TaxTMI 
TaxTMI 
2013 (7) TMI 620
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.... cotton in the ginning factory owned by it and trades in cotton and cotton seeds. The assessee had filed the return of income for the assessment year 2000-01 declaring total income of Rs. 2,29,520/-. A survey under Section 133A of the Income Tax Act (for short hereinafter referred to as 'the Act') was conducted in the business premises of the assessee on 23.11.2000. During the course of survey, a notebook was found in the business premises of the assessee, wherein certain transactions carried were noted. These transactions pertains to four cases showing names and amounts. The total of the transactions amounted to Rs. 7,98,200/-. The partner of the assessee - firm explaining those entries stated that the transactions noted in the book relate to the book creditors for which there are no liability. The assessee was called upon to file confirmation letters of credit balance of certain creditors. The same was not filed by the assessee. The department obtained a letter from the creditor who stated that it had no transaction with the assessee during the financial year relevant to the assessment year 2000-01 and informed the department that no balance is receivable from the assessee. There....
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....ime of survey. To buy peace with the Department, they have voluntarily agreed to declare the said sums towards cessation of the creditors liabilities and that accordingly as per the instructions of authorities, they filed revised return of income for the assessment year 2000-01 on 08.12.2000. Though the survey was made on 23-11-2000 during the financial year 2000-01 relevant to the assessment year 2001-02, they had paid taxes for the assessment year 2000- 01 itself and co-operated with the department in Survey and assessment proceedings to keep good relations. Assessing Officer found that reply was not convincing and did not accept the same and as such minimum penalty of Rs. 3,14,370/- and Rs. 5,96,310/- was levied in terms of Section 271(1)(c) of Income Tax Act, 1961. 6. Aggrieved by the said order of levy of penalty, both the assessees filed appeals before C.I.T (Appeals), Gulbarga, in ITA No.64-65/03-04/BLY. The Appellate Authority by separate orders dated 18.02.2004 confirmed the levy of penalty and dismissed the appeals filed by the assessees. Being aggrieved by these orders, assessees preferred further appeals in I.T.A.No.1306 &1307/BANG/03 before Income Tax Appellate Trib....
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.... To purchase peace, the assessee agreed to pay the tax and had not challenged the order of the Appellate Authority. Even after the said order of the Appellate Authority, the Assessing authority proceeded with the penalty proceedings initiated on 05.05.2006. The assessee filed his objections to the same on 26.02.2007 contending that the Assessing Officer has not recorded satisfaction about the assessee furnishing inaccurate particulars or concealing the income. Addition made under Section 69 of the Act at Rs. 4,98,39,000/- has not been accepted by the Appellate Authority, who also had not agreed with the valuation of stock done by the assessing authority. The assessing authority's satisfaction to impose penalty was on the basis of the additions made by him under Section 69 as investments made outside the books, which has been set-aside by the Appellate Authority and therefore, he contended that penalty proceedings have to be dropped. Overruling all the objections by an order dated 14.03.2007, imposing penalty of Rs. 1,22,88,132/- was passed. The assessing authority observed in his order that the Appellate Authority had confirmed the quantity of stock suppressed by the assessee, whic....
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....ssessment accordingly. Thereafter, the Assessing Authority simultaneously initiated penal proceedings under Section 271(1)(c) of the Act. Against the aforesaid additions, the assessee preferred appeal to the Commissioner of Income tax (Appeals). The Appellate Authority held that the Assessing Authority had not brought any evidence of any expenditure outside books of accounts, so as justify the additions under Section 69. Therefore, he set aside the said additions. However, he found that there is a stock outside books of accounts. It has to be valued and brought to tax. Therefore, held that the closing stock for assessment purpose should also be taken as 5.74,715 tons. When valued at a rate of Rs. 87.50 per ton, the value of closing stock would be Rs. 5,02,87,562/-. The value of closing stock disclosed in return of income is Rs. 80,87,110/-. Therefore, the total addition on account of un-accounted stock would be Rs. 4,22,00,452/-. This is the sum which should be brought to tax as the value of un-accounted stock. Likewise, even for the assessment year 2004-05, the Appellate Authority held that, all the factual/legal arguments for assessment year 2004-05 are exactly the same as discus....
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....turn of income for the assessment year 2003-04 was filed on 28.11.2003 declaring a total income of Rs. 3,62,590/-. For the assessment year 2004-05 the return was filed on 29.10.2004 declaring the total income of Rs. 4,78,649/-. The returns were processed under Section 143(1) of the Act on 13.02.2004 for the assessment year 2003-04 and on 25.01.2005 for the assessment year 2004-05. Subsequently, the returns were taken up for scrutiny. The additional DIT Investigation Unit-I at Bangalore forwarded certain information on account of a search conducted under Section 132 of the Act at the assessee's premises on 10.04.2003 stating that the assessee - Firm was under-invoicing and mis-declaring their import of ceramic tiles. It is stated that the assessee had changed the invoice and description in the Bill of Entry after it was assessed by the Customs. The assessee was asked to submit his explanation. Thereafter, the assessing authority recorded a finding that the assessee received excess stock, the sources of which required to be explained by the assessee. The assessee filed his reply on 20.03.2006 offering his explanation. The assessing authority was not convinced and therefore, the asses....
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....s and in the absence of the same, it cannot be said that any unexplained investment was made on behalf of the assessee to attract levy of penalty under Section 271(1)(c). The said explanation was not accepted and penalty was imposed. Aggrieved by the said order imposing penalty, the assessee preferred an appeal to the Commissioner of Income tax (Appeals). The Appellate Authority held that although the claim of the assessee has not been accepted by the Assessing authority, it did not out rightly reject the assessee's contention there by implying that there is some bonafides in the assessee's contention. There was no evidence or material on record to suggest that the assessee has deliberately acted in defiance of law to conceal its income in the form of excess stock, since its explanation in regard to higher rate and lower rate has been accepted to a great extent. There was material to indicate that the assessee has actually paid higher rate for the said consignment and it has made payment in excess of any other mode. Therefore, they were of the view that the penalty is based on the valuation of excess stock and such valuation has been determined between the Bill of exchange rate and....
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....lty under Section 271(1)(c) of the Act. The said addition made on the basis of the valuation made under the Customs Act was accepted by the assessee to buy peace of mind and to avoid extra litigation. Therefore, the Tribunal was of the view that no adverse inference can be drawn against the assessee on the basis of the same to impose penalty under Section 271(1)(c). Similarly, the addition made on account of difference in creditors' accounts was accepted by the assessee to avoid any further litigation as he could not reconcile the difference. Therefore, no penalty under Section 271(1)(c) could be imposed in respect of such agreed addition unless the explanation offered by the assessee for accepting such addition is found to be false. They were of the view that it was not a fit case to impose penalty under Section 271(1)(c) of the Act and therefore, they did not find any justification to interfere with the well considered order of the Appellate Authority deleting the penalty. Aggrieved by these orders, the Revenue has preferred this appeal. 18. We have heard the learned counsel appearing for the parties. The learned counsel fairly submitted that the substantial questions of law a....
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....t in the authorities. 20. Sri. Shankar, learned counsel appearing for the assessees contends that explanation offered by the assessees was not held to be false by the Tribunal. The payments recorded in a rough cash book which was found during the time of survey did not contain any dates against the payments made and entries were to be made by the accountant on the next working day and as such in order to buy peace with the department the assessees in quantum proceedings voluntarily declared the sum as income representing cessation of creditors liabilities. The additional income offered was in the nature of agreed addition and in penalty proceedings an independent finding has to be arrived at by conclusively holding that assessee owns the concealment and in the absence thereof penalty cannot be levied. Thereafter the order of tribunal deleting levy of penalty would not call for interference. 21. Insofar as dis-allowance of expenses non-confirmation of balance from the creditor is concerned, they agreed to buy peace with the department by agreeing for addition and paying tax on and the said amount and interest thereof, however, the said explanation was not accepted. The assessi....
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....141 deals with provisional assessment. Section 142 deals with enquiry before assessment. Section 143 deals with assessment. Section 147 deals with income escaping assessment. Chapter XXI deals with penalties imposable. Section 271 deals with failure to furnish returns, comply with notices, concealment of income, etc., It reads as under:- "271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTICES, CONCEALMENT OF INCOME, ETC. (1) If the Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that any person - (a) Omitted (b) Has failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 142; or (c) Has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty, - (i) Omitted (ii) In the cases referred to in clause (b), in addition to any tax payable by him, a sum which shall not be less than one thousand rupees but which may extend to twenty-five thousand rupees for....
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....on him under any other provision of this Act, be punishable, - (i) in a case where the amount sought to be evaded exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine; (ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine. (2) If a person wilfully attempts in any manner whatsoever to evade the payment of any tax, penalty or interest under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and shall, in the discretion of the court, also be liable to fine. Explanation: For the purposes of this section, a wilful attempt to evade any tax, penalty or interest chargeable or imposable under this Act or the payment thereof shall include a case where any person - (i) Has in his possession or control any books of account or other documents (be....
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....ventualities. One such eventuality is for concealment of income or furnishing of inaccurate particulars of such income. The penalty provisions has two distinct limbs. One limb deals with the condition precedent for initiating penalty action and assumption of jurisdiction of the authority concerned. This limb is separately enacted in Clause (c) of sub-section (1) of section 271. The other limb of the penalty provisions is the substantial part which deals with the actual imposition of the liability for penalty and the quantification thereof. This limb is found enacted, in clauses (iii) of sub-section (1) of Section 271. This however cannot mean that the two limbs have to be read disjunctively. Ordinarily, penalty can be imposed under clause (c) of Section 271(1) and the quantum of penalty is prescribed in clause (iii) of the same sub-section. 29. As is clear from Sec. 271(1)(c) the said provision is attracted only when the condition stipulated in Section 271(1)(c) are attracted. If those conditions are not fulfilled there is no question of exercising power under the said provision to impose penalty. Therefore, it is necessary to find out what are the conditions, which must exist b....
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....n penalty is leviable and when penalty is not leviable. The condition precedent for levying the penalty is the satisfaction of the authority that there is a concealment of the particulars of the income or inaccurate particulars are furnished to avoid payment of tax. Once the authority comes to such conclusion, the law mandates that before imposing penalty, the assessee must be heard. The assessee is given the opportunity to offer his explanation. Once such an opportunity is given and the assessee fails to offer the explanation or offers explanation which is found to be false, then the penalty will follow as prescribed under Clause (iii) of clause (c) of sub-section (1) of Section 271. Where the assessee offers an explanation and substantiate the explanation, the question of imposing penalty would not arise. Even in cases where he fails to substantiate the explanation, but if he proves that explanation offered is a bonafide one and all the facts relating to the same and material to the computation of his total income has been disclosed by him, then, in law, a discretion is vested with the authority not to impose penalty. In other words, if the assessee offers explanation, but fails ....
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.... been earned by the assessee in the previous year, claim of false deductions or losses, suppression of sales, camouflage of income as loans taken from third parties and claim of interest thereon as deduction, giving a colour of agricultural income to the otherwise taxable income, and unexplained investments that can be clearly attributed to concealed income. However, mere addition or estimates made on mere suspicion that there is something wrong with the book entries or their incompleteness, inadvertent omissions, debatable additions or disallowances, cash credits or investments not accepted as genuine, and rejection of a claim of expenses may not be themselves justify a penalty. The finding in assessment proceedings can be rebutted in the penalty proceedings to even demonstrate that the amount taxed was not income, or it has been taxed in the wrong year. 35. The condition precedent for inference of concealment of income is the intention to conceal income. This part of the clause earlier contained an adverbial prefix 'deliberately'. The word 'deliberately' in the above phrase was dropped by the Finance Act, 1964, with effect from 1 April, 1964. So, the element of mens rea was so....
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.... offered after search would not lead to levy of penalty automatically. The Apex Court in the case of DILIP SHROFF reported in 291 ITR 529, at Page 547 at para 62 has observed that finding in assessment proceedings cannot automatically be adopted in penalty proceedings and the authorities have to consider the matter afresh from different angle. This Court in the case of VASANTH K HANDIGUND reported in 327 ITR 233, has held that when addition has been accepted to buy peace and avoid litigation and the explanation was found reasonable by the appellate authorities the cancellation of penalty was justified. This Court in the case of BHADRA ADVANCING PVT LIMITED reported in 210 CTR 447, held that merely because the assessee has filed a revised return and withdraw some claim of depreciation penalty is not leviable. The additions in assessment proceedings will not automatically lead to inference of levying penalty. This Court in the case of GUJAMGADI reported in 290 ITR 168, has held that every addition to income by the Income Tax Officer will not automatically attract levy of penalty. Similar view has also been taken by this Court in the case of Balaji Vegetable Products Private Limited r....
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....ovides that if a person wilfully fails to furnish in due time the return of income required under section 139(1), he shall be punishable with rigorous imprisonment for a term which may extend to one year or with fine. It is clear that in the former case what is intended is a civil obligation while in the latter what is imposed is a criminal sentence. There can be no dispute that having regard to the provisions of section 276C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be imposed under that provision unless the element of mens rea is established. In most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent. The creation of an offence by statute proceeds on the assumption that society suffers injury by the act or omission of the defaulter and that a deterrent must be imposed to discourage the repetition of the offence. In the case of proceeding under Section 27(1)(a), however, it seems that the intention of the legislature is to emphasise the fact of loss of revenue and to provide a remedy for such loss, although no dou....
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....enue. The penalty under that provision is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under Section 276C of the Income-Tax Act." ........Dilip N. Shroff's case (2007) 8 Scale 304 (SC) was not correctly decided but Chairman, SEBI's case (2006) 5 SCC 361 has analysed the legal position in the correct perspectives. The reference is answered." 40. In the Dharmendra's case the apex Court was dealing with the penalty provisions contained in the Central Excise Act, 1944, Sec. 11AC. They have referred to penalty provision in the Income Tax Act 271(1) (c). After referring to various judgments on the point rendered by both the Apex Court as well as various High Courts it was held that Mens Rea is not an essential element for imposing penalty for breach of civil obligations. Further, it was held the judgment of the Apex Court in Dilip N. Sharoff's case, where it had been held Mens Rea is essential, it was sought to be distinguished by saying the conceptual and conspectual difference between Sec. 271(1)(c) and 276(c) of the Income Tax Act, was lost sight of in Dilip N. Sharoff'....
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....the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-s. (2) of s.11A. That is what Dharmendra Textile (supra) decides. 24. It must, however, be made clear that what is stated above in regard to the decision in Dharmendra Textile (supra) is only insofar as s. 11 (A) (C) is concerned. We make no observations (as a matter of fact there is no occasion for it! ) with regard to the several other statutory provisions that came up for consideration in that decision." 42. In Dharmendra's case at para 28 and 29, the Court observed as follows: "28. In Union Budget of 1996-97, s. 11AC of the Act was introduced. It has made the position clear that there is no scope for any discretion. In para 136 of the Union Budget reference has been made to the provision stating that the levy of penalty is a mandatory penalty. In the Notes on Clauses also the similar indication has been given. 29. Above being the position, the plea that the rr.96ZQ and 96ZO have a concept of discretion in built cannot be ....
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....n is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of section 11A. That is what Dharmendra Textile decides. Then the Apex Court held as under: "It goes without saying that for applicability of section 271(1) (c), the conditions stated therein must exist." 45. Following the said judgment it was held that it goes without saying that for the applicability of Section 271(1) (c) conditions stated therein must exist. 46. In a recent judgment the Supreme Court after referring to the aforesaid Judgments in the case of COMMISSIONER OF INCOME TAX VS. RELIANCE PETROPRODUCTS PVT. LTD., reported in (2010) 322 ITR 158 (SC) held as under: "9. Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed because that it is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. In Dilip N. Shroff v. J....
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.... Processors, was that according to this Court the effect and difference between section 271(1)(c) and section 276C of the Act was lost sight of in the case of Dilip N. Sharoff V. Joint CIT. However, it must be pointed out that in Union of India v. Dharmendra Textile Processors, no fault was found with the reasoning in the decision in Dilip N. Shroff v. Joint CIT, where the Court explained the meaning of the terms "conceal" and "inaccurate". It was only the ultimate inference in Dilip N. Shroff v. Joint CIT to the effect that mens rea was an essential ingredient for the penalty under section 271(1)(c) that the decision in Dilip N. Shroff v. Joint CIT was overruled. 10. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as: "not accurate, not exact or correct; nor according to truth; erroneous; as an inaccurate statement, copy or transcript". 11. We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in ....
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....ed. Therefore, it is clear that aforesaid instances by itself do not constitute concealment. The Assessing Officers were just writing at the end of the assessment order that penalty proceedings are initiated or something to the effect. The Delhi High Court in the case of Ram Commercials has held that such a note alone in the assessment order does not satisfy the requirement of assuming jurisdiction in law in respect of the initiation of penalty proceedings. The satisfaction should be in the assessment order. The said view was also approved by the full Bench of the Delhi High Court in the case of RAMPUR ENGINEERING reported in 309 ITR 143. The said view has been approved by the Apex Court in the case of DILIP SHROFF reported in 291 ITR 591. That is the view the courts have consistently taken. After taking note of the judicial pronouncements in this regard, the Legislature thought it fit to insert Section 271(1)(B), which reads as under: "271(1)(B) Where any amount is added or disallowed in computing the total income or loss of an assessee in any order of assessment or reassessment and the said order contains a direction for initiation of penalty proceedings under clause (c)....
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....fference and the satisfaction is required to arrived in the course of assessment proceedings and should be discernable in the assessment order. Therefore, this provision makes it abundantly clear that satisfaction of the Assessing Officer before initiation of penalty proceedings is a must. The satisfaction should be that he has concealed particulars of his income or furnished inaccurate particular of such income and even in the absence of those expressed words or findings recorded in the Assessment proceedings, if a direction as aforesaid is mentioned, it constitutes satisfaction of the Assessing Officer. DIRECTION 50. A reading of Section clearly indicates that the assessment order should contain a direction for initiation of penalty proceedings. The meaning of the word direction is of importance. Merely saying that penalty proceedings are being initiated will not satisfy the requirement. The direction to initiate proceedings should be clear and not be ambiguous. It is well settled law that fiscal statutes are to be construed strictly and more so the deeming provisions by way of legal fiction are to be construed more strictly. They have to be interpreted only for the said is....
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....ts are set out in the order, then the deeming provision in Explanation 1 applies and the concealment of income could be presumed and then they are entitled to initiate penalty proceedings under Section 271. If the said order do not disclose the facts set out in Explanation 1, they are not entitled to the benefit of deeming provision contained in provision (1)(B). The said deeming provision is confined only to the Assessing Officer. 53. From these discussion, it is clear that condition precedent for initiation of penalty proceedings under Section 271(1)(c) is existence of condition referred to in the said section. The person initiating penalty proceedings should be satisfied about the existence of said conditions which should be reflected in the assessment orders passed by them. In a given case, after appreciating the entire records, the Officer passing the order may categorically state that he is satisfied that the assessee has concealed income. Once such a finding is recorded that is sufficient to initiate penalty proceedings. Assuming such a categorical finding is not recorded in the order, at least, he has to record facts as contemplated in Explanation-1. If these facts are d....
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....roceedings the issue is examined and not any other authority. The levy of penalty has also to be done by the same officer as the language used in the later part of Section 271 is that: " He may direct that such person shall pay by way of penalty". The authority in which proceedings, there is satisfaction of concealment or furnishing inaccurate particulars of income alone can levy the penalty and not any other authority. If the Commissioner (Appeals) in the course of appeal proceedings is satisfied then it is the Commissioner (Appeals) who have to initiate the penalty proceedings and also complete the same by levying the penalty. He cannot permit the assessing authority to levy penalty. 56. Provisions of Section 274(3) makes it clear that if an authority other than the Assessing Officer passes an order under Chapter XXI which deals with matters of penalties then such authority has to forthwith send the copy of the order to the Assessing Officer. This fortifies that it is the authority who is satisfied in the course of the proceedings before it has the jurisdiction to initiate and levy of penalty. The Allahabad High Court in the case of MOTILAL SHAMSUNDAR reported in 84 ITR 183 he....
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....f appeal, it cannot be concluded that such addition or deletion amounts to concealment of income or furnishing of inaccurate particulars. When a plea is taken that in order to avoid litigation and purchase peace, the tax levied is paid with interest, if the assessee is able to demonstrate his bona fides and if the authority is satisfied about his bonafides, then the question of imposing penalty would not arise. Similarly, in cases where though the tax was not actually due but still the assessee pays tax with a hope of claiming deductions in the subsequent years, if the assessee is able to demonstrate there was no liability to pay tax at all, merely if assessee pays tax and he does not challenge order, that would not constitute concealment of income so as to enable the authorities to impose penalty. Similarly, in cases, where the legal position is not well settled, when few High Courts and Tribunals have taken a view in favour of the assessee and some High Courts and Tribunals have taken a view in favour of the Revenue and on legal advice if an assessee relies on the said legal position for not disclosing the income and for non-payment of tax, certainly, that is a fact which should ....
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....ssee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imp....
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....alty proceedings. It is because penalty proceedings are independent proceedings. The assessee cannot question the assessment jurisdiction in penalty proceedings. Jurisdiction under penalty proceedings can only be limited to the issue of penalty, so that validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter in penalty proceedings. It is not possible to give a finding that the re-assessment is invalid in such penalty proceedings. Clearly, there is no identity between the assessment proceedings and the penalty proceedings. The latter are separate proceedings that may, in some cases, follow as a consequence of the assessment proceedings. Though it is usual for the Assessing Officer to record in the assessment order that penalty proceedings are being initiated, this is more a matter of convenience than of legal requirement. All that the law requires, so far as the penalty proceedings are concerned, is that they should be initiated in the course of the proceedings for assessment. It is sufficient, if there is some record somewhere, even apart from the assessment order itself, that the Assessing Officer has recorded his satisfacti....
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....t is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the assessing officer in the assessment order. l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bonafide, an order imposing penalty could be passed. m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. n) The direction referred to in Explanation 1B to Section 271 of the Act should be clear and without any ambiguity. o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. (p) Notice under S....
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....duct of the assessee cannot be construed as malafide. Therefore, the Tribunal was justified in setting aside the orders passed by the Appellate Authority as well as the Assessing Authority. 65. In so far as the imposition of penalty is concerned, it is not in accordance with law. No fault could be found with the Tribunal for deleting the penalty. Thus, we answer the substantial question of law in favour of the assessee and against the Revenue. In ITA No. 5020/2009 66. In view of the aforesaid law, we are of the view that the Tribunal was justified in holding that the entire proceedings are vitiated as the notice issued is not in accordance with law and accordingly justified in interfering with the order passed by the Appellate Authority as well as the Assessing Authority and in setting aside the same. Hence, we answer the substantial questions of law framed in this case in favour of the assessee and against the Revenue. In ITA Nos. 5022 & 5023/2009 67. In the instant case, the penalty proceedings are initiated by the Assessing Authority initially on the basis of his assessment order. During the pendency of the said penalty proceedings, the assessment order was challe....