TaxTMI 
TaxTMI 
2013 (7) TMI 808
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....ent initiated survey operations under section 133A of the Act. The assessee filed revised return declaring an income of Rs. 1,33,102, Rs. 1,64,930 and Rs. 1,76,890 for the assessment years 1982-83, 1983-84 and 1984-85, respectively. The Assess-ing Officer completed assessments under section 143(3) read with section 148 for the assessment years 1982-83 and 1983-84, vide two separate orders dated March 31, 1989, and for the assessment year 1984-85, he completed assessment on March 27, 1987, under section 143(3) of the Act. The Assessing Officer later passed orders under section 271(1)(c) of the Act levying a penalty of Rs. 50,000, Rs. 62,000 and Rs. 70,985, respectively, for each of the above three years. 4. Challenging the same, the assessee filed appeals to the Commissioner of Income-tax (Appeals) and the said appeals were allowed on October 12, 1992, in favour of the assessee setting aside the penalty imposed on it under section 271(1)(c) of the Act. 5. Aggrieved thereby, the Revenue preferred appeals to the Income-tax Appellate Tribunal, Hyderabad, Bench-B, being I. T. A. Nos. 181, 182 and 183/Hyd/93 for the assessment years 1982-83, 1983-84 and 1984-85, respectively.....
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....pur Engineering Co. Ltd. [2009] 309 ITR 143 (Delhi) [FB] and CIT v. M. K. Sharma [2008] 307 ITR 147 (Delhi) (which was con-firmed in SLP (Civil) No. 17591 of 2008 dismissed on July 18, 2008 (see [2008] 306 ITR (St.) 2)) 3. When the assessment order merely states "penalty proceedings had been initiated", it will not satisfy the requirement of section 271(1)(c) of the Act. Because no satisfaction of the Assessing Officer that penalty proceedings required to be initiated against the assessee was discernible. (See CIT v. M. K. Sharma [2008] 307 ITR 147 (Delhi)). He relied on the decision reported in Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC), CIT v. Suresh Chandra Mittal [2000] 241 ITR 124 (MP) and CIT v. Suresh Chandra Mittal [2001] 251 ITR 9 (SC). He also contended that in CIT v. Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC), the Supreme Court had clarified that the decision in Dilip N. Shroff [2007] 291 ITR 519 (SC) to the extent that the court explained the meaning of the terms "con-ceal" and "inaccurate" in section 271(1)(c) of the Act is not overruled and still holds the field and that it was overruled only to the extent it had held there must be an ....
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....s is rejected. 11. Section 271(1)(c) of the Act states as follows : "271. Failure to furnish returns, comply with notices, concealment of income, etc.-(1) If the Assessing Officer, or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person . . . (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," 12. In Manasvi's case [1972] 86 ITR 557 (SC), relied upon by the Revenue, the assessee was an individual and the issue related to the levy of penalty under section 271(1)(c) of the Act for the assessment years 1959-60, 1960-61 and 1961-62 and 1962-63. During those years, the assessee derived income from several sources. The assessment for the first year was made under sec-tion 23(3) of the Indian Income-tax Act, 1922. The Income-tax Officer subse-quently found that income from the business in the name of M/s. Kohinoor Grain Mills Sales Depot (hereinafter referred to as "the Kohinoor Mills") was not included in the return filed by the assessee and he had not shown any connecti....
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....ing two questions were referred under section 256(1) of the Income-tax Act, 1961, to the High Court (page 559 of 86 ITR) : "(1) Whether, on the facts and in the circumstances of the case, the proceedings for the imposition of penalty were properly commenced in the course of any proceedings under the Act as required by section 271 of the Income-tax Act, 1961, for the assessment years 1959-60 to 1962-63 ? (2) Whether, on the facts and in the circumstances of the case, there was any material or evidence before the Tribunal to hold that the assessee had deliberately concealed the particulars of his income or deliberately furnished inaccurate particulars of such income as required by section 271(1)(c) of the Act for the assessment years 1959-60 to 1962-63 ?" These questions were answered in the affirmative by the High Court in favour of the Revenue and thereafter, the matter was carried to the Supreme Court. The Supreme Court held at paragraph 8 as follows (page 561 of 86 ITR) : "The fact that notices were issued subsequent to the making of the assessment orders would not, in our opinion, show that there was no satisfaction of the Income-tax Officer during the assessment pro....
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....-tion before initiating the penalty proceedings. Merely because the penalty proceedings have been initiated, it cannot be assumed that such a satisfaction was arrived at in the absence of the same being spelt out by the order of the assessing authority. Even at the risk of repetition we would like to state that the assessment order does not record the satisfaction as warranted by section 271 for initiating the penalty proceedings." In that case, there was no finding recorded by the assessing authority in the order of assessment about concealment of particulars of income or furnishing of inaccurate particulars of such income but the Assessing Officer in the assessment order directed that penalty proceedings under section 271(1)(c) to be initiated against the assessee. The Delhi High Court confirmed the finding of the Income-tax Appellate Tribunal that levy of penalty was not proper as the requisite satisfaction was not recorded in the order of assessment. It rejected the contention of the Revenue that all the facts available on record coupled with the assessment order itself would show that the assessing authority had chosen to initiate proceedings under section 271(1)(c) o....
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....erprises' case [2000] 246 ITR 571 (Delhi) wherein it was held that when the Assessing Officer had not recorded till the conclusion of assessment proceedings his satisfaction that the assessee had concealed the particulars of his income or furnished inaccurate particulars of such income, it is a jurisdictional defect which cannot be cured and, therefore, the initiation of penalty proceedings was bad. 17. In Rampur Engineering Co. Ltd.'s case [2009] 309 ITR 143 (Delhi) [FB], a Full Bench of the Delhi High Court considered the correctness of the decision of the Delhi High Court in Ram Commercial Enterprises Ltd.'s case [2000] 246 ITR 568 (Delhi) and after considering the decision in Manasvi's case [1972] 86 ITR 557 (SC), held as follows (page 148) : "In our opinion, the legal position is well settled in view of the Supreme Court decisions in CIT v. S. V. Angidi Chettiar [1962] 44 ITR 739 (SC) and D. M. Manasvi v. CIT [1972] 86 ITR 557 (SC), that power to impose penalty under section 271 of the Act depends upon the satisfaction of the Income-tax Officer in the course of the pro-ceedings under the Act. It cannot be exercised if he is not satisfied and has not....
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....N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC) and noted that the Supreme Court in that case had held that the order imposing penalty under section 271(1)(c) being penal in nature, the rule of strict construction shall apply. 19. In Dilip N. Shroff's case [2007] 291 ITR 519 (SC), the Supreme Court approved the judgment in Ram Commercial Enterprises Ltd.'s case [2000] 246 ITR 568 (Delhi) and also held that section 271(1)(c) being a penal provision must be strictly construed and that mens rea is necessary ingredient for penalty under section 271(1)(c) of the Act. 20. But, in Union of India v. Dharamendra Textile Processsors [2008] 306 ITR 277 (SC), the Supreme Court held that the penalty under section 271(1)(c) is a civil liability and "wilful" concealment is not an essential ingredient for attracting civil liability. It overruled only that portion of the judgment in Dilip N. Shroff's case [2007] 291 ITR 519 (SC) wherein the Supreme Court had held that the mens rea was essential ingredient for imposing penalty under section 271(1)(c) of the Act. This was pointed out in Reliance Petroproducts Pvt. Ltd.'s case [2010] 322 ITR 158 (SC). 21. In Reliance Petroprodu....
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....before imposing penalty, we noticed that in the assessment orders passed by the Assessing Officer for the assessment year 1982-83 (which is the subject-matter of I. T. T. A. No. 29 of 2000) and for the assessment year 1983-84 (which is the subject matter of I. T. T. A. No. 33 of 2000), no such satisfaction is recorded. 25. The Assessing Officer in the assessment order dated March 31, 1989, relating to the assessment year 1982-83 has merely recorded : "Hence, in view of the facts, the income declared as per the revised return filed on March 3, 1987, at Rs. 1,33,102 has been accepted and the assessee is considered to have made full disclosures of incomes for the assessment year 1982-83." Again, in the assessment order dated March 31, 1989, relating to the assessment year 1983-84 has recorded as follows : "In view of the above facts and circumstances of the case, it has been concluded that the assessee has made its full disclosure of its income at Rs. 1,64,930 in the revised return filed on March 3, 1987, and the income in the returns at Rs. 1,64,930 is accepted."Nowhere has the Assessing Officer noted in the assessment order his satisfaction that there w....