AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2005 (5) TMI 16
X X X X Extracts X X X X
X X X X Extracts X X X X
....lakhs. Aggrieved by this order, the assessee preferred an appeal which was dismissed by the Commissioner of Income-tax vide his order dated July 29, 1998, confirming the imposition of penalty under section 271(1)(c) of the Act. This order of the first appellate authority was an improvement (?) by the assessee before the Income-tax Appellate Tribunal. The petitioner assessee thus has challenged the order of the Appellate Tribunal before this court in an appeal under section 260A of the Act. After hearing learned counsel for the parties, we are of the opinion that out of all the questions framed by the assessee, only the following question of law arises for consideration of the court in the present appeal: "(i) Whether, on the facts and in the circumstances of the present case, the Income-tax Appellate Tribunal has erred in sustaining the penalty under section 271(1)(c) of the Act in the case of the appellant, for the assessment year 1992-93, inasmuch as the satisfaction of the Assessing Officer as contemplated in section 271(1)(c) of the Act was not recorded in the present case?" Learned counsel for the petitioner heavily relied upon the judgment of the Division Bench of this cou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....de order dated September 29, 1995 held that the plea has no merit and penalty needs to be imposed upon the petitioner. In the order imposing penalty, it was noticed that the alleged loan creditors were found to be non-existent and genuineness of the loans remained unverifiable. However, in the order of the Assessing Officer, it was noticed that some of the notices were returned unserved by the postal authorities while there were no remarks with regard to others. These facts by themselves, may not have been sufficient to interfere with the concurrent order passed by the concerned authorities. What is most material in the present case is, that the Assessing Officer on the very day, when he passed the assessment order, had also recorded a separate note which has been produced before us having a direct bearing on the matter in controversy before us. It will be appropriate to reproduce the note itself rather than referring its some extracts, which was recorded on March 29, 1995. It reads as under: "M/s. Shri Bhagwant Finance Co. Ltd. Assessment year 1992-93 Taxable Income b/d : 5,09,693 Assessed. Issue demand notice and challan. Give credit of prepaid taxes and charge intt. accordin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Assessing Officer and penalty proceedings were initiated which were confirmed and penalty imposed by the Assistant Commissioner vide his order dated September 29, 1995. It cannot be said that the satisfaction recorded by the Assessing Officer is the result of due application of mind to the ingredients of section 271(1)(c) of the Act, but is founded on the threat of the mighty Revenue to an assessee. We are unable to understand as to how penalty proceedings can be initiated against an assessee as a safeguard against any default in payment of tax for the same year, i.e., 1992-93. It will not only be unjust and unfair, but also contrary to the scheme of the Act if the revenue authorities are permitted to use the initiation, continuation of penalty proceedings and imposition thereof, as a threat to an assessee for recovery of the tax due from the concerned assessee. Established canons of law impose a duty upon the concerned authorities to apply their mind, record satisfaction and then alone initiate penalty proceedings in conformity with the provisions of section 271 of the Act. Such application of mind essentially must be free of bias and the opinion arrived at should not offend the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gh for a different reason and because the very foundation for initiation of the penalty proceedings is conspicuous by its absence. The opening clause of sub-section (1) of section 271 itself contemplates a finding as regards satisfaction of availability of grounds under clause (c) being recorded during the assessment proceedings. Recently, in CIT v. Ram Commercial Enterprises Ltd. (I.T.C. No. 13 of 1996 decided on October 8,1998-since reported in [2000] 246 ITR 568 (Delhi)), following the law laid down by their Lordships of the Supreme Court in D.M. Manasvi v. CIT [1972] 86 ITR 557 and CIT v. S.V. Angidi Chettiar [1962] 44 ITR 739 (SC), we have held that unless requisite satisfaction was recorded in the proceedings under the Act, which would mean the assessment proceedings, the jurisdiction to initiate the penalty proceedings could not have been exercised. Satisfaction has to be before the issue of notice or initiation of any step for imposing penalty. In the case at hand we find the Assessing Officer having nowhere recorded till the conclusion of the assessment proceedings his satisfaction that the assessee had concealed the particulars of his income or furnished inaccurate partic....