SAROOP LAL ADLAKHA v. DEPUTY COMMISSIONER OF INCOME TAX
[Citation -2005-LL-0624-3]

Citation 2005-LL-0624-3
Appellant Name SAROOP LAL ADLAKHA
Respondent Name DEPUTY COMMISSIONER OF INCOME TAX
Court ITAT
Relevant Act Income-tax
Date of Order 24/06/2005
Assessment Year 1992-93, 1997-98, 1999-00
Judgment View Judgment
Keyword Tags assessment proceeding • concealment of income • condition precedent • land development • issue of notice
Bot Summary: The Hon ble High Court, following the judgment of Supreme Court in the case of CIT vs. S.V. Angidi Chettiar 44 ITR 739, held that mere observation of the AO that penalty proceedings are being issued separately does not amount to satisfaction in terms of the provisions of s. 271(1)(c). According to him, had the Hon ble Delhi High Court considered the entire observations of the apex Court, the decision would have been entirely different. A decision can be said generally to be given per incuriam when the Supreme Court has acted in ignorance of a previous decision of its own or when a High Court has acted in ignorance of a decision of the Supreme Court. In our considered opinion, if the judgment of the apex Court has been considered by any other Court, then it has to be legally presumed that the entire judgment was considered by the Court. Since the judgment of the apex Court in the case of S.V. Angidi Chettiar was duly considered by the Hon ble Delhi High Court in the case of Ram Commercial Enterprises Ltd., it cannot be said that such judgment of the Hon ble Delhi High Court was per incuriam. In a recent judgment in the case of Vikas Promoters Ltd., the Hon ble jurisdictional High Court again observed that the apex Court in the case of S.V. Angidi Chettiar had emphasized that satisfaction is not to be in the mind of AO, but must be reflected from the record. Neither the judgment of jurisdictional High Court can be said to be per incuriam nor in conflict with judgment of apex Court.


K.C. Singhal, J.M.: Since common issues are involved in all these appeals, same are being disposed of by common order for sake of convenience. issues arising in these appeals are: "(i) Whether penalty proceedings were not validly initiated as per ratio laid down by Hon ble jurisdictional High Court in case of CIT vs. Ram Commercial Enterprises Ltd. (2001) 167 CTR (Del) 321: (2000) 246 ITR 568 (Del); and (ii) Whether this judgment of jurisdictional High Court is per incuriam." Since legal issues are involved in these appeals, it is not necessary for us to set out facts in detail. It is suffice to say that in all these cases assessments were completed under s. 143(3) and at end of assessment order, it was mentioned to effect that penalty proceedings are/are being initiated separately. Apart from these observations AO had not whispered anything about satisfaction in terms of s. 271(1)(c). On these facts question for consideration is whether penalty proceedings were initiated in accordance with law. This aspect of issue was subject-matter of consideration before Hon ble jurisdictional High Court in case of CIT vs. Ram Commercial Enterprises Ltd. (2001) 167 CTR (Del) 321: (2000) 246 ITR 568 (Del). Hon ble High Court, following judgment of Supreme Court in case of CIT vs. S.V. Angidi Chettiar (1962) 44 ITR 739 (SC), held that mere observation of AO that penalty proceedings are being issued separately does not amount to satisfaction in terms of provisions of s. 271(1)(c). relevant observations of their Lordships are quoted below: "A bare reading of provisions of s. 271 and law laid down by Supreme Court makes it clear that it is assessing authority which has to form its own opinion and record its satisfaction before initiating penalty proceedings. Merely because penalty proceedings have been initiated, it cannot be assumed that such satisfaction was arrived at in absence of same being spelt out by order of assessing authority. Even at risk of repetition we would like to state that assessment order does not record satisfaction as warranted by s. 271 for initiating penalty proceedings." In view of above observations, Court held that penalty proceedings were not validly initiated and consequently penalty levied by tax authorities was invalid. This judgment has been repeatedly followed by jurisdictional High Court in cases of Diwan Enterprises vs. CIT & Ors. (2001) 167 CTR (Del) 324: (2000) 246 ITR 571 (Del), CIT vs. B.R. Sharma (2005) 196 CTR (Del) 454: (2005) 275 ITR 303 (Del) and in recent case as CIT vs. Vikas Promoters (P) Ltd. (2005) 194 CTR (Del) 384. In view of these decisions it has to be held that in all cases before us, penalties were not validly initiated inasmuch as no satisfaction in terms of s. 271(1)(c) was recorded by AO. In view of above, we would have allowed appeals of assessees before us, but learned Departmental Representative kly submitted before us that aforesaid judgment of Hon ble Delhi High Court in case of Ram Commercial Enterprises Ltd. (supra) is per incuriam inasmuch as their Lordships relied upon and referred to in their judgment only part of observations of Hon ble Supreme Court in case of S.V. Angidi Chettiar (supra) appearing at p. 745 of report and did not refer to remaining portion of observations of apex Court. At this stage, it would be appropriate to reproduce relevant observations of apex Court as under: "The power to impose penalty under s. 28 depends upon satisfaction of ITO in course of proceedings under Act; it cannot be exercised if he i s not satisfied about existence of conditions specified in cls. (a), (b) or (c) before proceedings are concluded. proceeding to levy penalty has, however, not to be commenced by ITO before completion of assessment proceedings by ITO. Satisfaction before conclusion of proceeding under Act, and not issue of notice or initiation of any step for imposing penalty is condition for exercise of jurisdiction. There is no evidence on record that ITO was not satisfied in course of assessment proceeding that firm had concealed its income. assessment order is dated 10th of November, 1951, and there is endorsement at foot of assessment order by ITO that action under s. 28 had been taken for concealment of income indicating clearly that ITO was satisfied in course of assessment proceeding that firm had concealed its income." (Emphasis, italicised in print, supplied)" It was pointed out by him that italics portion of above passage was not quoted by jurisdictional High Court in above case and, therefore, failed to consider same. According to him, had Hon ble Delhi High Court considered entire observations of apex Court, decision would have been entirely different. He proceeded to argue that in case before Hon ble Supreme Court, there was endorsement at foot of assessment order by ITO that action under s. 28 had been taken for concealment of income which clearly indicated that ITO was satisfied in course of assessment proceedings that assessee had concealed its income. He further submitted that in all present cases similar endorsement is there and, therefore, such endorsement amounts to satisfaction in terms of s. 271(1)(c) as per ratio laid down by Hon ble Supreme Court. It was finally argued by him that judgment of Hon ble Delhi High Court is per incuriam and contrary to ratio laid down by Hon ble Supreme Court in case of S.V. Angidi Chettiar (supra) and consequently judgment of Hon ble Delhi High Court be ignored. We are unable to accept above contention of learned Departmental Representative. It appears that Departmental Representatives are not aware of exact meaning of legal maxim "per incuriam". In para 578 at p. 297 of Halsbury s Laws of England, Fourth Edn., rule of per incuriam is stated as follows: "A decision is given per incuriam when Court has acted in ignorance of previous decision of its own or of Court of co-ordinate jurisdiction which covered case before it, in which case it must decide which case to follow; or when it has acted in ignorance of House of Lords decision, in which case it must follow that decision or when decision is given in ignorance of terms of statute of rule having statutory force." In Punjab Land Development & Reclamation Corporation Ltd. vs. Presiding Officer, Labour Court (1990) 77 FJR 17 (SC), Supreme Court explained expression "per incuriam" thus: "The Latin expression per incuriam means through inadvertence. decision can be said generally to be given per incuriam when Supreme Court has acted in ignorance of previous decision of its own or when High Court has acted in ignorance of decision of Supreme Court." As noticed by us above, judgment can be said to be per incuriam only if it is rendered in ignorance of provisions of statute or rule having statutory force or binding authority. But, if relevant provisions of Act and binding judgments have been considered by Court in its judgment, then it cannot be said that judgment was delivered in ignorance of relevant provisions of Act or binding precedent. In present cases, it is not case of Revenue that relevant provisions of Act were not considered. It is also not case of Revenue that jurisdictional High Court rendered judgment in ignorance of Supreme Court judgment. In our considered opinion, if judgment of apex Court has been considered by any other Court, then it has to be legally presumed that entire judgment was considered by Court. Since judgment of apex Court in case of S.V. Angidi Chettiar (supra) was duly considered by Hon ble Delhi High Court in case of Ram Commercial Enterprises Ltd. (supra), it cannot be said that such judgment of Hon ble Delhi High Court was per incuriam. We are also of considered view that there is no conflict between Supreme Court judgment and judgment of Delhi High Court. We have gone through judgment of apex Court. It is seen that Hon ble Court has not quoted actual endorsement at foot of assessment order, but from observations made by their Lordships at p. 745 of report, it is clear that endorsement was to effect that action under s. 28 had been taken for concealment of income. However, in case before Hon ble High Court there was no such endorsement. Nowhere AO observed that penalty proceedings were being initiated either for concealment of particulars of income or for furnishing of inaccurate particulars of income in terms of s. 271(1)(c). In absence of such observations, their Lordships held that recording of satisfaction was condition precedent for initiating penalty proceedings and mere observation that penalty proceedings are being initiated separately was not suffice to initiate valid penalty proceedings. In recent judgment in case of Vikas Promoters (P) Ltd. (supra), Hon ble jurisdictional High Court again observed that apex Court in case of S.V. Angidi Chettiar (supra) had emphasized that satisfaction is not to be in mind of AO, but must be reflected from record. Therefore, element of satisfaction should be apparent from order itself. This shows that judgment of Supreme Court was duly considered and applied in various judgments. Consequently, neither judgment of jurisdictional High Court can be said to be per incuriam nor in conflict with judgment of apex Court. In view of above discussion, it is held that penalty proceedings were not initiated in accordance with law and consequently, penalties levied under s. 271(1)(c) cannot be sustained. orders of CIT(A) in all these cases as well as penalty orders passed by AO are hereby cancelled. In result, appeals are allowed. *** SAROOP LAL ADLAKHA v. DEPUTY COMMISSIONER OF INCOME TAX
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