Penalty under section 271A need not begin in the assessment order, while section 44AA thresholds operate in the alternative.

Penalty under section 271A was held not to depend on initiation in the assessment order, because that procedural restriction was treated as applicable to section 271 and not to section 271A. The objection to the penalty on that ground therefore failed. Section 44AA(2)(ii) was construed as operating in the alternative: where either the likely income exceeds the prescribed limit or the sales, turnover or gross receipts exceed it, the obligation applies. On the stated facts, the thresholds were exceeded, so the assessee could not avoid penalty. The penalty was substantially sustained, but reduced to the minimum prescribed amount.

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Issues: (i) Whether penalty under section 271A of the Income-tax Act, 1961 had to be initiated in the assessment order itself. (ii) Whether the assessee satisfied the conditions in section 44AA(2)(ii) of the Income-tax Act, 1961 so as to avoid penalty.

Issue (i): Whether penalty under section 271A of the Income-tax Act, 1961 had to be initiated in the assessment order itself.

Analysis: The statutory language of section 271A, like section 271B, was treated as materially different from section 271 of the Income-tax Act, 1961. The latter provision contemplated initiation of penalty in the course of proceedings, whereas the former group of provisions did not carry that restriction.

Conclusion: The objection that the penalty was invalid for want of initiation in the assessment order was rejected, against the assessee.

Issue (ii): Whether the assessee satisfied the conditions in section 44AA(2)(ii) of the Income-tax Act, 1961 so as to avoid penalty.

Analysis: The condition in section 44AA(2)(ii) was held to be alternative, not cumulative: it applied where either the likely income exceeded the prescribed limit or the sales, turnover or gross receipts exceeded the prescribed limit. On the facts, the assessee's declared income and the estimated gross receipts exceeded the statutory thresholds.

Conclusion: The plea based on section 44AA(2)(ii) failed, against the assessee.

Final Conclusion: The penalty order was substantially sustained, but the quantum of penalty was reduced to the minimum prescribed amount, resulting in a partial allowance of the appeal.

Ratio Decidendi: Penalty under section 271A is not confined to initiation in the assessment order, and the conditions in section 44AA(2)(ii) operate in the alternative, so satisfaction of either threshold attracts the provision.

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