COMMISSIONER OF IT-I vs. RAVINDER KUMAR JAIN

ITA No. 488 of 2005 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 488 of 2005 Date of Decision: 12.1.2011 Commissioner of Income Tax-I, Ludhiana ....Appellant. Versus Sh. Ravinder Kumar Jain ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Rajesh Katoch, Advocate for the appellant. Mr. Pankaj Jain, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1. The appeal was admitted by this Court vide order dated May 4, 2006 for determination of the following substantial question of law:- “Whether the Commissioner while exercising jurisdiction under Section 263 of the Income Tax Act, 1961 (for short 'the Act') can direct for initiation of proceedings for levy of penalty under Section 271(1) (c) of the Act?” 2. The facts necessary for adjudication as mentioned in the instant appeal are that the assessee filed his return on 14.12.1994 declaring an income of Rs.48,415/-. His assessment was framed under

ITA No. 488 of 2005 -2- Section 143(3) of the Income Tax Act, 1961 (in short “the Act”) vide order dated 18.4.1996 at a total income of Rs.10,20,023/- after making an addition of Rs.9,71,608/- on account of agricultural income. As the assessee failed to explain the agricultural income, enquiries were got conducted from the Inspector who submitted his report pointing out various defects in the documents furnished by the assessee. Thereafter, the assessee made an offer to surrender Rs.9,71,608/- subject to no penal action under Section 271(1)(c). Accordingly, the assessment was framed by the Assessing Officer. Commissioner of Income Tax (in short “the CIT”) vide order dated 11.1.1999 in exercise of power under Section 263 of the Act set aside the assessment order holding that the same was erroneous and prejudicial to the interest of the revenue. The CIT directed the Assessing Officer to frame fresh assessment after taking into account the facts attracting penal action under Section 271(1)(c) of the Act. Feeling aggrieved, the matter was taken up in appeal by the assessee and the Tribunal vide order dated 11.3.2005 set aside the order of the CIT holding that the CIT cannot direct the Assessing Officer to initiate penalty proceedings under Section 271(1)(c) as the same were not part of the assessment proceedings. Hence the present appeal by the revenue. 3. We have heard learned counsel for the parties. 4. Learned counsel for the assessee submitted that the issue raised in this appeal stands concluded by the decision of this Court in ITA No. 225 of 2003 (Commissioner of Income Tax-I, Ludhiana v. Shri Subhash Kumar Jain) decided on 10.9.2010. He further submitted that the aforesaid view is supported by the amendment made

ITA No. 488 of 2005 -3- by Finance Act, 2002 which has been made effective from 1.6.2002, whereby Section 271(1) itself has been amended and the Commissioner has been empowered to levy penalty. According to the learned counsel, it is only after 1.6.2002 that the CIT would have jurisdiction to order for initiating penalty proceedings while passing an order under Section 263 of the Act whereas the present case is governed by the unamended provision of Section 271(1) of the Act. 5. We find considerable force in the submission made by the learned counsel for the assessee. The issue in the present case stands answered by the decision in Subhash Kumar Jain's case (supra). 6. In view of the above, the substantial question of law is answered against the revenue. Accordingly, there is no merit in this appeal and the same is hereby dismissed. (AJAY KUMAR MITTAL) JUDGE January 12, 2011 (ADARSH KUMAR GOEL) gbs JUDGE