ito Vs. Surinder Kumar Gupta - Court Judgment

Excerpt:
the revenue is in appeal against the order of the commissioner (appeals), ludhiana, dated 12-9-2002 in appeal no. 380/it/cit(a) (appeals)-li/1999-2000 for the assessment year 1990-91 on the following effective ground : "that the learned commissioner (appeals)-ii, ludhiana, erred both in law as well as facts of the case in deleting the penalty of rs. 52,789 which was rightly imposed by the assessing officer. " the relevant and material facts for the disposal of this ground of appeal are that according to the assessing officer, the assessee had introduced unaccounted income of rs. 4,70,000 in the books of accounts as advances received from various brick kiln owners and accordingly, confirmations from some of the brick kiln owners with whom the assessee was having trading dealings, were called. according to the assessing officer, confirmation to the tune of rs. 1,05,900 was not filed and so the same was treated as unexplained. the assessee then filed revised return on 30-4-1996 in which the abovesaid amount of rs. 1,05,900 was shown as surrendered because he could not contact these parties, as detailed in the order of the assessing officer, from whom the assessee received these advances totalling to rs. 1,05,900. the department issued notice under section 148 of the act and accordingly assessment was completed on the revised return which was filed earlier to the issue of notice under section. 148 i.e., on 30-4-1996. penalty proceedings under section 271(l)(c) were initiated and show-cause notice was issued to the assessee. in its reply, the assessee contended that the revised return was filed on 30-4-1996 in which a sum of rs. 1,05,900 was voluntarily surrendered by the assessee, and so no penalty should be imposed. the assessing officer rejected this plea of the assessee because according to him, this surrender was not made voluntarily but was made by the assessee after detection by the department failure to prove the advances on the part of the assessee.after considering various judgments relied upon by the assessee, the assessing officer imposed a penalty of rs. 52,798 under section 271(l)(c) of the act.aggrieved with the order of the assessing officer, the assessee went in appeal before the commissioner (appeals) and submitted that some parties could not be contacted to whom also under the same modus operandi, the accounts have been settled and in support of that, the copies of account have been filed before the commissioner (appeals) and copies of which were also filed before the assessing officer. it was further argued before the commissioner (appeals) that the sales made to these parties, there is no such objection or doubt from the assessing officer. however, the assessee in order to avoid litigation and earn peace of mind and as advised by his counsel at that time, filed the revised return surrendering rs. 1,05,900 in the revised return to give quietus to the proceedings and tax was paid on the abovesaid amounts.the assessee also contended before the commissioner (appeals) that since this amount has been surrendered by the assessee with a view to avoid further proceedings against the assessee, so it would not lead to any inference that the assessee was guilty of concealment of income.the assessee also contended before the commissioner (appeals) that before levying penalty, clear-cut charge has to be framed against the assessee for concealment of income or for furnishing inaccurate particulars of such income by the assessing officer, whereas no specific charge has been framed against the assessee for which penalty has been levied. so the assessing officer was not justified in levying the penalty.after considering these submissions of the assessee and placing reliance on the various decisions, as mentioned in the order of the commissioner (appeals), the commissioner (appeals) cancelled the penalty levied by the assessing officer by making following observations : "in respect of amount of rs. 1,05,900 which has been offered to surrender, also copies of accounts have been filed before me and the nature and facts and circumstances of such advances are the same as of the other parties which has been accepted by the assessing officer. the dealing with these parties are with regard to the trade transactions and merely because the appellant could not file the confirmation from the parties concerned and specially when the matter has become very old, would not tantamount to concealment of income or furnishing of inaccurate particulars of income. the law on this issue is now settled one and the judgments which have been cited by the learned counsel for the appellant as mentioned supra, are relevant to the facts of the case. there is no material on record which has been brought on record by the assessing officer to justify the imposition of penalty. i also find force in the arguments of the counsel of the appellant with regard to the legal issue which has raised about the specific charge, which has not been framed against the appellant. the judgment of the jurisdictional bench in the case of m/s national pictures corporation ltd. have been gone through and after carefully going through the various case laws as relied upon the appellant and also from the notice of the income tax officer in which he has not framed any specific charge against the appellant, which is a condition for the levy of penalty and accordingly the penalty levied by the assessing officer both on the facts and on this legal ground are ordered to be cancelled." before us, learned departmental representative for the revenue placing reliance on the reasoning given in the order of the assessing officer, submitted that in this case, the assessing officer by placing reliance on the decision of the apex court reported in g.c. agarwal v. cit (1991) 95 mr (sc) 257 : (1990) 186 itr 571 (sc), has rightly imposed the impugned penalty amount on the assessee because in this case, once the assessee has not been able to produce confirmation from some of the brick kiln owners, whose advances amounted to rs. 1,05,900, the assessee revised his return of income and surrendered an amount of rs. 1,05,900 and so the same cannot be called a voluntary surrender made to earn peace of mind because this surrender was made by the assessee after the same was detected by the department because the assessee failed to prove the genuineness of the advances received from those persons.on the other hand, learned authorised representative for the assessee laying main emphasis on the legal arguments, drew our attention to the assessment order passed by the assessing officer in which he initiated the penalty proceedings against the assessee under section 271(l)(c) and submitted that in his entire order, the assessing officer has not recorded his satisfaction before initiating penalty proceedings under section 271(l)(c) i.e., that the assessee had concealed particulars of his income or furnished inaccurate particulars of such income. he further submitted that since the assessing officer has nowhere recorded his satisfaction under section 271 of the act before initiating penalty proceedings against the assessee under section 271(l)(c), so the penalty amount imposed by the assessing officer was invalid and the same was required to be cancelled. hence, the commissioner (appeals) has rightly cancelled the impugned penalty amount. in support of his contention, he placed reliance on the following decisions (i) in the case of cit v. ram commercial enterprises ltd. (2000) 246 itr 568 (del), their lordships while observing that : "the satisfaction as to the assessee having concealed the particulars of his income or furnished inaccurate particulars of such income is to be arrived at by the assessing officer during the course of any proceedings under the act, which would mean the assessment proceedings, without which, the very jurisdiction to initiate the penalty proceedings is not conferred on the assessing authority by reference to clause (c) of sub-section (1) of section 271 of the income tax act, 1961" "dismissing the application to direct reference, that the tribunal had found that the assessment order did not record the satisfaction as warranted by section 271 for initiating proceedings. the tribunal was justified in cancelling the penalty. no question of law arose from its order." (ii) in the case of cit v. super metal re-rollers (p) ltd. (2004) 265 itr 82 (del), their lordships while observing that : "a bare reading of the provisions of section 271 of the income tax act, 1961, laid the law laid down by the supreme court makes it clear that it is the assessing authority which has to form its own opinion and record its satisfaction before initiating the penalty proceedings.merely because the penalty proceedings have been initiated, it cannot be assumed that such a satisfaction was arrived at in the absence of the same being spelt out by the order of the assessing authority" held "dismissing the appeal that it had been submitted that the satisfaction of the assessing officer as contemplated in section 271(l)(c) of the act was inherent in the queries raised by him during the course of assessment proceedings and that the assessing officer had directed the issue of notice for levy of penalty under the section after being satisfied that the assessee had concealed the particulars of its income. this was not sufficient. the cancellation of penalty by the tribunal was justified. no substantial question of law arose from its order." (iii) in the case of cit v. munish iron store (2003) 263 itr 484 (p&h), their lordships while observing that : "in this case, the tribunal deleted the penalty on the ground that while finalising the assessment, the assessing officer did not record satisfaction in terms of section 271(l)(c). on appeal to the high court, their lordships observing that the junsdiction to impose penalty flows from the recording of the satisfaction of the assessing officer regarding concealment of income. in case there is a defect in the assumption of jurisdiction, it cannot be cured." "dismissing the appeal that the reason assigned by the tribunal for cancellation of the penalty were legally correct and the order passed by it did not give rise to any question of law, much less a substantial question of law . " we have considered the rival submissions, perused the records and carefully gone through the orders of the tax authorities below.in the instant case, we have gone through the entire assessment order passed by the assessing officer and find that during the course of entire assessment proceedings, the assessing officer has not recorded his satisfaction that the assessee has concealed particulars of his income or furnished inaccurate particulars of such income before initiating penalty proceedings against the assessee under section 271(l)(c). the law laid down by the decisions (supra), relied upon by the learned authorised representative for the assessee, makes it clear that in case in the assessment order, the assessing authority has not recorded satisfaction, as warranted by section 271 for initiating penalty proceedings under section 271(l)(c) the commissioner (appeals) was justified in cancelling the penalty imposed by the assessing officer. since the impugned order of the commissioner (appeals) is in conformity with the legal proposition laid down by the high courts in its decisions (supra), the same is upheld and the ground of appeal taken by the revenue is rejected.

Judgment:
The revenue is in appeal against the order of the Commissioner (Appeals), Ludhiana, dated 12-9-2002 in Appeal No. 380/IT/CIT(A) (Appeals)-lI/1999-2000 for the assessment year 1990-91 on the following effective ground : "That the learned Commissioner (Appeals)-II, Ludhiana, erred both in law as well as facts of the case in deleting the penalty of Rs. 52,789 which was rightly imposed by the assessing officer. " The relevant and material facts for the disposal of this ground of appeal are that according to the assessing officer, the assessee had introduced unaccounted income of Rs. 4,70,000 in the books of accounts as advances received from various brick kiln owners and accordingly, confirmations from some of the brick kiln owners with whom the assessee was having trading dealings, were called. According to the assessing officer, confirmation to the tune of Rs. 1,05,900 was not filed and so the same was treated as unexplained. The assessee then filed revised return on 30-4-1996 in which the abovesaid amount of Rs. 1,05,900 was shown as surrendered because he could not contact these parties, as detailed in the order of the assessing officer, from whom the assessee received these advances totalling to Rs. 1,05,900. The department issued notice under section 148 of the Act and accordingly assessment was completed on the revised return which was filed earlier to the issue of notice under section. 148 i.e., on 30-4-1996. Penalty proceedings under section 271(l)(c) were initiated and show-cause notice was issued to the assessee. In its reply, the assessee contended that the revised return was filed on 30-4-1996 in which a sum of Rs. 1,05,900 was voluntarily surrendered by the assessee, and so no penalty should be imposed. The assessing officer rejected this plea of the assessee because according to him, this surrender was not made voluntarily but was made by the assessee after detection by the department failure to prove the advances on the part of the assessee.

After considering various judgments relied upon by the assessee, the assessing officer imposed a penalty of Rs. 52,798 under section 271(l)(c) of the Act.

Aggrieved with the order of the assessing officer, the assessee went in appeal before the Commissioner (Appeals) and submitted that some parties could not be contacted to whom also under the same modus operandi, the accounts have been settled and in support of that, the copies of account have been filed before the Commissioner (Appeals) and copies of which were also filed before the assessing officer. It was further argued before the Commissioner (Appeals) that the sales made to these parties, there is no such objection or doubt from the assessing officer. However, the assessee in order to avoid litigation and earn peace of mind and as advised by his counsel at that time, filed the revised return surrendering Rs. 1,05,900 in the revised return to give quietus to the proceedings and tax was paid on the abovesaid amounts.

The assessee also contended before the Commissioner (Appeals) that since this amount has been surrendered by the assessee with a view to avoid further proceedings against the assessee, so it would not lead to any inference that the assessee was guilty of concealment of income.

The assessee also contended before the Commissioner (Appeals) that before levying penalty, clear-cut charge has to be framed against the assessee for concealment of income or for furnishing inaccurate particulars of such income by the assessing officer, whereas no specific charge has been framed against the assessee for which penalty has been levied. So the assessing officer was not justified in levying the penalty.

After considering these submissions of the assessee and placing reliance on the various decisions, as mentioned in the order of the Commissioner (Appeals), the Commissioner (Appeals) cancelled the penalty levied by the assessing officer by making following observations : "In respect of amount of Rs. 1,05,900 which has been offered to surrender, also copies of accounts have been filed before me and the nature and facts and circumstances of such advances are the same as of the other parties which has been accepted by the assessing officer. The dealing with these parties are with regard to the trade transactions and merely because the appellant could not file the confirmation from the parties concerned and specially when the matter has become very old, would not tantamount to concealment of income or furnishing of inaccurate particulars of income. The law on this issue is now settled one and the judgments which have been cited by the learned counsel for the appellant as mentioned supra, are relevant to the facts of the case. There is no material on record which has been brought on record by the assessing officer to justify the imposition of penalty. I also find force in the arguments of the counsel of the appellant with regard to the legal issue which has raised about the specific charge, which has not been framed against the appellant. The judgment of the jurisdictional Bench in the case of M/s National Pictures Corporation Ltd. have been gone through and after carefully going through the various case laws as relied upon the appellant and also from the notice of the Income Tax Officer in which he has not framed any specific charge against the appellant, which is a condition for the levy of penalty and accordingly the penalty levied by the assessing officer both on the facts and on this legal ground are ordered to be cancelled." Before us, learned Departmental Representative for the revenue placing reliance on the reasoning given in the order of the assessing officer, submitted that in this case, the assessing officer by placing reliance on the decision of the Apex Court reported in G.C. Agarwal v. CIT (1991) 95 MR (SC) 257 : (1990) 186 ITR 571 (SC), has rightly imposed the impugned penalty amount on the assessee because in this case, once the assessee has not been able to produce confirmation from some of the brick kiln owners, whose advances amounted to Rs. 1,05,900, the assessee revised his return of income and surrendered an amount of Rs. 1,05,900 and so the same cannot be called a voluntary surrender made to earn peace of mind because this surrender was made by the assessee after the same was detected by the department because the assessee failed to prove the genuineness of the advances received from those persons.

On the other hand, learned authorised representative for the assessee laying main emphasis on the legal arguments, drew our attention to the assessment order passed by the assessing officer in which he initiated the penalty proceedings against the assessee under section 271(l)(c) and submitted that in his entire order, the assessing officer has not recorded his satisfaction before initiating penalty proceedings under section 271(l)(c) i.e., that the assessee had concealed particulars of his income or furnished inaccurate particulars of such income. He further submitted that since the assessing officer has nowhere recorded his satisfaction under section 271 of the Act before initiating penalty proceedings against the assessee under section 271(l)(c), so the penalty amount imposed by the assessing officer was invalid and the same was required to be cancelled. Hence, the Commissioner (Appeals) has rightly cancelled the impugned penalty amount. In support of his contention, he placed reliance on the following decisions (i) In the case of CIT v. Ram Commercial Enterprises Ltd. (2000) 246 ITR 568 (Del), their Lordships while observing that : "The satisfaction as to the assessee having concealed the particulars of his income or furnished inaccurate particulars of such income is to be arrived at by the assessing officer during the course of any proceedings under the Act, which would mean the assessment proceedings, without which, the very jurisdiction to initiate the penalty proceedings is not conferred on the assessing authority by reference to clause (c) of sub-section (1) of section 271 of the Income Tax Act, 1961" "Dismissing the application to direct reference, that the Tribunal had found that the assessment order did not record the satisfaction as warranted by section 271 for initiating proceedings. The Tribunal was justified in cancelling the penalty. No question of law arose from its order." (ii) In the case of CIT v. Super Metal Re-rollers (P) Ltd. (2004) 265 ITR 82 (Del), their Lordships while observing that : "A bare reading of the provisions of section 271 of the Income Tax Act, 1961, laid the law laid down by the Supreme Court makes it clear that it is the assessing authority which has to form its own opinion and record its satisfaction before initiating the penalty proceedings.

Merely because the penalty proceedings have been initiated, it cannot be assumed that such a satisfaction was arrived at in the absence of the same being spelt out by the order of the assessing authority" Held "Dismissing the appeal that it had been submitted that the satisfaction of the assessing officer as contemplated in section 271(l)(c) of the Act was inherent in the queries raised by him during the course of assessment proceedings and that the assessing officer had directed the issue of notice for levy of penalty under the section after being satisfied that the assessee had concealed the particulars of its income. This was not sufficient. The cancellation of penalty by the Tribunal was justified. No substantial question of law arose from its order." (iii) In the case of CIT v. Munish Iron Store (2003) 263 ITR 484 (P&H), their Lordships while observing that : "In this case, the Tribunal deleted the penalty on the ground that while finalising the assessment, the assessing officer did not record satisfaction in terms of section 271(l)(c). On appeal to the High Court, their Lordships observing that the junsdiction to impose penalty flows from the recording of the satisfaction of the assessing officer regarding concealment of income. In case there is a defect in the assumption of jurisdiction, it cannot be cured." "Dismissing the appeal that the reason assigned by the Tribunal for cancellation of the penalty were legally correct and the order passed by it did not give rise to any question of law, much less a substantial question of law . " We have considered the rival submissions, perused the records and carefully gone through the orders of the tax authorities below.

In the instant case, we have gone through the entire assessment order passed by the assessing officer and find that during the course of entire assessment proceedings, the assessing officer has not recorded his satisfaction that the assessee has concealed particulars of his income or furnished inaccurate particulars of such income before initiating penalty proceedings against the assessee under section 271(l)(c). The law laid down by the decisions (supra), relied upon by the learned authorised representative for the assessee, makes it clear that in case in the assessment order, the assessing authority has not recorded satisfaction, as warranted by section 271 for initiating penalty proceedings under section 271(l)(c) the Commissioner (Appeals) was justified in cancelling the penalty imposed by the assessing officer. Since the impugned order of the Commissioner (Appeals) is in conformity with the legal proposition laid down by the High Courts in its decisions (supra), the same is upheld and the ground of appeal taken by the revenue is rejected.