2007 (9) TMI 255 - HC - Income Tax

Penalty levied u/s 271 (1)(c) - assessment order indicates no satisfaction by the Assessing Officer that the penalty proceedings should be initiated against the Assessee moreover revenue had been unable to demonstrate that the Assessee had concealed any income or furnished inaccurate particulars of income therefore no penalty can be levied penalty proceedings not sustainable

Summary

Issues:
1. Appeal against order of Income Tax Appellate Tribunal setting aside penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Interpretation of whether satisfaction of the officer initiating penalty proceedings under Section 271 of the Income Tax Act should be explicitly recorded in the assessment order.

Analysis:
1. The appeal was directed against the Tribunal's order setting aside the penalty under Section 271(1)(c) of the Act for the assessment year 1995-96. The Tribunal's decision was based on the absence of recorded satisfaction by the Assessing Officer regarding concealment of income or inaccurate particulars furnished by the Assessee in the assessment order.

2. Ms. Prem Lata Bansal referred to a previous judgment and highlighted a substantial question of law regarding the requirement of recording satisfaction by the Assessing Officer for initiating penalty proceedings. The Court was urged to await a decision from a larger Bench on this matter.

3. The Court noted that the decision in Ram Commercial Enterprises Limited (2000) 246 ITR 568 had been upheld by the Supreme Court in subsequent cases. However, the Court acknowledged the pending consideration by a larger Bench on whether the satisfaction of the Assessing Officer must be explicitly recorded in the assessment order for initiating penalty proceedings.

4. In case the larger Bench decides that the satisfaction need not be expressly indicated in the assessment order, the Court stated that the assessment order in the present case would need to be examined to determine if the satisfaction of the Assessing Officer is discernible from it.

5. Upon reviewing the assessment order, the Court found that the observation made by the Assessing Officer regarding the initiation of penalty proceedings did not meet the requirements of Section 271(1)(c) of the Act, as clarified in the previous judgment. The Court concluded that no satisfaction of the Assessing Officer for initiating penalty proceedings against the Assessee was discernible from the assessment order.

6. Consequently, the Court held that no substantial question of law arose and dismissed the appeal against the Tribunal's order setting aside the penalty under Section 271(1)(c) of the Act for the assessment year 1995-96.