C I T vs. EKTA GUPTA

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No.173 of 2009 Date of decision: 8.4.2011 Commissioner of Income Tax. -----Appellant. Vs. Ekta Gupta. -----Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Ms. Urvashi Dhugga, Sr. Standing Counsel for the appellant. None for the respondent. --- ADARSH KUMAR GOEL, J.

This appeal has been preferred by the revenue under Section 260-A of the Income Tax Act, 1961 (for short, “the Act”) against order of the Income Tax Appellate Tribunal, New Delhi dated 10.8.2007 in ITA No.485/Del/06 & C.O. No.247/Del/06 for the assessment year 2001-02 claiming following substantial question of law:- “Whether, on the facts and in the circumstances of the case the Hon’ble ITAT in deleting the penalty levied by the Assessing Officer u/s 271(1)(c) in contravention of the order of Hon’ble Madras High Court in the case of M. Sajjanraj Nahar Vs. CIT (283 ITR 230), is correct when the Assessing Officer had

I.T.A. No.173 of 2009 recorded initiation of penalty proceedings u/s 271(1) (c) in the assessment order? 2. During the course of assessment, the Assessing Officer noticed that the assessee had unexplained income. While making addition on that account, it was directed that penalty proceedings be initiated under Section 271(1)(c) of the Act for furnishing inaccurate particulars of income. The addition was upheld upto the Tribunal. The penalty levied by the Assessing Officer was upheld by the CIT(A) except for reduction of the amount. On appeal filed by the revenue and cross objections filed by the assessee, the Tribunal held that in absence of requirement of recording of satisfaction in the order of assessment itself, jurisdiction to levy penalty could not be invoked. Observations of the Tribunal are as follows:- “8.8. In the instant case, as observed above, since the AO in the assessment order has not recorded any positive and categorical satisfaction as required u/s 271(1)(c) stands cancelled.” 3. We have heard learned counsel for the appellant. 4. Learned counsel for the appellant submits that recording of satisfaction was a matter of substance and not mere of form and if satisfaction was reflected in the order, format of recording of satisfaction was not enough to invalidate the action. Reference was also made to statutory amendment clarifying this position under explanation to Section 271(1B) of the Act added by 2

I.T.A. No.173 of 2009 the Finance Act, 2008 w.e.f.1.4.1989. Reliance has also been placed on the judgment of Madras High Court in M. Sajjanraj Nahar v. CIT [2006] 283 ITR 230 and judgment of this Court in CIT v. Pearey Lal and Sons (EP)_ Ltd. [2009] 308 ITR 438. 5. In view of above, the question has to be answered in favour of the revenue and the matter has to remanded to the Tribunal for fresh decision on merits. 6. Accordingly, this appeal is allowed, the impugned order is set aside and the matter is remanded to the Tribunal for fresh decision in accordance with law. (ADARSH KUMAR GOEL) JUDGE April 08, 2011 ( AJAY KUMAR MITTAL ) ashwani JUDGE 3