TMI Blog2005 (2) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... stion of law in terms of section 260A - We see no reason to proceed with this appeal any further. - - - - - Dated:- 3-2-2005 - Judge(s) : SWATANTER KUMAR., MADAN B. LOKUR JUDGMENT The judgment of the court was delivered by Swatanter Kumar J.- The Commissioner of Income-tax questions the validity and correctness of the order dated February 4, 2003 in this appeal under section 260A of the Income-tax Act, 1961 (hereinafter referred to as the "Act"). Learned counsel appearing for the appellant contended that the Tribunal has fallen in error of law in coming to the conclusion that the Assessing Officer had not recorded his satisfaction for initiation of penalty as contemplated under section 271(1)(c) of the Act. It is also contended th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty proceedings under section 271(1)(c) will not amount to recording of satisfaction before issue of notice under section 271(1)(c) of the Act. Respectfully following the same, we hold that as the initiation of penalty proceedings under section 271(1)(c) itself was not valid, the imposition of penalty on the basis of such notice was invalid. Though the Commissioner of Income-tax (Appeals) has cancelled the penalty on the basis of the merits, we are not going into the merits of the case as on the preliminary ground itself, the penalty imposed by the Assessing Officer does not survive. Thus, while affirming the order of Commissioner of Income-tax (Appeals), we dismiss the ground of appeal raised by the Revenue." The necessary facts are that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Income-tax Appellate Tribunal, which as already noticed above, met the same fate with the observations as afore-recorded. We have perused the order of the Assessing Officer initiating the penalty proceedings under section 271(1)(c). In this order there is no reasoning much less an appropriate reasoning has been given which could in any way demonstrate that the Assessing Officer has recorded his satisfaction at the time of initiation of the penalty proceedings. The provisions of section 271(1)(c) of the Act contemplate recording of a satisfaction by the Assessing Officer which would form the basis of discretion exercisable by such authority under the provisions of that Act. The discretion that is indicated by the Legislature by using t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the requisite satisfaction. Even the order of assessment prima facie does not establish the concealment or furnishing of incorrect particulars. On the contrary, the appellate authority as well as the Tribunal have held that the assessee has acted bona fide and relied upon the judgments of this court. It will be appropriate to refer to the recent Division Bench judgments of this court in the case of CIT v. Ram Commercial Enterprises Ltd. [2000] 246 ITR 568 and Diwan Enterprises v. CIT [2000] 246 ITR 571, where, after discussing the matter at some length, the court held as under: "In spite of the abovesaid plea of the petitioner having been rejected, the penalty imposed under section 271(1)(c) has still to be set aside though for a diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear from the abovereferred judgments that the consistent view of this court has been that the Assessing Officer is under an obligation to record satisfaction prior to the initiation of the penalty proceedings in terms of section 271(1)(c) of the Act. The order of the Assessing Officer should apparently show that there is application of mind. Application of mind can only be gathered by the reasons stated in the order and reference to other records may not be very relevant for this purpose. The satisfaction contemplated under section 271(1)(c) of the Act may be subjective but it must be arrived at objectively so that the underlining of these provisions which would require a strict construction the provisions being penal in nature, would st ..... X X X X Extracts X X X X X X X X Extracts X X X X
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