COMM. OF INCOME TAX, KARNAL vs. M/S DURGA TRADERS, ISMAILABAD

ITA/388/2004HC Punjab & HaryanaPHHC01051547200409 February 2011Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE ADARSH KUMAR GOEL2 pages
AI SummaryRemanded

What were the facts?

The Revenue, the Commissioner of Income Tax, filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT), Chandigarh. The appeal pertained to the assessment year 1991-92 and challenged the ITAT's cancellation of a penalty levied under Section 271(1)(c) of the Act. The penalty was imposed due to alleged concealment of income arising from the undervaluation of closing stock of rice. The Assessing Officer had initiated penalty proceedings in the assessment order itself. The ITAT had cancelled the penalty by applying the ratio in the case of Munish Iron Store, 263 ITR 484.

What did the High Court hold?

The High Court noted that the matter was covered by its own order in CIT v. Pearey Lal and Sons (EP) Ltd. [2009] 308 ITR 438. In that decision, it was held that a formal order of satisfaction was not required to be recorded, a view that aligned with the ITAT's finding in the impugned order. Consequently, the High Court set aside the impugned order of the ITAT. The matter was remanded to the ITAT for a fresh decision on merits in accordance with the law. The operative direction was to remand the case for fresh adjudication.

What were the issues?

1. Whether on the facts and in the circumstances of the case, the ITAT was right in cancelling the penalty levied under Section 271(1)(c) by applying the ratio in the case of Munish Iron Store, 263 ITR 484, when there existed satisfaction of the Assessing Officer with regard to the concealment of income on account of undervaluation of closing stock of the rice in the assessment order itself when he initiated penalty proceedings u/s 271(1)(c)? Assessee's contention: The ITAT was right in cancelling the penalty by applying the ratio in Munish Iron Store, 263 ITR 484, as the Assessing Officer had initiated penalty proceedings in the assessment order itself, indicating satisfaction regarding concealment of income due to undervaluation of closing stock. Revenue's contention: The Assessing Officer had recorded satisfaction regarding concealment of income on account of undervaluation of closing stock of rice in the assessment order itself when he initiated penalty proceedings under Section 271(1)(c), and therefore, the ITAT was not right in cancelling the penalty. The revenue relied on the principle that a formal order of satisfaction was not required to be recorded.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. C.M. No.2264-CII of 2011 in/and Date of decision: 9.2.2011 The Commissioner of Income Tax. -----Appellant. Vs. M/s Durga Traders. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Yogesh Putney, Sr. Standing Counsel for the appellant. Mr. Avneesh Jhingan, Advocate for the respondent. --- ADARSH KUMAR GOEL, J.

On joint request, hearing is preponed for today. Heard on merits. This appeal has been preferred by the revenue under Section 260-A of the Income Tax Act, 1961 (for short, “the Act”) against the order of the Income Tax Appellate Tribunal, Chandigarh in I.T.A. No.120/Chandi/2003 for the assessment year 1991-92 proposing to raise following substantial questions of law:- “Whether on the facts and in the circumstances of the case, the ITAT was right in cancelling the penalty levied under Section 271(1)(c) by applying the ratio in the case of Munish Iron Store, 263 ITR 484, when there existed satisfaction of the Assessing Officer with regard to the concealment of income on account of under valuation of closing sto

The order continues below.

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