1977 (7) TMI 37 - HC - Income Tax

Summary

Issues Involved:
1. Satisfaction of the Income-tax Officer u/s 271(1)(c).
2. Jurisdiction of the Income-tax Officer in referring the penalty proceeding to the Inspecting Assistant Commissioner u/s 274(2).
3. Timing of the penalty notice issuance.
4. Impact of the Appellate Assistant Commissioner's order on the penalty proceeding.
5. Adequacy of particulars in the penalty notices.

Summary:

1. Satisfaction of the Income-tax Officer u/s 271(1)(c):
The appellant contended that the Income-tax Officer (ITO) was not satisfied during the assessment proceedings about the conditions mentioned in section 271(1)(c). The court held that the ITO must be prima facie satisfied before issuing a penalty notice, but it is not mandatory to record such satisfaction in writing. The facts of the case indicated that the ITO was prima facie satisfied, as evidenced by the additions made and the issuance of the penalty notice during the assessment proceedings.

2. Jurisdiction of the Income-tax Officer in referring the penalty proceeding to the Inspecting Assistant Commissioner u/s 274(2):
The appellant argued that the ITO acted without jurisdiction in referring the penalty proceeding to the Inspecting Assistant Commissioner without determining that the minimum penalty imposable exceeded Rs. 1,000. The court clarified that the ITO need not determine the exact amount of penalty but should make a prima facie consideration. The large sums added by the ITO indicated that the minimum penalty would exceed Rs. 1,000, thus justifying the reference.

3. Timing of the penalty notice issuance:
The appellant contended that the penalty notice could not be issued before the completion of the assessment proceedings. The court referred to the Supreme Court's decision in D. M. Manasvi v. Commissioner of Income-tax, which stated that the satisfaction of the ITO must precede the issue of notice, but the notice itself can be issued either before or after the completion of the assessment proceedings.

4. Impact of the Appellate Assistant Commissioner's order on the penalty proceeding:
The appellant argued that the penalty proceeding became infructuous after the Appellate Assistant Commissioner deleted the addition of Rs. 27,62,346. The court found that the penalty proceeding was not solely based on this amount, as other additions, such as Rs. 8,000 and Rs. 21,942.24, were upheld. Therefore, the penalty proceeding remained valid.

5. Adequacy of particulars in the penalty notices:
The appellant claimed that the penalty notices were vague and did not provide particulars of the concealed income, thus depriving them of a reasonable opportunity to be heard. The court held that section 274(1) does not require the particulars to be mentioned in the notice but mandates that the assessee be given a reasonable opportunity of being heard. The court directed the ITO to provide the necessary particulars before the Inspecting Assistant Commissioner proceeds with the matter.

Conclusion:
All contentions of the appellant were rejected, and the appeal was dismissed without any order for costs. All interim orders were vacated.