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Shambhu Dayal,C/o. RRA Taxindia, D-28, South Extension, Part-I, New Delhi Vs. ACIT, Gurgaon Circle, Gurgaon
December, 01st 2015
                        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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