2006 (6) TMI 510

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....ta, Ms. Radha, Satyen Sethi and Rajesh Mahna for the Respondents. JUDGMENT T.S. Thakur, J.:- Tribunal has, in all these cases, either deleted or affirmed the deletion of penalty levied upon the assessee under section 271(1)(c) of the Income Tax Act, 1961. The Tribunal has, while doing so, relied upon a decision of Division Bench of this court in CIT v. Ram Commercial Enterprises Ltd. (2000) 246 ITR 568 (Del) and held that the authority initiating the penalty had not recorded its satisfaction regarding concealment of income or furnishing of inaccurate particulars thereof by the assessee. The revenue has assailed the correctness of the said orders in these appeals. 2. Learned counsel for the revenue advanced a two-fold submission in suppo....

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.... & Sons (1972) 83 ITR 369 (SC), Anantharam Veerasinghaiah & Co. v. CIT (1980) 123 ITR 457 (SC) (These two citations seem to be wrong as these cannot be said to have followed the decision in Ram Commercial's case-Ed) and CIT v. JK Synthetics Ltd. (1996) 219 ITR 267 (Del). From a conspectus of these decisions, it is evident that the following propositions of law relevant to levy of penalty under section 271(1)(c) of the Income Tax Act are fairly well settled : (i) That the officer initiating the penalty proceedings must record his satisfaction that the assessee has concealed his income or furnished inaccurate particulars of such income. (ii) Such satisfaction must be recorded in the course of any proceedings under the Act. (iii) The....

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....elves constitute not only proper application of mind but satisfaction of the authority that the assessee has either concealed his income or furnished inaccurate particulars of such income. Recording of satisfaction before initiating proceedings is in our opinion a requirement that ensures that penalty proceedings are not initiated as a matter of course and in a mechanical fashion. The scheme of the Act and the provisions authorising levy of penalty sufficiently show that levy of penalty is not a matter of course. The use of the word 'may' in section 271 by itself suggests that the authorities mentioned therein may or may not initiate proceedings for levy of penalty and even if the proceedings are initiated, they may or may not levy ....