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TMI Blog2008 (2) TMI 534X X X X Extracts X X X X X X X X Extracts X X X X ..... on by him in the contest as income. Subsequently, however, the assessee filed a revised return declaring total income of Rs. 3,25,954 on 30th Aug., 2001, where the assessee had claimed exemption of Rs. 5,68,000 being value of Opel Corsa car won by him as prize money in the contest of coining slogans for M/s Compact Computers India Limited, Bangalore, under s. 2(24)(ix) of the IT Act. 1961 (in short, 'the Act'). The assessee also relied on the decision of Tribunal, Hyderabad Bench in the case of ITO v. Smt. Shukba Mukherjee [1987] 21 ITD 482 (Hyd) in support of his contention that the prize money won in the slogan contest did not fall in the category of income mentioned under s. 2 (24)(ix) of the Act. Reliance was also placed on the judgment of Hon'ble Madras High Court in the case of CIT v. G.R. Karthikeyan [1980] 17 CTR (Mad) 301 : [1980] 124 ITR 85 (Mad). However, the AO observed that the judgment of Hon'ble Madras High Court was reversed by the Hon'ble Supreme Court in the case of CIT v. G.R. Karthikeyan [1993] 112 CTR (SC) 302 : [1993] 201 ITR 866 (SC), where it was held that such income was taxable under the head 'Income from other sources'. The AO, therefore, completed the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent of the tax sought to be evaded in respect of an addition of Rs. 5.68 lacs though the minimum leviable was at Rs. 1,99,368. 3. Being aggrieved, the assessee filed an appeal before the CIT (A). The submissions made before the AO were reiterated. It was argued that recording of satisfaction at the time of initiation of penalty proceedings was mandatory requirement of law. Failure to do so vitiates the order for imposing penalty. Reliance was placed on the judgment of Hon'ble Punjab Haryana High Court in the case of CIT v. Munish Iron Store and the decision of Tribunal (SMC) Amritsar Bench, in the case of Sh. Joginder Pal, Prop. M/s New Radna Industries v. ITO, in ITA No. 280/Asr/2002 for the asst. yr. 1993-94. The learned CIT (A) observed that the judgment of Hon'ble Punjab Haryana High Court in the case of CIT v. Munish Iron Store was not applicable to the facts of the present case because in that case, the AO had quietly accepted the revised return and not a word has been written about the concealment of income whereas in the present case the only addition has been made and the penalty proceedings have been duly initiated by the AO. He also observed that the decision of T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case, it is seen that the appellant had declared the value of car in the original return but subsequently filed a revised return by relying on the judgment of Hon'ble Madras High Court cited supra which had already been overruled by Hon'ble Supreme Court. Not Only this, the appellant filed application under s. 144A before the Addl. CIT against the proposed addition. The Addl. CIT did not agree with the contention of the appellant and directed the AO to make the impugned addition. The appellant field appeal before learned CIT (A) also, but could not succeed. Hence, the overall conduct of the appellant despite the ruling of Hon'ble Supreme Court in the case of CIT v. G.R. Karthikeyan [1993] 112 CTR (SC) 302 : [1993] 201 ITR 866 (SC) was to evade tax on the value of Opel Corsa car. Hence, the penalty under s. 271(1)(c) has been rightly imposed. However, keeping in view the facts and circumstances of the case, it was not warranted to imposed penalty @ 200 per cent of tax sought to be evaded, which is reduced to 100 per cent of tax sought to be evaded. Accordingly, penalty imposed is reduced to 1,99,368 and appellant gets relief of Rs. 1,99,368." The assessee is aggrieved wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons have been given by the CIT(A) as to why these judgments are not applicable. Thus, he submitted that the order passed by the CIT (A) deserves to be quashed and since the assessee has been subjected to undue harassment he may be awarded costs. As regards the merits, the learned counsel relied on the recent judgment of Hon'ble Punjab Haryana High Court in the case of CIT v. Balbir Singh [2008] 214 CTR (P H) 147 : [2007] 164 Taxman 65 (P H) (a copy or order placed before this Bench) to support his contention that addition made on bona fide difference of opinion did not warrant levy of penalty under s. 271(1)(c) of the Act. 5. The learned Departmental Representative, on the other hand, heavily relied on the orders of the authorities below and submitted that the learned CIT(A) has already given reasons as to why the judgment of Hon'ble Punjab Haryana High Court in the case of CIT v. Munish Iron Store is not applicable. Therefore, such order deserves to be upheld. 6. We have heard both the parties and carefully considered the rival submissions, examined the facts, evidence and material placed on record. We have also gone through the orders of the authorities below. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also relied on two judgments of Hon'ble Supreme Court in the cases of Jain Bros. v. Union of India [1970] 77 ITR 107 (SC) and D.M. Manasvi v. CIT 1972 CTR (SC) 437 : [1972] 86 ITR 557 (SC). Thus, the sum and substance of the ratio of the various decisions is that recording of satisfaction by the AO in the assessment order is sine qua non for initiating the penalty proceedings. In the absence of such satisfaction, the initiation of penalty proceedings would be illegal, invalid and without jurisdiction. 6.1 Now in this case, the AO has merely stated towards the end of the assessment order that "Penalty notice under s. 271(1)(c) is issued". He has not applied his mind at the time of initiating the proceedings as nowhere the AO has mentioned whether the assessee has concealed the particulars of income or furnished inaccurate particulars of income. This does not amount to recording of valid satisfaction. He has issued the notice without recording any satisfaction. Therefore, the order for imposing the penalty is Illegal and without jurisdiction. The authorities below have wrongly mentioned that the judgment of Hon'ble Punjab Haryana High Court in the case of CIT v. Munish Iron Store ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is binding on all the authorities working in its jurisdiction. Failure to follow such judgment is a serious lapse on the part of the CIT (A). 6.2 Further, we find that the assessee had also relied on the decision of Tribunal, Amritsar Bench, in the case of Sh. Joginder Pal, Prop. M/s New Radha Industries v. ITO, where the order for imposing penalty was quashed by recording following findings: "6. I have heard both the parties and given my thoughtful consideration to the rival contentions. It is not in dispute that the addition made in the present case has been upheld by the learned CIT(A). However, it is a settled position under the law that both assessment proceedings and penalty proceedings are separate and distinct proceedings. Merely because the addition made in the case has been upheld in appeal does not by itself justify levy of penalty under s. 271(1)(c) of the IT Act. The provisions of s. 271(1)(c) mandate recording of satisfaction during the course of assessment proceedings. The jurisdiction to impose penalty flows from a recording of satisfaction and in case there is a jurisdictional defect in the assessment of jurisdiction it cannot be cured. This view finds suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Hon'ble Supreme Court in the case of Khalida Automobiles v. Union of India [1995] 4 SCC Suppl 653 where it was held that judicial discipline demands that the authorities subordinate to the Tribunal accept as binding the decisions of the Tribunal and another judgment of the Hon'ble apex Court in the case of Asstt. Collector of Central Excise v. Dunlop India Ltd. [1985] 154 ITR 172 (SC). The decision of the jurisdictional High Court or the jurisdictional Tribunal can be deviated from only if there is a judgment of the Supreme Court or there is amendment to the provisions of the Act. There is none in the present case. Even while deviating from the binding judgment due to above reason, full respect has to be shown to the concerned authority. The approach adopted by the CIT (A) for not following the judgment of the Hon'ble Punjab Haryana High Court and the decision of Tribunal, Amritsar Bench was against judicial discipline and propriety. Such action on the part of CIT (A) does no good to the Revenue much less to the taxpayer. On the contrary, this causes harassment to the taxpayer and prolongs the litigation. This is not the spirit of law. Be that as it may, we are of the consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... py of the statement of income filed alongwith the return does show that the assessee had disclosed all relevant material facts relating to the prize won by the assessee. There is neither any omission nor suppression of income relating to the amount of Rs. 5,68,000. The assessee filed a revised return claiming exemption of amount of Rs. 5.68 lacs by relying on the decision of Tribunal, Hyderabad Bench in the case of ITO v. Smt Shukba Mukherjee and the judgment of Hon'ble Madras High Court in the case of CIT v. G.R. Karthikeyan. The decision of Tribunal, Hyderabad Bench in the case of ITO v. Smt. Shukba Mukherjee is directly on the issue of prize winning in slogan contest. Again when revised return was filed, the assessee had not concealed the material facts relating to the claim for exemption made by the assessee in the revised return. No evidence or material has been placed on record to show any mala fide intent on the part of the assessee to evade tax. We have also gone through the assessment order where the AO has merely made the addition by relying on the judgment of Hon'ble Supreme Court in the case of CIT v. G.R. Karthikeyan. No charge has been made out against the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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