TaxTMI 
TaxTMI 
2011 (2) TMI 156
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....nation (1) to section 271(1)(c) and upholding imposition of penalty are arbitrary, unreasonable and perverse. 2. The facts leading to preferring this appeal for upsetting the judgment of the learned Tribunal are shortly put hereunder :- "The appellant is the Surgeon (Gynecology) by profession and as such running a Nursing Home in the District of Hooghly. He returned his income for the assessment year 2001-02, of Rs. 2,18,390. The Assessing Officer however did not accept the returned income to be his annual income of the previous year. The appellant/assessee submitted daily case register in Form 3(c) furnishing the cases handled by him during the relevant previous year in course of assessment proceeding. The Assessing Officer in order to verify correctness of the receipt shown by the assessee in the said Form 3(c) issued notice under sections 133(c) and 131 to the Nursing Home concerned. On information and materials having been collected from two Nursing Homes the Assessing Officer found that a large number of cases handled by the assessee were not shown in Form 3(c) and in some cases payment receipts submitted by the appellant/assessee show amount lesser than actual amounts paid ....
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....fore initiating penalty proceeding under the aforesaid section satisfaction of the Assessing Officer ought to have been recorded and recording satisfaction is a pre-condition to initiate such proceeding. Neither in the order of assessment nor any order before issuance of notice to show cause nor even in such notice itself the Assessing Officer recorded his satisfaction. Hence the impugned order of penalty is bad in law as the Assessing Officer had no jurisdiction to pass such order without recording his satisfaction. In support of his aforesaid legal submission he drawn our attention to the decision of the Delhi High Court in case of Diwan Enterprises v. CIT [2000] 246 ITR 571, CIT v. Ram Commercial Enterprises Ltd. [2000] 246 ITR 568, Subhash Gupta v. Dy. CIT [2003] 85 ITD 167 (JP) (TM) and Jt. CIT v. A.M. Ltd. 147 Tax 96. 4. Next he contends on merit that even assuming the Assessing Officer has jurisdiction but on the fact and circumstances of this case the Assessing Officer ought to have accepted the explanation put forward by the assessee that it was not his lapse nor fault rather his Accountant upon whom he absolutely relied, has wrongly advised and it was his fault by not me....
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....nt of law is without any authority. Accordingly, he submits that this appeal should be dismissed. 9. After consideration of the submission of the respective parties and having gone through the records it appears to us that in this case the points for decision of this appeal fallen for consideration, are as follows :- (i) Whether omission and/or failure to record the satisfaction by the Assessing Officer that the assessee had concealed the particulars of his income or furnished inaccurate income of such income under section 271(1)(c) of the said Act entails the penalty proceeding invalid and illegal, in other words smacks of statutory defect? (ii) Whether all the learned fora below are justified in law to reject the affidavit filed by the Accountant on the plea of afterthought? 10. While addressing first point we feel it necessary to set out section 271(1)(c) of the Income-tax Act. "271. Failure to furnish returns, comply with notices, concealment of income, etc.- (1)(a) and (b)** ** ** (c) has concealed the particulars of his income or furnished inaccurate particulars of. ....." It appears on interpretation of the said section that satisfact....
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....he case of CIT v. S.V. Angidi Chettiar [1962] 44 ITR 739. In that case the Supreme Court factually accepted the penalty proceedings to be valid without having recording of satisfaction under section 28 of the previous Income-tax Act which was corresponding to section 271 of the present Act, although going by the language of the said section recording of satisfaction in expressed words was required. In the said judgment it has not been specifically stated whether satisfaction has to be recorded in so many words before initiation of the proceeding under said section by the Assessing Officer. After reading all the judgments of the Courts viz., Allahabad High Court, Madras High Court, and the Supreme Court as above, we think that the decision of the Delhi High Court is substantially conflicting with the earlier decision of the Supreme Court with regard to the question of jurisdiction in relation to initiation of penalty proceedings. In our opinion, the Assessing Officer must form opinion and further must have satisfaction about act of concealment of the income as required in the said section, though not worded in the record. We think it is not mandatorily necessary to record in so many....
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....ear. 19. We are of the view that if explanation offered by the assessee is satisfactory penalty may not be imposed. In this case the assessee explained that he completely relied on Accountant/Advisor who is the new comer in this profession. The Accountant in discharge of his duty did not record and register receipt of income in the Register maintained under Form (c). The said Accountant had filed an affidavit and accepted his lapses and failure. Therefore, there has been some explanation, but all the fora below did not accept the said affidavit on the ground of afterthought. We think that the findings of afterthought of all the fora below is perverse and without having any material whatsoever. This conclusion of all the authorities below is based on conjecture and surmise. The question of afterthought will arise when an explanation was asked to be given earlier but not given at the appropriate time and after having realized the mistake any document or affidavit is created or prepared subsequently it can be said to be an instance of afterthought. 20. Explanation is required at the stage of initiation of the penalty proceedings, not at the time of the assessment made on discovery o....
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....e revenue to challenge the correctness of the cash book entries or the statements made by this deponent in their affidavits. The fact of the cases before the Supreme Court showed that a few persons had filed affidavit in support of the assessee stating that currency notes of denomination of Rupees one thousand each were supplied by them." 23. Bombay High Court in the case of Dilip Kumar Roy v. CIT [1974] 94 ITR 1 following the said decision of the Supreme Court took the same view. It has been observed at page 8 of the said report that the affidavit which was filed before the Income-tax Officer and its truthfulness was not challenged by the cross-examination of Richard Millar. In that context, it was held that the Income-tax officials should not have rejected the said affidavit without cross-examining the deponent. 24. When an affidavit is affirmed the deponent makes statement on oath with complete understanding and responsibility if not risk that if such statement is found to be false or incorrect he will be charged with the offence of purgery. As such, the affidavit cannot be thrown away without declaring the statements made therein are false or incorrect. Hence unless contrary ....