TMI Blog2007 (12) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... ucted at various premises of the group of the assessee on 6-6-2003. In response to notice issued under section 153A of the Act, on 1-11-2003, the assessee filed return on 30-7-2004 by declaring nil income. In the assessment framed under section 153A read with section 143(3) of the Act, the following additions were made to the declared income of the assessee : (i) Extra income earned which was not found recorded in the regular books of accounts amounting to Rs. 5,67,926 and (ii) expenditure paid in cash amounting to Rs. 56,085 added under section 40A(3) of the Act. The Assessing Officer initiated penalty proceeding under section 271(1)(c) of the Act for concealment of income/filing of inaccurate particulars of income. The assessee replied the show-cause notice so issued vide letter dated 5-9-2006. After carefully considering the reply of the assessee the learned Assessing Officer finally levied a penalty of Rs. 2,08,480 under section 271(1)(c) of the Act, as per law at the rate of 100 per cent of the tax sought to be evaded. The above action of the Assessing Officer was also confirmed by the learned CIT(A). Now, the assessee is in further appeal. The assessee has not filed appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which the impugned penalty is based. In the assessment order, the Assessing Officer has mentioned that the penalty proceedings under section 271(1)(c) have been separately initiated for filing inaccurate particulars of income/concealment of income . 5. First of all, we are dealing with the legal objections raised by the assessee. It has been contended that no requisite satisfaction has been recorded by the Assessing Officer either in the assessment order or in the notice issued under section 271(1)(c) to the assessee on 28-3-2006. As per learned counsel, the Assessing Officer has to come to a definite conclusion and has to record his satisfaction that the assessee has concealed income/has furnished inaccurate particulars of income. The learned Departmental Representative has controverted the above submission of learned Authorised Representative and has further contended that it is enough compliance if the satisfaction of the learned Assessing Officer is manifest from the assessment order. 6. The latest legal position which has emerged from the decisions of Hon ble apex Court of this country, rendered in the cases of (1) Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519 (SC) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars of income, the assessee does not ipso facto become liable to penalty. Imposition of penalty is not automatic. The discretion given to the Assessing Officer in this regard has to be exercised keeping in mind the relevant factors with a fair and objective approach. 7. Now coming to the recording of satisfaction we have noticed that the Assessing Officer has simply mentioned that the penalty proceedings are being separately initiated. He has nowhere come to the conclusion from which it can be specifically gathered that the assessee has either concealed income or has furnished inaccurate particulars of income. The Assessing Officer has also not displayed such satisfaction even in the notice issued under section 271(1)(c). Rather in the notice it is not clear as to whether it was issued for concealment of income or for furnishing of inaccurate particulars of income, or for both. In this regard the learned counsel, Shri U.C. Jain has referred to the decision of the Hon ble Delhi High Court given in the case of CIT v. Ram Commercial Enterprises Ltd. [2000] 246 ITR 568 (Delhi) in which the Hon ble Delhi High Court after relying on the decision of the Hon ble Supreme Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n D.M. Manasvi v. CIT [1972] 86 ITR 557 (SC) 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 has nowhere recorded till the conclusion of the assessment proceedings his satisfaction that the assessee had concealed the particulars of his income or furnished inaccurate particulars of such income. This is a jurisdictional defect, which cannot be cured. The initiation of the penalty proceeding was itself bad and consequently, all the subsequent proceedings leading upto the passing of the penalty order fail. CWP No. 3869 of 1997 is, therefore, liable to be allowed. The Delhi E Bench of the Tribunal while deciding the case of Balka Service (P.) Ltd. v. ITO [2006] 102 TTJ (Delhi) 115 has held that merely by writing issue of notice under section 271(1)(c) for furnishing inaccurate particulars of income/concealin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to do so cannot amount to mere and sheer irregularities. We are not concerned with the irregularities of evidence but we are concerned with a specific note of satisfaction, which is required to initiate penalty under section 271(1)(c) of the Act. The learned Authorised Representative has relied on the decision of Hon ble Madras High Court in the case of M. Sajjanraj Nahar v. CIT [2006] 283 ITR 230 (Mad.); the fact of the above decisions are distinguishable. Moreover, this very Bench has similar conclusion in recent decision in the case of Navini Enterprises v. Asstt. CIT ITA No. 590/Ju/2006 dated 7-9-2007 in which decision of Hon ble Madras High Court was found not applicable as in that case the revised return had been filed. Moreover, the issue involved in this case is covered by the decision of the Jodhpur Bench itself. The non-recording of satisfaction has been held not as a mere irregularity by the Calcutta Bench in the case of ITO v. Budge Budge Co. Ltd. [2006] 100 ITD 387 which was followed by this Bench in the cases of Verma Tractors v. Asstt. CIT [2007] 18 SOT 9 (Jodh.) (SMC) (URO) and Navini Enterprises. The other decision on which learned Departmental Representative has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no mens rea or guilty mind on his part; even in this view of the matter, the explanation alone cannot justify levy of penalty and absence of proof acceptable to the Department cannot be equated with fraud or willful default. Thus, the Assessing Officer is required to prove positive concealment. If it is found noted, yes, one may gather such a satisfaction of the Assessing Officer. In a recent decision, the Hon ble Mumbai Bench of Tribunal has examined nature of proceedings under section 271(1)(c) threadbare and has finally concluded that the Assessing Officer has to arrive at his satisfaction and simply putting a footnote issue penalty notice under section 271(1)(c) does not mean a satisfaction of the Assessing Officer about the existence of any of the condition which attracts penalty under section 271(1)(c) of the Act. The Hon ble Bench has placed heavy reliance on the decision of the case of Hon ble Supreme Court in the case of CIT v. S.V. Angidi Chettiar [1962] 44 ITR 739, inter alia. 9. The overall picture which now emerges is that the Assessing Officer has to record his satisfaction in so many words marely mentioning penalty proceedings under section 271(1)(c), are be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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