TMI Blog2009 (8) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... the Petitioner. Mr. Arun Khosla, Advocate, for the Respondent. JUDGMENT A.K. SIKRI, J. - Following two substantial questions of law were framed in this case :- (a) Whether ITAT was correct in law in deleting the penalty of Rs.2,17,268/- imposed by the Assessing Officer under Section 27(1)(c) of the Act? (b) Whether ITAT was correct in law in deleting the penalty on the ground that no satisfaction was recorded by the Assessing Officer in the assessment order whereas the necessary satisfaction is clearly discernible as envisaged by the Supreme Court in 86 ITR 557 in the assessment order?" 2. Insofar as question of law No. (b) is concerned, having regard to the amendment to Section 1(b) of Section 271 of the Income Tax Act, 1961 (hereinafter referred to as the "Act") by the Finance Act, 2008 with retrospective effect from 1.4.1989, it was observed that it was not necessary for the Assessing Authority to specifically record satisfaction while initiating penalty proceedings under Section 271 of the Act. This question was accordingly answered on 21.7.2009 itself while framing the aforesaid questions. Arguments were heard on question of law No. (a) above and the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ADI (Inv.) under Section 131 of the Act that the assessee came out with the revised return. Therefore, it could not be said that it had made revision in its income voluntarily. Following discussion in this behalf is contained in the penalty order dated 29.8.1997 :- "In this case, report from ADI (Inv.) Unit-V, New Delhi was received vide his letter dated 16-5-95. It was found out by the ADI (Inv.) that the assessee company had declared bogus agricultural income and before coming to this conclusion, extensive enquiries were made by the Directorate of Investigation, New Delhi to verify the assessee's claim of agricultural income. Enquiries were also conducted at the Village Archar, Tehsil Sikandarbad (UP) where the company had claimed to have done agricultural activities. Statement of various persons of that village, were also recorded by the ADI (Inv) u/s 131 of the Act and it transpired that the assessee company did not have any agricultural land in that village. Statement of the proprietor of M/s Shiv Bhandar Naya Bazar, Delhi was also recorded on 8-3-95 in which he categorically stated that he had given a number of entries to the various clients of one Sh. S.K. Jain, CA o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the income to avoid the tax effect. In this behalf, the Tribunal relied upon the judgment of this Court in the case of CIT v. Ram Commercial Enterprises Ltd. , 246 ITR 568; and Diwan Enterprises v. CIT Ors ., 246 ITR 571. This ground, to set aside the penalty, does not hold good in view of retrospective amendment to the provisions of Section 271(1)(c), as mentioned above. (b) The Tribunal went into the merits of the orders passed by the authorities below and noted that under similar circumstances the Tribunal had cancelled the penalty orders in the case of AFL Developers (P) Ltd. Para 7 of the orders passed in the said case was reproduced by the Tribunal wherein it was recorded as under :- "7. We have duly considered the rival contentions and the material on record. It is true that the revised return was filed subsequent to the issue of the questionnaire. But the assessee cannot be discredited by saying that it was cornered by its investigations. The assessee was definitely in a fix, but more so on becoming handicapped by the death of its auditor in a road accident. Not only that the assessee could not lay its hands on the relevant documents, but it felt suffocat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounded. In the case of AFL Developers (supra), the Tribunal noted that the said assessee could not lay its hands on the relevant documents, but it felt suffocated by the absence of the auditor as it was he who had audited the accounts and it was he who must have prepared and furnished the original return and it was he who could have satisfied the assessing authorities of the questions posed by them, but the said auditor Shri S.K. Jain died thereby placing the assessee on a quagmire. 8. It would be of interest to take note of the observations of the Tribunal in that case, to the effect that the authorities in the said case were carried away by the inquiries conducted in the case of Dass Trading, i.e. the present assessee, and thus no categorical findings were made from the said assessee. If that was the reason for setting aside the penalty orders in AFL Developers (supra), we fail to understand how on the same reasoning case of M/s. Dass Trading, i.e. the present assessee, could be decided. Even going by that order, it is clear that insofar as the present assessee is concerned, inquiries were conducted. Furthermore, the reasons given by AFL Developers for filing return, which w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inquired into the matter and found that the assessee had declared bogus agricultural income that the revised return was filed. It would be material to note that ADI (Inv.) had given his report vide letter No. 239 dated 9/16.5.1995. As per that report, the assessee had declared bogus agricultural income. Inquiries had revealed that the assessee had not sold any agricultural produce to M/s. Shiv Bhandar as claimed by the assessee in the original return. Statement of the proprietor of M/s. Shiv Bhandar was recorded, who had stated that he received only commission for issuing sale bills and no agricultural produce was purchased. Thus, the assessee had procured bogus bills to show sale of the agricultural produce. The report further revealed that even agricultural land in question did not exist in village Archar, Tehsil Sikandarbad (UP). The assessee was sent various letters during this inquiry, but he did not respond. Cat was out of box on the culmination of inquiry and report dated 9/16.5.1995. It is only thereafter that the revised return was filed on 8.3.1996 when the assessee had his back to the wall and was exposed of its bogus claim made in the original return. Therefore, the al ..... 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