Commissioner of Income Tax (Central)-III vs Udayveer Singh

Sanjiv Khanna, J.—Revenue by this appeal u/s 260A of the Income Tax Act, 1961 (Act, for short), which relates to Assessment Year 2000-01, impugns reduction of penalty to the extent of Rs. 11,97,100/- u/s 271(1)(c) of the Act. In other words, penalty of Rs. 16,500/- imposed u/s 271(1)(c) has been sustained. At the very outset, we record that the appellants have not placed on record the order passed by the Commissioner of Income Tax (Appeals) in the quantum appeal. However, relevant portion of the said order has been quoted in the penalty order and we shall refer to the same. The respondent-assessee was subjected to search operations u/s 132 of the Act and thereafter notice u/s 153A was issued. The Assessing Officer made two additions. Rs. 2,24,000/- on account of low withdrawals towards household expenses. He made another addition of Rs. 50,000/- on account of purchase of immovable property. On appeal, Commissioner (Appeals) observed that the assessee and his wife had shown personal withdrawals of Rs. 2,10,000/-, which were not noticed and taken into consideration by the Assessing Officer. The said personal withdrawals were taken into consideration and the addition was restricted to Rs. 54,000/-. Thus, the Commissioner (Appeals) reduced the addition on account of lack of withdrawals for personal expenses from Rs. 2,64,000/- to Rs. 54,000/-. Obviously this was an estimate.

The Commissioner (Appeals), however, made an addition of Rs. 33,30,981/-. The exact reason for making the said addition is not indicated or stated in detail, but in the order of penalty, the following portion of the order passed by the Commissioner (Appeals) in quantum proceedings is quoted:-

As regards the amount of Rs. 33,30,981/-, the appellant had admitted that he has no objection to enhancement of the commission income/addition made by the A.O. from Rs. 50,000/- only. Therefore, in the returned income of Rs. 2,32,360/-, the A.O. is directed to make an addition of Rs. 33,30,981/- representing undisclosed income of A.Y. 2000-01.

It is apparent from the aforesaid quote that the assessee conceded and agreed to the said addition, which had not been made by the Assessing Officer, before the first appellate authority in the quantum appeal. It is also accepted and admitted that the Commissioner (Appeals) did not issue any notice or record that notice be issued u/s 271(1)(c) of the Act in respect of the said addition. Revenue cannot and are obviously unable to answer why and for what reason Commissioner (Appeals) did not issue the said notice. This being the factual position, we do not see any reason to interfere with the order passed by the tribunal.

Learned counsel for the appellant relies upon Explanation 5 to Section 271(1)(c). Reliance on the said Explanation is of no consequence because in the present case the Commissioner (Appeals) neither deemed it appropriate to issue notice nor recorded satisfaction or referred to Section 271(1)(c) in the order. Commissioner (Appeals) did not think that it was appropriate to record or mention concealment or make any reference to Section 271(1)(c) of the Act. It is clear from the language of Section 271(1)(c) itself that satisfaction in words or at least direction that notice be issued is mandated and required.

The relevant portion of the section reads:-

Failure to furnish returns, comply with notices, concealment of income, etc.-

(1) if the Assessing Officer or the Commissioner (Appeals) or Commissioner in the course of any proceedings under this Act is satisfied that any person-

(c) has concealed the particulars of his income or furnished inaccurate particulars of such income or.

(emphasis supplied)

In the present case, there is no satisfaction whatsoever as the Commissioner (Appeals) has not mentioned the word "concealment" or referred to or stated there was concealment/furnishing of inaccurate particulars or notice u/s 271(1)(c) of the Act should be issued. No such evidence or material has been placed on record.

In Commissioner of Income Tax Vs. Ram Commercial Enterprises Ltd., , this Court emphasized the need and requirement of recording satisfaction. In this case, satisfaction was required to be recorded by the Commissioner (Appeals) when the said addition was made. The Commissioner (Appeals) was aware of the facts and circumstances, why and for what reason respondent-assessee was conceding and accepting the said addition. No such facts have been brought on record. The decision in the case of Ram Commercial Enterprises (supra) was followed in Commissioner of Income Tax Vs. Smt. Santosh Sharma, , Commissioner of Income Tax Vs. Auto Lamps Ltd., , Commissioner of Income Tax Vs. Vikas Promoters (P) Ltd., and Commissioner of Income Tax Vs. Super Metal Re-Rollers (P) Ltd., . Subsequently, Section 271(1B) was inserted and by statutory provision a deeming friction is stipulated. Section 271(1B) stipulates that where any amount is added or disallowed in computing total income or loss and said order contains a direction for initiation of penalty proceedings, it shall constitute satisfaction. In the present case, Commissioner (Appeals) did make an addition over and above the additions made by the Assessing Officer, but the said order does not direct initiation of penalty proceedings u/s. 271(1)(c) of the Act. Therefore, there was no deemed satisfaction of Commissioner (Appeals). Section 271(1B) is not applicable. In view of the aforesaid position, we do not find any merit in the present appeal and the same is dismissed.