TMI Blog2005 (7) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... er called for the details, the assessee submitted to the Assessing Officer that by inadvertent mistake, the claim has been made twice. Actual claim is only Rs. 1,73,126 to which he accepted the addition. The second issue was about the addition out of training expenses debited in respect of M/s. Surekha Decorators and M/s. Grumore Caterers. The assessee could not prove the expenditure, it was claimed before the Assessing Officer that payment was through account payee cheque. The CIT(A) confirmed this addition, as the assessee could not establish the genuineness of the expenditure. The third addition was about amount debited in the foreign travel expenses. The total claim under this head was to the extent of Rs. 22.07 lakhs. The scrutiny of the accounts indicated that a sum of Rs. 8.69 lakhs was claimed on the basis of estimated liability. According to the Assessing Officer, the expenditure had not crystallised before 31-3-1992. It was only a provision and not actual. The details thereof were mentioned in the penalty order passed by the Assessing Officer on 31-3-1995. It was mentioned by the Assessing Officer in the assessment order that he initiated penalty proceedings for all the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department appealed before the Tribunal against cancellation of Rs. 3.00 lakhs and Rs. 1,13,970. While assessee filed an appeal against sustaining the penalty in respect of sum of Rs. 1,73,126. The appeal filed by the department was dismissed by the Tribunal in ITA No. 911/M/98 vide its order dated 29-4-2005. The operating portion of the order is as under : "3. We have duly considered the rival contention. We find that penalty has been deleted by the learned CIT(A) because addition qua foreign tour expenses has been retained marginally and major portion of expenses has been allowed to the assessee. Therefore, it shows that element of concealment was not available. Partial disallowance of expenses could be confirmed because of appreciation of facts, and not because of conduct of the assessee. Similarly for training expenses the learned CIT(A) accepted the contention of the assessee that payment was made through account payee cheques. Nothing contrary was brought to our notice. Therefore, we do not see any good reason to interfere in the order of learned CIT(A). Since on facts, we are satisfied that the assessee has not concealed or furnished inaccurate particulars of the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch should have been recorded by the assessing authority in the order of assessment but has not been so recorded." ( iv )Following the above judgment of the Hon ble Delhi High Court, the Hon ble Allahabad High Court has laid down the said principle in Diwan Enterprises v. CIT ( supra ). This principle has also followed in CIT v. Super Metal Re-rollers (P.) Ltd. ( supra ). ( v )The appellant respectfully submits that the Assessing Officer has not recorded in his order as to his satisfaction as to the assessee having concealed the particulars of his income or furnished inaccurate particulars of such income, before initiation of penalty as required under the provisions of law. Therefore, in absence of such a recording, which is a sine qua non before initiation of penalty under consideration, the order levying penalty is liable to be quashed. The appellant, therefore, prays that the penalty proceedings be quashed." 6. The main crux of the arguments of the learned counsel for the assessee is that the Assessing Officer has not recorded his satisfaction about initiation of penalty in the assessment order. Therefore, the order is bad in law and should be quashed. 7. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the addition and separately initiated penalty proceedings for each addition. It is not the case that at the end of assessment order, he has initiated penalty without application of mind. Therefore, technical objection raised by the assessee is not sustainable. On merits, he supported the order of the CIT(A) on the ground that the mistake was not inadvertent and assessee had filed inaccurate particulars with the return. 11. Since all the facts relating to additional ground are on the record, following the decision of Hon ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383, we admit the additional ground. 12. We have heard the rival submissions and considered the facts and materials on record. We are not convinced with the technical objection raised by the assessee by raising additional ground that the assessment is bad in law because Assessing Officer has not initiated penalty proceedings after taking conscious decision after satisfying himself that there is concealment of income. There is no doubt that assessment proceedings and penalty proceedings are independent. This is evident from the fact that law permits passing of two or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een drafted wherein the factum of initiation of penalty proceedings has been mentioned after every addition that he has applied his mind and he was satisfied about concealment of income and only thereafter penalty proceedings were initiated. There is another point to be noted is that he has not left it to the office staff to initiated penalty proceedings by simply mentioning "to initiate penalty proceedings". He has mentioned penalty proceedings "initiated" after each amount of addition. We are satisfied that Assessing Officer has followed the basic requirement of application of mind before initiating penalty proceedings. Accordingly, this ground of assessee is rejected. 13. Regarding merits, we are of the view that assessee has a reasonable case. It is a fact accepted by the Hon ble Settlement Commission that there was a labour unrest in the business of the assessee. The staff was sacked. The CIT(A) has also accepted this fact. It is reasonable to believe that there would be disruption in sorting out papers. Further, there was no discovery made by the Assessing Officer about concealment of income. When asked for the details about the FPS payments, it was discovered by the asse ..... 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