Commissioner of Income Tax vs India Crafts and Others

Badar Durrez Ahmed, J.—IT Appeal Nos. 766 of 2006, 1015 of 2005, 1044 of 2005, 1077 of 2005, 1138 of 2005, 1155 of 2005, 1170 of 2005, 45 of 2006, 105 of 2006, 177 of 2006, 213 of 2006, 252 of 2006, 306 of 2006, 312 of 2006, 323 of 2006, 326 of 2006, 331 of 2006, 332 of 2006, 339 of 2006, 345 of 2006, 417 of 2006, 460 of 2006, 562 of 2006, 565 of 2006, 583 of 2006, 600 of 2006, 604 of 2006, 635 of 2006, 647 of 2006, 660 of 2006 and 664 of 2006.

These appeals were referred to the Full Bench by the Division Bench on the following substantial question of law:

Whether satisfaction of the officer, initiating the proceedings u/s 271 of the Income Tax Act can be said to have been recorded even in cases where satisfaction is not recorded in specific terms but not otherwise discernible from the order passed by the authority ?

The Full Bench has considered the same and by virtue of its judgment dated 27-11-2008 in CIT v. Rampur Engineering Co. Ltd. and Ors. (IT Appeal No. 211 of 2006 and other connected matters, directed that the individual cases be listed before the appropriate Bench for hearing and disposal. The Full Bench, in its judgment has noted that, pending the reference, Sub-section (IB) has been inserted in Section 271 of the Income Tax Act, 1961 by the Finance Act, 2008. It was also observed that the said provision creates a fiction by which satisfaction of the assessing officer is deemed to have been recorded in cases where an addition or disallowance is made by the assessing officer and a direction for initiation of penalty proceeding is issued. The said provision has been made effective retrospectively with effect from 1-4-1989. The Full Bench observed that in some of the cases forming part of the batch, the assessment orders were passed after 1-4-1989 and that the reference was being answered only in respect of the cases where the assessment orders were made prior to 1-4-1989. Insofar as the present batch of cases is concerned, they all relate to assessment orders made after 1-4-1989 and, therefore, are not covered by the reference, as answered by the Full Bench. They would be covered by the amendment brought about in Section 271 by the insertion of Sub-section (IB). Since all these appeals arise out of the orders passed by the Tribunal which limited itself only to the question of recording of satisfaction and did not go into the question on merits, in view of the amendment brought about in Section 271 by virtue of Finance Act, 2008, these matters would have to be remitted to the Tribunal for consideration on merits. Consequently the impugned orders passed by the Tribunal, in each of these appeals are set aside and the appeals are remitted to the Tribunal for hearing on merits. All these matters be listed before the Tribunal on 21-1-2009 for directions, with regard to further listing.

These appeals stand disposed of.