1991 (5) TMI 87 - AT - Income Tax

Summary

Issues:
1. Confirmation of penalty under s. 273(2)(aa) of the IT Act, 1961.
2. Lack of notice and opportunity for the assessee in penalty proceedings.
3. Application of s. 292B of the Act to cure irregularities.
4. Distinction between offenses under ss. 273(2)(aa) and 273(2)(c).
5. Legality of penalty under s. 273(2)(aa) without recorded satisfaction by the ITO.

Analysis:
1. The appeal before the Appellate Tribunal ITAT AHMEDABAD-B concerned the confirmation of a penalty of Rs. 11,400 under s. 273(2)(aa) of the IT Act, 1961. The appeal was time-barred by 7 days, but the delay was condoned due to the misplacement of the order by the assessee. The ITO had initially felt satisfied that the assessee had committed a default under s. 273(2)(c) and issued a notice accordingly. However, the ITO later concluded that the assessee violated s. 273(2)(aa) and levied the penalty.

2. The assessee contended that no notice or opportunity was provided under s. 273(2)(aa) for the penalty. The CIT(A) upheld the penalty, citing s. 292B of the Act as curing any irregularities. The Tribunal noted that the foundation of penal action requires the ITO's satisfaction, which must be communicated to the assessee. Non-recording of such satisfaction in the assessment order renders the penalty illegal, as the assessee must be informed of the nature of the default.

3. The Tribunal emphasized that the offenses under ss. 273(2)(aa) and 273(2)(c) are distinct, and the assessee was never informed or given an opportunity to address the specific default under s. 273(2)(aa). The absence of recorded satisfaction by the ITO for this specific default rendered the penalty unsustainable. The Tribunal rejected the argument that the CIT(A)'s hearing of the assessee on the matter cured the defect, as the foundational issue remained.

4. Ultimately, the Tribunal held that the penalty under s. 273(2)(aa) was legally unsustainable due to the lack of recorded satisfaction by the ITO and the failure to provide the assessee with notice and an opportunity to be heard. As a result, the order of the CIT(A) was set aside, and the penalty under s. 273(2)(aa) was also set aside, leading to the allowance of the appeal.