COMMISSIONER OF INCOME TAX DELHI IV vs. H.B.LEASINGH & FINANCE CO. LTD.

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ITA - 1388 / 2008HC Delhi18 December 20081 pages
For Petitioner: PREM LATA BANSAL
AI SummaryRemanded

What did the High Court hold?

The High Court set aside the impugned order of the Tribunal. It held that the insertion of sub-Section (1B) in Section 271 of the Income Tax Act, 1961, by the Finance Act, 2008, with retrospective effect from April 1, 1989, necessitated a decision on the merits of the penalty proceedings. The Tribunal's previous decision, based on the absence of recorded satisfaction, was rendered insufficient in light of the amended provision. Therefore, the High Court remanded the matter back to the Tribunal for a fresh decision on the merits of the penalty. No opinion was expressed on the merits by the High Court itself.

What were the facts?

This High Court appeal concerns the assessment year 1994-95. The assessee is challenging an order dated January 11, 2008, passed by the Income Tax Appellate Tribunal (ITAT) in ITA No. 4771/Del/05. The ITAT had decided in favour of the assessee, holding that penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961, could not be initiated because the satisfaction for such initiation was not recorded in the assessment order. The ITAT did not decide the case on its merits. The High Court noted the insertion of sub-Section (1B) into Section 271 of the Act by the Finance Act, 2008, effective from April 1, 1989.

What were the issues?

1. Whether the Tribunal erred in deleting the penalty under Section 271(1)(c) of the Income Tax Act, 1961, solely on the ground that the satisfaction for initiating penalty proceedings was not recorded in the assessment order, without deciding the merits of the case? The assessee contended that the Tribunal correctly followed the High Court's decision in CIT vs. Ram Commercial Enterprises Ltd. (246 ITR 568 Del.) which held that satisfaction must be recorded. The revenue argued that due to the insertion of Section 271(1B) by the Finance Act, 2008, the matter requires reconsideration on merits.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 271(1B)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF DELHI AT NEW DELHI . 18.12.2008 . Present: Ms Prem Lata Bansal, Mr Mohan Prasad Gupta, Mr Sanjeev Rajpal and Ms Anshul Sharma, Advocates for the Appellant. Mr Santosh K. Aggarwal, Advocate for the Respondent . + ITA 1388/2008 . This appeal is directed against the order dated 11.01.2008 passed by the Income Tax Appellate Tribunal in ITA No 4771/Del/05 relating to the assessment year 1994-95. The Tribunal has decided in favour of the assessee following the decision of this Court in the case of CIT vs Ram Commercial Enterprises Ltd: 246 ITR 568 (Del.) on the ground that the satisfaction was not recorded in the assessment order for initiating penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961. The Tribunal, however, has not expressed any opinion on merits. In view of the insertion of sub-Section (1B) in Section 271 of the said Act by virtue of the Finance Act, 2008 w.e.f. 1.4.1989, the matter would require to be remanded back to the Tribunal for a decision on merits. The impugned order is set aside. The matter is remitted to the Tribunal for a decision on merits. The appeal stands disposed of. . BADAR DURREZ AHMED, J . . RAJIV SHAKDHER, J December 18, 2008/kk . . . 3

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