Case Law Details
Background :-Section 271(1)(c) of the Income-tax Act, 1961 (“the Act”) empowers the Assessing Officer (“AO”) to levy penalty if he is satisfied that the assessee has concealed the particulars of income or furnished inaccurate particulars of income.
A new section 271(1B) was introduced by the Finance Act, 2008 with retrospective effect from 1 April 1989, providing that in a case where an addition/disallowance has been made in computing taxable income/loss, a direction given by the AO to initiate penalty proceedings would deem to constitute „ satisfaction? for initiation of penalty proceedings.
Facts:- In the assessment orders passed in the cases of Ms. Madhushree Gupta and British Airways Plc. („assessees?,) certain disallowances/additions were made to the returned income. The AO initiated penalty proceedings under section 271(1)(c) of the Act, by making an appropriate endorsement to the assessment order. here were no reasons recorded by the AO in support of its? satisfaction? of the fact that there was concealment of income or filing of inaccurate particulars, nor did the AO record his satisfaction before initiating penalty proceedings. Hence, the Tribunal deleted the penalty imposed against which the Department preferred an appeal before the High Court.
In response, the assessees filed a writ petition before the Delhi High Court challenging the constitutional validity of the provisions of section 271(1B) of the Act on the basis that the same is arbitrary, ultra vires and in violation of Article 14 of the Constitution of India. The writ petition also challenged the retrospective operation of section 271(1B).
Assessee’s contention
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