INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "G": NEW DELHI
BEFORE SHRI I.C.SUDHIR, JUDICIAL MEMBER
AND
SHRI O.P.KANT, ACCOUNTANT MEMBER
ITA No. 3391/Del/2013
(Assessment Year: 2006-07)
Shambhu Dayal, ACIT,
C/o. RRA Taxindia, Gurgaon Circle,
D-28, South Extension, Part-I, Vs. Gurgaon
New Delhi
PAN:ADWPD0056A
(Appellant) (Respondent)
Appellant by : Dr. Rakesh Gupta, Adv,
Sh. Somil Agarwal, Adv
Respondent by : Sh. Sujit Kumar, Sr. DR
Date of Hearing 13.10.2015
Date of pronouncement 30.11.2015
ORDER
PER O.P.KANT, ACCOUNTANTMEMBER
This appeal is preferred by the assessee against the order dated 19.03.2013
of the Commissioner of Income-tax (Appeals)-2, Faridabad, wherein he has
confirmed the penalty levied u/s 271(1)(c) of the Income Tax Act, 1961 (in short
`the Act') by the Assessing Officer. The grounds of appeal raised by the assessee
are as under:-
"1. That having regard to the facts and circumstances of the case, Ld.
CIT(A) has erred in law and on facts in confirming the action of Ld. AO in
levying penalty of Rs.3,18,200/- and that too without assuming jurisdiction
as per law and without considering the facts and circumstances of the
case and the impugned penalty order being illegal and void ab-initio.
2. That in any case and in any view of the matter, action of Ld. CIT(A) in
not quashing the penalty order framed by Ld. AO is beyond jurisdiction
and without considering the facts and circumstances of the case and
the impugned penalty order being illegal and void ab-initio and the
impugned penalty order has been framed without considering the
submissions/evidences of the assessee and without providing any
adverse material on record and without establishing that there was
concealment or furnishing of inaccurate particulars of income on the
part of the assessee.
3. That having regard to the facts and circumstances of the case, Ld.
CIT(A) has erred in law and on facts in confirming the action of Ld. AO in
Page 2 of 6 ITA No. 3391/Del/2013
passing the impugned penalty order being contrary to law as the
assessment order framed under section 144 dated 31/12/2008 and the
same is illegal, beyond jurisdiction and void ab-initio and further erred in
observing that Rs.10,39,870/- was unaccounted income of the assessee
and addition was made in the assessment order without giving
opportunity of hearing and in violation of principles of natural justice.
4. That having regard to the facts and circumstances of the case, Ld.
CIT(A) has erred in law and on facts in confirming the action of Ld. AO in
levying penalty u/s 271(l)(c) on the addition made in the assessment
order u/s 144 dated 31/12/2008 as the same are also contrary to law
and facts.
5. That having regard to the facts and circumstances of the case, Ld.
CIT(A) has erred in law and on facts in confirming the action of Ld. AO in
levying penalty u/s 271(1 )(c) is bad in law being beyond jurisdiction and
barred by limitation and contrary to the principles of natural justice and
has been passed by recording incorrect facts and findings and without
giving adequate opportunity to the assessee and without considering
the submissions/evidences of the assessee and without providing any
adverse material on record and the same is not sustainable on various
legal and factual grounds."
2. The facts in brief are that the assessee filed return of income declaring
income of Rs.7,12,362/- on 28.09.2006. In the course of scrutiny proceedings, the ld.
Assessing officer noticed that gross receipt from contract work was shown in the
return of income at Rs.1,47,50,000/- as against the gross receipt of Rs.1,57,89,871/-
of contract from M/s. Crew B.O.S. Products Limited reported in the Annual
Information Return (AIR). The ld. Assessing officer completed the scrutiny
assessment under section 144 of the Act i.e. ex-party assessment on 31.12.2008
adding thereby the difference in gross receipt of Rs. 10,49,871 to the total income
of the assessee. He has mentioned in the assessment order the fact of non-
compliance of various notices issued under section 143(2) and 142(1) of the Act by
him & reasons for completing the assessment order u/s 144 of the Act. The ld.
Assessing Officer also initiated penalty proceedings under section 271(1)( c) of the
Act for concealment/ furnishing of inaccurate particulars of income. The ld.
Assessing officer again observed non-compliance on the part of the assessee, but
looking to the limitation, he levied penalty amounting to Rs.3,18,200/- u/s 271(1)(c)
of the Act on 30.06.2009. The assessee carried the matter of penalty before the
learned Commissioner of Income-tax (Appeals) by filing appeal before him,
however, could not succeed. Aggrieved, the assessee is before us.
Page 3 of 6 ITA No. 3391/Del/2013
3. The effective ground of appeal of the assessee is that in absence of any
satisfaction recorded in the assessment order, the penalty has been imposed
without any jurisdiction and also, the assessee was not provided sufficient
opportunity of being heard.
4. The learned Authorized Representative of the assessee submitted that the ld.
Assessing Officer has failed to record satisfaction for initiation of penalty u/s
271(1)(c) of the Act in the assessment order passed u/s 144 of the Act on
31.12.2008. He further submitted that absence of prima-facie satisfaction of the
Assessing Officer for initiation of penalty proceeding in that order was jurisdictional
defect and therefore the order of penalty imposed by the ld. Assessing Officer was
without any jurisdiction. The Authorized Representative relied on the decision of the
jurisdictional High Court in the case of `Madhushree Gupta' Vs. Union of India
(2009) 317 ITR 107 (Del) and further relied on the decision of ITAT Delhi `H' Bench in
the case of `Triveni Engineering and Industries Ltd.' Vs. DCIT in ITA No.
5709/Del/2010. On the other hand the learned Senior Departmental
Representative relied on the order of the lower authorities and submitted that in
view of the non-compliance by the assessee on various notices, the penalty was
rightly confirmed by the learned Commissioner of Income-tax (Appeals).
5. We have heard the rival submission and perused the material available on
record. The learned Commissioner of Income-tax (Appeals) in para 5.4 of his order
has given the finding in respect of initiation of penalty as under:-
"5.4................................................ In the present case, the appellant,
instead of merely harping on getting a copy of assessment order should
have also tried to defend himself against imposition of penalty since these
proceedings were initiated separately in assessment order. In the case of M.
Sajjan Raj & Nahar and Others Vs. CIT (Mad) 280 ITR 230, it has been held
that mentioning the words penalty proceedings initiated separately in
assessment order is sufficient in invoking penal action."
6. Perusal of the above finding shows that the learned Commissioner of
Income-tax (Appeals) has confirmed the penalty on the assumption that the
words `penalty proceeding initiated' were mentioned in the assessment order and
same were sufficient to invoke the penal action in the case of the assessee. But,
when we perused the order of the ld. Assessing Officer passed u/s 144 of the Act
dated 31.12.2008, we find that no such words mentioning initiation of penalty are
appearing in the copy of the order supplied by the assessee along with Form
Page 4 of 6 ITA No. 3391/Del/2013
No.35 filed by the assessee. Though there is no stamp of Income Tax Department
on the copy of the order, however the learned Departmental Representative has
not questioned the genuineness of the copy of the order. In view of the facts, we
find that the ld. Assessing Officer has failed to record any prima-facie satisfaction
in respect of initiation of penalty proceeding in the assessment order, which being
a sine-qua-non i..e prime requirement in view of the judgment of the Hon'ble
jurisdictional High Court in the case of Madhushree Gupta (supra). The relevant
finding of the Hon'ble High Court is as under:-
"Conclusions
19. In the result, our conclusion are as follow:- . :
(i) Section 271(1B) of the Act is not violative of Article 14 of the Constitution.
(ii) The position of law both pre and post amendment is similar, in as much,
the Assessing Officer will have to arrive at a prima facie satisfaction during
the course of proceedings with regard to the assesses having concealed
particulars of income or furnished inaccurate particulars, before he initiates
penalty proceedings.
(iii) Prima facie 'satisfaction of the Assessing Officer that the case may
deserve the imposition of penalty should be discernible from the order
passed during the course of the proceedings. Obviously, the Assessing
Officer would arrive at a decision, i.e., a final conclusion only after hearing
the assessee.
(iv)...................... "
7. Following the decision of the jurisdictional High Court in the case of
Madhushree Gupta (supra), the Tribunal in the case of the Triveni Engineering and
Industries Ltd. (supra) has also held as under:-
"Respectfully following the judgment of Hon'ble Jurisdictional High Court in
the case of Madhushree Gupta (supra) and ITAT Delhi Bench in the cases of
Cornerstone Financial Services (supra), Global Green Limited (supra) and
ITAT Kolkata Bench in the case of Budge Budge Co. Ltd. (supra), in the
present case, we hold that the Assessing Officer has not recorded his
satisfaction for initiation of penalty proceedings in regard to the additions
made pertaining to interest on SDF loan at the end of relevant part of the
order. Accordingly, impugned order inter alia original penalty order dated
18.03.2009 cannot be sustained and upheld. Therefore, we set aside the
same and ground no. 1.2 is allowed."
8. As we find that the ld. Assessing Officer has failed to record prima-facie
satisfaction for initiate penalty proceeding in the assessment order passed under
section 144 of the Act, respectfully following the judgement of the jurisdictional
High court in the case of Madhushree Gupta( supra) and decision of the Tribunal
Page 5 of 6 ITA No. 3391/Del/2013
in the case of Triveni Engineering and Industries Ltd. (supra), we hold that in
absence of any prima-facie satisfaction recorded by the ld. Assessing Officer for
initiation of penalty in the assessment order, the penalty levied by the AO is without
any jurisdiction and void ab-initio, therefore, order of the learned Assessing Officer
passed under 271(1)(c ) of Act is quashed and the ground No. 1 of the assessee is
allowed.
10. In view of above, remaining grounds of the assessee are not required to be
adjudicated.
11. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 30.11.2015.
Sd/- Sd/-
(I.C.SUDHIR) (O.P.KANT)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 30 /11/2015
A K Keot
Copy forwarded to
1. Applicant
2.
3. Respondent
4. CIT
5. CIT (A)
6. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
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