SH. SHAMBHU DAYAL,NEW DELHI vs. ACIT, GURGAON

PER O.P.KANT, ACCOUNTANTMEMBER

raised by the assessee are as under:- “1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in levying penalty of Rs.3,18,200/- and that too without assuming jurisdiction as per law and without considering the facts and circumstances of the case and the impugned penalty order being illegal and void ab-initio.

2. That in any case and in any view of the matter, action of Ld. CIT(A) in not quashing the penalty order framed by Ld. AO is beyond jurisdiction and without considering the facts and circumstances of the case and the impugned penalty order being illegal and void ab-initio and the impugned penalty order has been framed without considering the submissions/evidences of the assessee and without providing any adverse material on record and without establishing that there was concealment or furnishing of inaccurate particulars of income on the part of the assessee.

3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in Page 2 of 6 passing the impugned penalty order being contrary to law as the assessment order framed under section 144 dated 31/12/2008 and the same is illegal, beyond jurisdiction and void ab-initio and further erred in observing that Rs.10,39,870/- was unaccounted income of the assessee and addition was made in the assessment order without giving opportunity of hearing and in violation of principles of natural justice.

4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in levying penalty u/s 271(l)(c) on the addition made in the assessment order u/s 144 dated 31/12/2008 as the same are also contrary to law and facts.

5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in levying penalty u/s 271(1 )(c) is bad in law being beyond jurisdiction and barred by limitation and contrary to the principles of natural justice and has been passed by recording incorrect facts and findings and without giving adequate opportunity to the assessee and without considering the submissions/evidences of the assessee and without providing any adverse material on record and the same is not sustainable on various legal and factual grounds.”

Page 3 of 6 3. The effective ground of appeal of the assessee is that in absence of any satisfaction recorded in the assessment order, the penalty has been imposed without any jurisdiction and also, the assessee was not provided sufficient opportunity of being heard.

4. The learned Authorized Representative of the assessee submitted that the ld. Assessing Officer has failed to record satisfaction for initiation of penalty u/s 271(1)(c) of the Act in the assessment order passed u/s 144 of the Act on 31.12.2008. He further submitted that absence of prima-facie satisfaction of the Assessing Officer for initiation of penalty proceeding in that order was jurisdictional defect and therefore the order of penalty imposed by the ld. Assessing Officer was without any jurisdiction. The Authorized Representative relied on the decision of the jurisdictional High Court in the case of ‘Madhushree Gupta’ Vs. Union of India (2009) 317 ITR 107 (Del) and further relied on the decision of ITAT Delhi ‘H’ Bench in the case of ‘Triveni Engineering and Industries Ltd.’ Vs. DCIT in ITA No. 5709/Del/2010. On the other hand the learned Senior Departmental Representative relied on the order of the lower authorities and submitted that in view of the non-compliance by the assessee on various notices, the penalty was rightly confirmed by the learned Commissioner of Income-tax (Appeals).

5. We have heard the rival submission and perused the material available on record. The learned Commissioner of Income-tax (Appeals) in para 5.4 of his order has given the finding in respect of initiation of penalty as under:- “5.4…………………………………………In the present case, the appellant, instead of merely harping on getting a copy of assessment order should have also tried to defend himself against imposition of penalty since these proceedings were initiated separately in assessment order. In the case of M. Sajjan Raj & Nahar and Others Vs. CIT (Mad) 280 ITR 230, it has been held that mentioning the words penalty proceedings initiated separately in assessment order is sufficient in invoking penal action.”

6. Perusal of the above finding shows that the learned Commissioner of Income-tax (Appeals) has confirmed the penalty on the assumption that the words ‘penalty proceeding initiated’ were mentioned in the assessment order and same were sufficient to invoke the penal action in the case of the assessee. But, when we perused the order of the ld. Assessing Officer passed u/s 144 of the Act dated 31.12.2008, we find that no such words mentioning initiation of penalty are appearing in the copy of the order supplied by the assessee along with Form Page 4 of 6 No.35 filed by the assessee. Though there is no stamp of Income Tax Department on the copy of the order, however the learned Departmental Representative has not questioned the genuineness of the copy of the order. In view of the facts, we find that the ld. Assessing Officer has failed to record any prima-facie satisfaction in respect of initiation of penalty proceeding in the assessment order, which being a sine-qua-non i..e prime requirement in view of the judgment of the Hon’ble jurisdictional High Court in the case of Madhushree Gupta (supra). The relevant finding of the Hon’ble High Court is as under:- "Conclusions 19. In the result, our conclusion are as follow:- . : (i) Section 271(1B) of the Act is not violative of Article 14 of the Constitution. (ii) The position of law both pre and post amendment is similar, in as much, the Assessing Officer will have to arrive at a prima facie satisfaction during the course of proceedings with regard to the assesses having concealed particulars of income or furnished inaccurate particulars, before he initiates penalty proceedings. (iii) Prima facie 'satisfaction of the Assessing Officer that the case may deserve the imposition of penalty should be discernible from the order passed during the course of the proceedings. Obviously, the Assessing Officer would arrive at a decision, i.e., a final conclusion only after hearing the assessee. (iv)…………………. ”

7. Following the decision of the jurisdictional High Court in the case of Madhushree Gupta (supra), the Tribunal in the case of the Triveni Engineering and Industries Ltd. (supra) has also held as under:- “Respectfully following the judgment of Hon'ble Jurisdictional High Court in the case of Madhushree Gupta (supra) and ITAT Delhi Bench in the cases of Cornerstone Financial Services (supra), Global Green Limited (supra) and ITAT Kolkata Bench in the case of Budge Budge Co. Ltd. (supra), in the present case, we hold that the Assessing Officer has not recorded his satisfaction for initiation of penalty proceedings in regard to the additions made pertaining to interest on SDF loan at the end of relevant part of the order. Accordingly, impugned order inter alia original penalty order dated 18.03.2009 cannot be sustained and upheld. Therefore, we set aside the same and ground no. 1.2 is allowed.”

8. As we find that the ld. Assessing Officer has failed to record prima-facie satisfaction for initiate penalty proceeding in the assessment order passed under section 144 of the Act, respectfully following the judgement of the jurisdictional High court in the case of Madhushree Gupta( supra) and decision of the Tribunal