2003 (5) TMI 191 - AT - Income Tax

Appeal allowed, penalty canceled as AO failed to record satisfaction before initiating penalty proceedings.

RAM NATH CHADHA. Versus ASSISTANT COMMISSIONER OF INCOME TAX.

RAM NATH CHADHA. Versus ASSISTANT COMMISSIONER OF INCOME TAX. - TTJ 082, 331, [2004] 4 SOT 120 (ASR.) (SMC) Issues:Appeal against penalty under section 271(1)(c) of the IT Act, 1961.Detailed Analysis:1. The appeal was filed against the penalty imposed by the AO under section 271(1)(c) of the IT Act, 1961. The assessee contended that there was no concealment of income or furnishing of inaccurate particulars. The AO issued a show cause notice under section 274 read with section 271(1)(c) to the assessee, who responded stating no concealment or inaccurate particulars were involved. The AO levied a penalty of Rs. 1,17,310 under section 271(1)(c) along with Explanation 3. The assessee challenged this penalty before the CIT(A) on grounds of lack of satisfaction by the AO regarding concealment. The CIT(A) upheld the penalty, stating the AO was justified as the penalty was imposed under the main provisions of section 271(1)(c).2. The CIT(A) noted that the assessee had substantial income, did not pay advance tax, and did not file a return despite statutory notices. The CIT(A) considered it a case of positive act of concealment as the assessee was aware of the taxable income. The CIT(A) held that the AO's satisfaction was not required to be mentioned in the assessment order for initiating penalty proceedings. The CIT(A) concluded that the AO was justified in imposing the penalty under section 271(1)(c) based on the available facts.3. The ITAT observed that the AO had not recorded satisfaction during assessment proceedings regarding the liability for penalty under section 271(1)(c). Citing precedents, the ITAT emphasized that the assessing authority must form an opinion and record satisfaction before initiating penalty proceedings. Merely initiating penalty proceedings does not imply satisfaction. The ITAT referred to decisions by the Bombay High Court and Delhi High Court, highlighting the necessity for the assessing authority to record satisfaction in the assessment order before imposing penalties. The ITAT concluded that the CIT(A) was not justified in confirming the penalty and canceled the penalty imposed by the AO.4. The appeal was allowed, and the penalty under section 271(1)(c) was canceled based on the lack of recorded satisfaction by the AO during the assessment proceedings, as required by law.This detailed analysis outlines the legal arguments, findings, and conclusions of the ITAT in the appeal against the penalty imposed under section 271(1)(c) of the IT Act, 1961.