SHAM SUNDER AGGARWAL vs. COMMISSIONER OF INCOME TAX

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ITA/61/2007HC Himachal PradeshHPHC01005475200714 December 2009Author: HONOURABLE MR. JUSTICE DEEPAK GUPTA,HONOURABLE MR. JUSTICE V.K. AHUJA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Income-tax Appellate Tribunal was justified in its finding. The Court referred to Section 271(1B) of the Income-tax Act, 1961, which was inserted by the Finance Act of 2008 but given retrospective effect from April 1, 1989. This provision states that where an assessment order contains a direction for the initiation of penalty proceedings under Section 271(1)(c), such an order shall be deemed to constitute the satisfaction of the Assessing Officer for initiating those proceedings. The Court noted that it was not disputed that this amendment applied to both cases. Therefore, in view of the statutory amendment, the question of law was answered in favour of the revenue and against the assessee. The appeals were accordingly dismissed.

What were the facts?

These are two appeals filed by the assessee, Sham Sunder Aggarwal, against the order of the Income-tax Appellate Tribunal (ITAT). The appeals pertain to the assessment years not explicitly stated in the judgment. The core issue revolves around the initiation of penalty proceedings under Section 271(1)(c) of the Income-tax Act, 1961. The assessee is challenging the ITAT's decision that recording of specific satisfaction to initiate penalty proceedings is not mandatory if it can be inferred from the assessment order. The respondent is the Commissioner of Income-tax, Solan. The appeals were admitted on an identical question of law.

What were the issues?

1. Whether the Income-tax Appellate Tribunal was justified in holding that recording of satisfaction to initiate penalty proceedings is not mandatory if it can be inferred from the assessment order? (Question of law, turning on Section 271(1)(c) and Section 271(1B) of the Income-tax Act, 1961). Assessee's Contention: The assessee's argument, though not explicitly detailed, is implied by the question of law, suggesting they believe a specific recording of satisfaction is mandatory for initiating penalty proceedings. Revenue's Contention: The revenue's position, as reflected in the Tribunal's decision and the High Court's reasoning, is that a specific recording of satisfaction is not mandatory if it can be inferred from the assessment order. The revenue relies on the retrospective insertion of Section 271(1B) of the Act.

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 HIMACHAL PRADESH, SHIMLA

Income-tax Appeal Nos. 60 of 2007

and 61 of 2007

Date of decision: 14.12.2009

(In both the appeals) Sham Sunder Aggarwal

…Appellant.

Versus

The Commissioner of Income-tax, Solan.

…Respondent.

Coram The Hon’ble Mr.Justice Deepak Gupta, J. The Hon’ble Mr. Justice V.K.Ahuja, J. Whether approved for reporting? No. In both the appeals.

For the appellant: Mr. Rajesh Garg and Mr. Dushyant Dadwal, Advocates.

For the respondent:

Ms. Vandana Kuthiala, Advocate.

Per Deepak Gupta, J.

Both these appeals have been admitted on the following identical question of law:- “Whether the Income-tax Appellate Tribunal was justified in holding that recording of satisfaction to initiate penalty proceedings is not mandatory if it can be inferred from the assessment order?”

Section 271 (1B) has been inserted in the Income-tax Act, 1961 (here-in-after referred to as the Act) by the Finance Act of 2008. This provision has been given retrospective effect from 1.4.1989. It reads as follows:- “(1B) Where any amount is added or disallowed in computing the total income or loss of an assessee in any order of assessment or re-assessment and the said order contains a direction for initiation of penalty proceedings under clause (c) of sub-section

2 (1), such an order of assessment or reassessment shall be deemed to constitute satisfaction of the Assessing Officer for initiation of the penalty proceedings under clause (c) of sub- section (1).”

A bare perusal of this provision which has been inserted now but w.e.f. 1.4.1989 clearly shows that the legislature has taken a decision that when the direction for initiation of penalty proceedings is contained in the order of assessment or re- assessment, that by itself, shall be deemed to constitute satisfaction of the Assessing Officer for initiation of penalty proceedings under Section 271 (1) (c) of the Act.

It is not disputed before us that this amendment applies to both the cases. In view of the amendment made to the statute the question has to be answered in favour of the revenue and against the assessee. The appeals are accordingly dismissed.

( Deepak Gupta ), J.

14th December 2009

( V.K.Ahuja ), J.

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