TaxTMI 
TaxTMI 
2014 (6) TMI 16
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.... interest on Sugar Development Fund (SDF). The assessment year to which the appeal relates is A.Y. 2000-01. The following questions of law have been raised by the Revenue in the appeal. "1. Whether the ITAT erred in law in interpreting the language and provisions of Section 271(1)(c) which only talks of initiation of penalty in "course of any proceedings" and there is no condition in the language of the Section which calls for recording of satisfaction before initiation of u/s 271(1)(c). 2. Whether the ITAT erred in law in not considering the provisions of Explanation 7 (1B) to section 271 which clearly indicates that where any order of assessment contains a direction for initiation of penalty under clause (c) of sub-section (1), s....
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....ounts written off (Item No.(vii) above); commission paid (Item No.(viii) above); foreign exchange fluctuation (Item No.(ix) above); and depreciation (Item No.(x) above). Significantly, the Assessing Officer did not direct the initiation of any penalty under section 271(1)(c) in respect of the other heads including in particular on the aspect of interest on SDF loan. In the concluding part of the order, the Assessing Officer observed as follows:- "Assessed at Business Loss of (-) Rs. (-) 14,03,30,430/-. Issue necessary forms. Issue penalty notice u/s 271(1)(c) as discussed above." (emphasis supplied) Consequently, the Assessing Officer had directed the issuance of a penalty notice under section 271(1)(c) as discussed above. Where th....
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....ed in the course of any proceedings under the Act that the assessee had concealed the particulars of his income or furnished inaccurate particulars of such income, to direct the payment of penalty. Sub-section (1B) was introduced by way of an amendment by the Finance Act, 2008 with retrospective effect from 1 April 1989. Sub-section (1B) reads as follows:- "(1B)- 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) of sub-section (1), such an order of assessment or reassessment shall be deemed to constitute satisfaction of the Assessing Officer for initiation of ....
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.... books on accrual basis but the unpaid amounts have been disallowed by the department u/s 43B in earlier assessments holding SDF to be a financial institution against which the assessee is in appeal in the respective years. During the previous years relevant to this assessment year, the assessee company has paid interest of Rs. 14.40 lacs out of the amounts provided earlier. The actual payment now having been made in this year, the assessee has claimed the amount of Rs. 14.40 lacs as deductible u/s 43B, since the provisions made in earlier years have not been allowed. In case the assessee succeeds in its appeal the amount claimed this year shall be offered for tax." 5.2 On examination of the record of earlier years, it is found that in t....
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....f several other heads, where the Assessing Officer did consider it appropriate to initiate penalty proceedings, he made an observation to that effect. In fact, even in the concluding part of his order, the Assessing Officer issued a direction for initiating penalty notice under section 271(1)(c) "as discussed above". The expression "as discussed above" is material because it refers to those heads in respect of which a specific direction was issued by him for initiating steps under section 271(1)(c). Undoubtedly, as held in the decision of the Supreme Court in Mak Data Private Limited Vs. Commissioner of Income Tax1, the Assessing Officer has to satisfy himself whether penalty proceedings should be initiated or not during the course of asses....