of thepenalty imposed and modified by the First AppellateAuthority would be considered by the Tribunal, asexpeditiously as possible at any rate within 6 months from thedate of appearance of the parties. 14. The appeal stands allowed. (K. Vinod Chandran, CJ) Harish Kumar, J: I agree (Harish Kumar, J) sharun/- 12. We see that the First Appellate Authority hadlooked at the penalty order, on the quantum and interferedwith the same. It is only proper that a factual adjudication isconducted by the Tribunal for which we remand the matter tothe Tribunal. 13. Both the appeal and the cross objection stands restored to the files of the Tribunal. The question ofsatisfaction having been found by us, the legality of thepenalty imposed and modified by the First AppellateAuthority would be considered by the Tribunal, asexpeditiously as possible at any rate within 6 months from thedate of appearance of the parties. 14. The appeal stands allowed. (K. Vinod Chandran, CJ) Harish Kumar, J: I agree (Harish Kumar, J) sharun/- AFR/NAFRCAV DATE21.02.2024Uploading Date27.02.2024Transmission Date