2010 (9) TMI 1176 - AT - Income Tax

Penalty overturned on appeal due to lack of satisfaction in assessment order

Cornerstone Financial Services Ltd. Versus Commissioner of I. Tax, Circle 1 (7), New Delhi

Cornerstone Financial Services Ltd. Versus Commissioner of I. Tax, Circle 1 (7), New Delhi - TMI Issues involved: Assessment of concealment penalty u/s 271(1)(c) for shifting expenses, legal and professional charges, deferred revenue expenditure, and loss on transfer of asset.Details of the judgment:1. Jurisdictional issue regarding initiation of penalty proceedings:The appeal was filed against the concealment penalty levied on various items for the assessment year 1999-2000. The counsel for the assessee raised the issue of no satisfaction recorded in the assessment order regarding the initiation of penalty proceedings. The contention was that the satisfaction was not evident from the assessment order itself. The AO had observed in the assessment order that 'Penalty proceedings, u/s 271(1)(c) are initiated separately.' The Tribunal referred to the requirement of section 271(1)(c) which mandates the AO to be satisfied during the proceedings regarding concealment of income. It was noted that the satisfaction must be discernible from the assessment order. In this case, the Tribunal found no prima facie satisfaction of the AO for initiating penalty proceedings in the assessment order, as required by law. Therefore, the grievance of the assessee was accepted, and the penalty imposed was set aside as it was void ab initio due to the absence of recorded satisfaction in the assessment order.2. Conclusion:As the penalty was set aside due to the lack of satisfaction recorded in the assessment order, no other issue remained for consideration. The appeal filed by the assessee was allowed, and the penalty imposed was overturned.This judgment highlights the importance of the AO being satisfied regarding concealment of income during the assessment proceedings, as mandated by section 271(1)(c) of the Income Tax Act.