By this order, we shall dispose of this appeal of assessee filed against order of CIT(A), Jammu with Headquarters at Amritsar for asst. yr. 2001-02. only effective issue raised in this appeal is that learned CIT(A) was not justified in sustaining penalty imposed by AO under s. 271(1)(c) by ignoring judgment of Hon ble Punjab & Haryana High Court in case of CIT vs. Munish Iron Store (2004) 186 CTR (P&H) 159: (2003) 263 ITR 484 (P&H) and decision of Tribunal (SMC), Amritsar Bench, in case of Shri Joginder Pal, Prop. M/s New Radha Industries vs. ITO, Ward-1, Hoshiarpur, for asst. yr. 1993-94 (a copy of order placed at pp. 23 to 28 of paper book). facts of case are that assessee had filed return declaring therein income of Rs. 8,83,984 on 3rd July, 2001, which was processed under s. 143(1). In return assessee had included value of Rs. 5,68,000 of Opel Corsa car won by him in contest as income. Subsequently, however, assessee filed revised return declaring total income of Rs. 3,25,954 on 30th Aug., 2001, where assessee had claimed exemption of Rs. 5,68,000 being value of Opel Corsa car won by him as prize money in contest of coining slogans for M/s Compact Computers India Limited, Bangalore, under s. 2(24)(ix) of IT Act, 1961 (in short, Act ). assessee also relied on decision o f Tribunal, Hyderabad Bench in case of ITO vs. Smt. Shukba Mukherjee (1987) 21 ITD 482 (Hyd) in support of his contention that prize money won in slogan contest did not fall in category of income mentioned under s. 2(24)(ix) of Act. Reliance was also placed on judgment of Hon ble Madras High Court in case of CIT vs. G.R. Karthikeyan (1980) 17 CTR (Mad) 301: (1980) 124 ITR 85 (Mad). However, AO observed that judgment of Hon ble Madras High Court was reversed by Hon ble Supreme Court in case of CIT vs. G.R. Karthikeyan (1993) 112 CTR (SC) 302: (1993) 201 ITR 866 (SC), where it was held that such income was taxable under head Income from other sources . AO, therefore, completed assessment under s. 143(3) on 9th June, 2003 by making addition of Rs. 5,68,000. AO also initiated penalty proceedings by issue of notice under s. 271(1)(c) by recording following towards end of assessment order below computation of income: "Penalty notice under s. 271(1)(c) is issued." In response to show-cause notice, assessee submitted detailed reply vide letter dt. 24th Feb., 2006 stating therein that AO has not recorded proper satisfaction at time of initiating proceedings. Therefore, relying on judgment of Hon ble Punjab & Haryana High Court in case of CIT vs. Munish Iron Store (supra), two judgments of Hon ble Delhi High Court in cases of CIT vs. Ram Commercial Enterprises Ltd. (2001) 167 CTR (Del) 321: (2000) 246 ITR 568 (Del) and Diwan Enterprises vs. CIT (2001) 167 CTR (Del) 324: (2000) 246 ITR 571 (Del) it was contended that no order for imposing penalty can be passed in absence of recording of valid satisfaction at time of initiating penalty proceedings. However, AO observed that judgment of Hon ble Punjab & Haryana High Court was not applicable because in that case, assessee had filed revised return to declare and pay tax on that part of income which had not been earlier declared in original return of income whereas in present case, assessee had first declared such income in original return and paid tax thereon and later on assessee had revised return by excluding taxable income. As regards merits of case, assessee had contended that since addition has been made on basis of mere difference of opinion, no penalty under s. 271(1)(c) was exigible. Reliance was also placed on three judgments of Hon ble Punjab & Haryana High Court in cases of Ganesh Textiles vs. CIT (2001) 171 CTR (Guj) 167: (2002) 253 ITR 216 (Guj), CIT vs. M.M. Rice Mills (2002) 253 ITR 17 (P&H) and CIT vs. Himmat Ram Laxmi Narain (1986) 54 CTR (P&H) 336: (1987) 166 ITR 633 (P&H). This submission of assessee did not find favour with AO who observed that there was no difference of opinion with regard to taxability of receipt at any point of time by Department. Thus, AO held that assessee has intentionally tried to evade tax payable by him. AO, therefore, imposed penalty of Rs. 3,98,736 i.e., @ 200 per cent of tax sought to be evaded in respect of addition of Rs. 5.68 lacs though minimum leviable was at Rs. 1,99,368. Being aggrieved, assessee filed appeal before CIT(A). submissions made before AO were reiterated. It was argued that recording of satisfaction at time of initiation of penalty proceedings was mandatory requirement of law. Failure to do so vitiates order for imposing penalty. Reliance was placed on judgment of Hon ble Punjab & Haryana High Court in case of CIT vs. Munish Iron Store (supra) and decision of Tribunal (SMC) Amritsar Bench, in case of Sh. Joginder Pal, Prop. M/s New Radha Industries vs. ITO (supra), in ITA No. 280/Asr/2002 for asst. yr. 1993-94. learned CIT(A) observed that judgment of Hon ble Punjab & Haryana High Court in case of CIT vs. Munish Iron Store (supra) was not applicable to facts of present case because in that case, AO had quietly accepted revised return and not word has been written about concealment of income whereas in present case only addition has been made and penalty proceedings have been duly initiated by AO. He also observed that decision of Tribunal, Amritsar Bench in case of Sh. Joginder Pal, Prop. New Radha Industries vs. ITO (supra) was not applicable because in that case Tribunal has placed reliance on judgment of Hon ble Punjab & Haryana High Court in case of CIT vs. Munish Iron Store (supra) which has not been found applicable to facts of present case. Thus, he upheld penalty imposed by AO. However, he reduced amount of penalty from 200 per cent to 100 per cent of tax sought to be evaded. relevant findings recorded by CIT(A) in impugned order are as under: "4. I have duly considered submission of learned counsel of appellant. submissions made and case law quoted by learned counsel for appellant are same as were filed before AO during course o f penalty proceedings. AO has properly dealt with submission of appellant in impugned penalty order passed by him. reliance placed by learned counsel for appellant on case of Munish Iron Store (supra) is completely misplaced because facts of present case are totally different from facts of case of Munish Iron Store (supra). In case of Munish Iron Store (supra), AO had quietly accepted revised return and not word had been written about concealment of income, whereas, in present case only one addition has been made and penalty proceedings have been duly initiated by AO. Obviously, penalty has been initiated on this very issue, which was subject-matter of addition. has been initiated on this very issue, which was subject-matter of addition. Moreover, Hon ble Punjab & Haryana High Court had dismissed appeal of Department on ground that order passed by Hon ble Punjab & Haryana High Court had dismissed appeal of Department on ground that order passed by Hon ble Tribunal did not give rise to any question of law, much less substantial question of law. other judgment quoted by learned counsel for appellant is of Hon ble Tribunal, Amritsar (supra). In this judgment, Hon ble Tribunal, Amritsar has mainly relied upon decision of Hon ble Punjab & Haryana in case of Munish Iron Store (supra) and it has already been discussed in para 4.1 (supra) that facts in case of Munish Iron Store (supra) were entirely different and Hon ble High Court had merely said that ground of appeal raised by Department did not give rise to question of law. Coming to facts of case, it is seen that appellant had declared value of car in original return but subsequently filed revised return by relying on judgment of Hon ble Madras High Court cited supra which had already been overruled by Hon ble Supreme Court. Not only this, appellant filed application under s. 144A before Addl. CIT against proposed addition. Addl. CIT did not agree with contention of appellant and directed AO to make impugned addition. appellant field appeal before learned CIT(A) also, but could not succeed. Hence, overall conduct of appellant despite ruling of Hon ble Supreme Court in case of CIT vs. G.R. Karthikeyan (1993) 112 CTR (SC) 302: (1993) 201 ITR 866 (SC) was to evade tax on value of Opel Corsa car. Hence, penalty under s. 271(1)(c) has been rightly imposed. However, keeping in view facts and circumstances o f 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." assessee is aggrieved with order of CIT(A). Hence, this appeal before this Bench. learned counsel for assessee, Sh. R.C. Khanna, reiterated submissions, which were made before authorities below. He submitted that assessee had filed return of income with detailed notes (a copy placed at pp. 1 to 4 of paper book), where value of Opel Corsa car at Rs. 5,68,000 won by him as prize money in contest of coining slogans for M/s Compact Computers India Ltd., Bangalore, was included. However, subsequently, assessee field revised return on 30th Aug., 2001 claiming exemption of value of Opel Corsa car by relying on decision of Tribunal, Hyderabad Bench in case of ITO vs. Smt. Shukba Mukherjee (supra) and judgment of Hon ble Madras High Court in case of CIT vs. G.R. Karthikeyan (supra). He submitted that at time of completing assessment, AO initiated penalty proceedings by simply recording at end that "Penalty notice under s. 271(1)(c) is issued." AO has not pointed out whether assessee had concealed particulars of income or furnished inaccurate particulars of income. Moreover, there is absolutely no discussion in assessment order about any mala fide intent on part of assessee so as to justify initiation of penalty proceedings under s. 271(1)(c) of Act. Thus, during course of penalty proceedings, it was submitted that penalty could not be imposed by AO for want of proper satisfaction recorded in assessment order. Reliance was also placed on judgment of Hon ble Punjab & Haryana High Court in case of CIT vs. Munish Iron Store (supra) and decision of Tribunal (SMC) Amritsar Bench, in case of Sh. Joginder Pal, Prop. M/s New Radha Industries vs. ITO (supra). He submitted that AO rejected these submissions merely by saying that judgment of Hon ble Punjab & Haryana High Court in case of CIT vs. Munish Iron Store (supra) was not applicable to facts of present case. He stated that assessee filed appeal before CIT(A), where similar submissions were made. learned CIT(A) has summarily held that judgment of Hon ble Punjab & Haryana High Court in case of CIT vs. Munish Iron Store (supra) is not applicable to facts of present case. Similarly, decision of Tribunal (SMC) Amritsar Bench, in case of Sh. Joginder Pal, Prop. M/s New Radha Industries, vs. ITO (supra) is again not applicable. He submitted that no valid reasons have been given by CIT(A) as to why these judgments are not applicable. Thus, he submitted that order passed by CIT(A) deserves to be quashed and since assessee has been subjected to undue harassment he may be awarded costs. As regards merits, learned counsel relied on recent judgment of Hon ble Punjab & Haryana High Court in case of CIT vs. 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 Act. learned Departmental Representative, on other hand, heavily relied on orders of authorities below and submitted that learned CIT(A) has already given reasons as to why judgment of Hon ble Punjab & Haryana High Court in case of CIT vs. Munish Iron Store (supra) is not applicable. Therefore, such order deserves to be upheld. We have heard both parties and carefully considered rival submissions, examined facts, evidence and material placed on record. We have also gone through orders of authorities below. assessee has taken specific ground before authorities below that order for imposing penalty under s. 271(1)(c) was illegal and bad in law because of failure on part of AO to record proper satisfaction in assessment order at time o f initiating penalty proceedings. Reliance was placed on judgment of Hon ble jurisdictional High Court of Punjab & Haryana in case of CIT vs. Munish Iron Store (supra) and decision of Tribunal (SMC), Amritsar Bench, in case of Sh. Joginder Pal, Prop. M/s New Radha Industries vs. ITO (supra). This submission has not found favour with authorities below perhaps for reason that they are not clear in their mind about meaning of recording of proper satisfaction in assessment order at time of initiation of proceedings under s. 271(1)(c). Provisions of s. 271(1) provide for initiation of penalty proceedings inter alia under s. 271(1)(c). Sub-s. (1) of s. 271 r/w cl. (c) of said section provide that if AO or CIT(A) or CIT in course of any proceedings under this Act is satisfied that any person has concealed particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty as specified in cl. (iii) of s. 271(1) of Act. Thus, recording of satisfaction in assessment order is mandatory requirement of law for initiation of penalty proceedings. If satisfaction is not recorded by AO or same is not proper, proceedings initiated under this section would be invalid and without jurisdiction. initiated under this section would be invalid and without jurisdiction. recording of satisfaction means that assessment order must apparently show that there was application of mind by AO. application of mind can only be gathered by reasons stated in assessment order or it should be discernible from assessment order. In case of CIT vs. Munish Iron Store (supra), Hon ble Punjab & Haryana High Court has also held that jurisdiction to impose penalty flows from recording of satisfaction of AO regarding concealment of income. In case, there is defect in assumption of jurisdiction i.e., if satisfaction has not been recorded, such defect cannot be cured. Hon ble Punjab & Haryana High Court, apart from relying on two judgments of Delhi High Court in cases of CIT vs. Ram Commercial Enterprises Ltd. (supra) and Diwan Enterprises vs. CIT (supra) has also relied on two judgments of Hon ble Supreme Court in cases of Jain Bros. & Ors. vs. Union of India & Ors. (1970) 77 ITR 107 (SC) and D.M. Manasvi vs. CIT 1972 CTR (SC) 437: (1972) 86 ITR 557 (SC). Thus, sum and substance of ratio of various decisions is that recording of satisfaction by AO in assessment order is sine qua non for initiating penalty proceedings. In absence of such satisfaction, initiation of penalty proceedings would be illegal, invalid and without jurisdiction. Now in this case, AO has merely stated towards end of assessment order that "Penalty notice under s. 271(1)(c) is issued". He has not applied his mind at time of initiating proceedings as nowhere AO has mentioned whether assessee has concealed particulars of income or furnished inaccurate particulars of income. This does not amount to recording of valid satisfaction. He has issued notice without recording any satisfaction. Therefore, order for imposing penalty is illegal and without jurisdiction. authorities below have wrongly mentioned that judgment of Hon ble Punjab & Haryana High Court in case of CIT vs. Munish Iron Store (supra) is not applicable to facts of present case. In CIT vs. Munish Iron Store (supra), facts of case were that assessee had filed return disclosing income of Rs. 74,155. During pendency of assessment proceedings, AO got information that assessee had purchased drafts from bank out of unaccounted cash. Statement of assessee s father was also recorded and books of account were impounded under s. 131 of Act. Thereafter, assessee filed revised return showing income of Rs. 9,43,155. AO completed assessment under s. 143(3) on basis of revised return and also initiated penalty proceedings for levy of penalty proceedings under s. 271(1)(c). However, in assessment order, AO did not mention anything as to how revised return came to be filed whether, same was filed after AO had already detected concealment as result of enquiries made by him or otherwise. facts noted in order do show that revise return came to be filed only after AO had received information and investigated matter. Still, Hon ble Punjab & Haryana High Court by relying on judgments of Hon ble Supreme Court in cases of Jain Bros. vs. Union of India (supra), D.M. Manasavi vs. CIT (supra) and judgments of Hon ble Delhi High Court in cases of CIT vs. Ram Commercial Enterprises Ltd. (supra) and Diwan Enterprises vs. CIT (supra) held that assumption of jurisdiction by issue of notice under s. 271(1)(c) without recording valid satisfaction was bad in law because satisfaction about concealment of income or furnishing inaccurate particulars of income was not recorded by AO. Hon ble High Court also held that jurisdictional defect cannot be cured. facts of present case are similar to facts of case before Hon ble Punjab & Haryana High Court. Here also, AO has not recorded any finding whether notice under s. 271(1)(c) was issued for concealing particulars of income or furnishing inaccurate particulars of income. Therefore, judgment of Hon ble Punjab & Haryana high Court is squarely applicable to facts of present case. learned CIT(A) ought to have considered these facts while recording finding that this judgment of jurisdictional High Court in above case is not applicable to facts of present case. judgment of jurisdictional High Court is binding on all authorities working in its jurisdiction. Failure to follow such judgment is serious lapse on part of CIT(A). Further, we find that assessee had also relied on decision of Tribunal, Amritsar Bench, in case of Sh. Joginder Pal, Prop. M/s New Radha Industries vs. ITO (supra), where order for imposing penalty was quashed by recording following findings: "6. I have heard both parties and given my thoughtful consideration to "6. I have heard both parties and given my thoughtful consideration to rival contentions. It is not in dispute that addition made in present case has been upheld by learned CIT(A). However, it is settled position under law that both assessment proceedings and penalty proceedings are separate and distinct proceedings. Merely because addition made in case has been upheld in appeal does not by itself justify levy of penalty under s. 271(1)(c) of IT Act. provisions of s. 271(1)(c) mandate recording of satisfaction during course of assessment proceedings. jurisdiction to impose penalty flows from recording of satisfaction and in case there is jurisdictional defect in assessment of jurisdiction it cannot be cured. This view finds support from judgment of Hon ble Punjab & Haryana High Court in case of CIT vs. Munish Iron Store (supra), two judgments of Hon ble Delhi High Court in cases of CIT vs. Ram Commercial Enterprises Ltd. (2001) 167 CTR (Del) 321: (2000) 246 ITR 568 (Del) and Diwan Enterprises vs. CIT (2001) 167 CTR (Del) 324: (2000) 246 ITR 571 (Del). Besides, this view also finds support from judgment of Hon ble Supreme Court in case of D.M. Manasvi vs. CIT 1972 CTR (SC) 437: (1972) 86 ITR 557 (SC). In present case, AO has merely recorded in assessment order that penalty notice under s. 271(1)(c) has been issued. He has not mentioned whether assessee has concealed particulars of income or furnished inaccurate particulars thereof. Thus, mere mention that penalty notice under s. 271(1)(c) issued does not amount to recording of proper and valid satisfaction. Their Lordships of Hon ble Delhi High Court, Hon ble Punjab & Haryana High Court and Hon ble Supreme Court in cases referred to above have held that mere mention in assessment order that notice under s. 271(1)(c) is issued was not sufficient. Therefore, following aforesaid judgments including judgment of jurisdictional High Court in case of CIT vs. Munish Iron Store (supra), I hold that penalty imposed under s. 271(1)(c) is bad in law in absence of valid satisfaction recorded by AO in assessment order and order of AO is liable to be quashed on this ground itself." (Emphasis, italicized in print, supplied is ours) In above case also, AO has recorded in assessment order that "Penalty notice under s. 271(1)(c) has been issued". This is exactly same satisfaction as recorded by AO in present assessment order. AO has not applied his mind whether assessee has concealed particulars of income or furnished inaccurate particulars of income. In fact, AO has straightway issued notice without recording satisfaction. Therefore, decision of Tribunal in above case is applicable to facts of present case with full force. Still, learned CIT(A) has observed that this decision is not applicable to facts of present case without assigning any reason as to how said decision was not applicable to this case. decisions of jurisdictional Tribunal are binding on authorities working in its jurisdiction. Reliance in this regard is placed on judgment of Hon ble Supreme Court in case of Khalida Automobiles vs. Union of India (1995) 4 SCC Suppl. 653, where it was held that judicial discipline demands that authorities subordinate to Tribunal accept as binding decisions of Tribunal and another judgment of Hon ble apex Court in case of Asstt. Collector of Central Excise vs. Dunlop India Ltd. & Ors. (1985) 154 ITR 172 (SC). decision of jurisdictional High Court or jurisdictional Tribunal can be deviated from only if there is judgment of Supreme Court or there is amendment to provisions of Act. There is none in present case. Even while deviating from binding judgment due to above reason, full respect has to be shown to concerned authority. approach adopted by CIT(A) for not following judgment of Hon ble Punjab & Haryana High Court and decision of Tribunal, Amritsar Bench was against judicial discipline and propriety. Such action on part of CIT(A) does no good to Revenue much less to taxpayer. On contrary, this causes harassment to taxpayer and prolongs litigation. This is not spirit of law. Be that as it may, we are of considered opinion that order for imposing penalty under s. 271(1)(c) is bad in law and without jurisdiction for reason that AO failed to record satisfaction in assessment order at time of initiating penalty proceedings. judgment of Hon ble Punjab & Haryana High Court in case of CIT vs. Munish Iron Store (supra) and decision of Tribunal (SMC), Amritsar Bench in case of Sh. Joginder Pal, Prop. M/s New Radha Industries vs. ITO (supra) are squarely applicable and respectfully following same, we quash order for imposing penalty and resultant order of CIT(A). grounds of appeal of assessee are allowed. Even on merits, assessee deserves to succeed. It is settled law that b o t h assessment proceedings and penalty proceedings are separate and independent proceedings. mere fact that addition has been made and upheld in appeal does not, by itself, justify imposition of penalty under s. 271(1)(c), though findings recorded in assessment order may be relevant for purpose of levy of penalty under s 271(1)(c). Reliance in this regard is placed on judgment of Hon ble Punjab & Haryana High Court (Full Bench) in case of Vishwakarma Industries vs. CIT (1982) 29 CTR (P&H)(FB) 243: (1982) 135 ITR 652 (P&H)(FB). same view was held by Hon ble Madhya Pradesh High Court in case of CIT vs. Smt. Padma Devi Jain (2000) 158 CTR (MP) 278: (2000) 245 ITR 818 (MP) and judgment of Hon ble Madras High Court in case of CIT vs. Inden Bislers (2000) 158 CTR (Mad)323: (1999) 240 ITR 943 (Mad). In case of Durga Kamal Rice Mills vs. CIT (2003) 183 CTR (Cal) 223: (2004) 265 ITR 25 (Cal), Hon ble Calcutta High Court has also held that where two views are possible and when no clear and definite inference can be drawn, in penalty proceedings, penalty cannot be imposed. Two judgments of Hon ble Punjab & Haryana High Court in cases Ganesh Textiles vs. CIT (supra), CIT vs. M.M. Rice Mills (supra) and CIT vs. Himat Ram Laxmi Narain (supra) also support same view. Now in this case, basic facts of case, which have not been disputed by Revenue are that in original return of income, assessee had included amount of Rs. 5,68,000 being value of Opel Corsa car earned by assessee as prize money in contest of coining slogans for M/s Compact Computer India Ltd. Bangalore, in his income. copy of statement of income filed alongwith return does show that assessee had disclosed all relevant material facts relating to prize won by assessee. There is neither any omission nor suppression of income relating to amount of Rs. 5,68,000. assessee filed revised return claiming exemption of amount of Rs. 5.68 lacs by relying on decision of Tribunal, Hyderabad Bench in case of ITO vs. Smt. Shukba Mukherjee (supra) and judgment of Hon ble Madras High Court in case of CIT vs. G.R. Karthikeyan (supra). decision of Tribunal, Hyderabad Bench in case of ITO vs. Smt. Shukba Mukherjee (supra) is directly on issue of prize winning in slogan contest. Again when revised return was filed, assessee had not concealed material facts relating to claim for exemption made by assessee in revised return. No evidence or material has been placed on record to show any mala fide intent on part of assessee to evade tax. We have also gone through assessment order where AO has merely made addition by relying on judgment of Hon ble Supreme Court in case of CIT vs. G.R. Karthikeyan (supra). No charge has been made out against assessee indicating mala fide intent on part of assessee. AO has merely recorded towards end that "Penalty notice under s. 271(1)(c) is issued". AO has not at all mentioned whether assessee was guilty of concealing particulars of income or furnishing inaccurate particulars of income. In case of Dilip N. Shroff vs. Jt. CIT (supra), Hon ble Supreme Court has held that expressions used in s. 271(1)(c) i.e., concealment of income or furnishing inaccurate particulars are different. Both concealment and furnishing inaccurate particulars refer to deliberate acts on part of assessee. mere omission or negligence would not constitute deliberate act of suppressio veri or suggestio falsi. Hon ble Supreme Court has further held that word "inaccurate" signifies deliberate act or omission on part of assessee. Such deliberate act must be either for purpose of concealment of income or furnishing inaccurate particulars. Nowhere AO has recorded such finding which could show contumacious conduct of assessee with view to evade tax. mere filing of revised return based on bona fide belief that assessee was entitled to exemption in respect of value of Opel Corsa car supported by decision of Tribunal, Hyderabad Bench and judgment of Hon ble Madras High Court cannot constitute either concealment of income or furnishing inaccurate particulars of income. Expln. 1 to s. 271(1)(c) is also not applicable as AO has not found explanation of assessee to be false or not bona fide. Thus, we are of considered opinion that even on merits penalty under s. 271(1)(c) is not leviable in this case. This ground of appeal is allowed. In result, appeal filed by assessee is allowed. However, we do not consider necessary to award any cost to assessee. *** VIKRAM CHADHA v. INCOME TAX OFFICER