TMI Blog2007 (1) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... ustained by the learned CIT (Appeals) is bad in law and wrong on facts inasmuch as the addition on account of fee paid to ROC on which the penalty has been levied is based on legal issue and further all material facts were disclosed by the assessee in audited books of account and return. (3) That no specific opportunity was provided to the assessee as to the incorrect particulars or concealments involved. As such too, the penalty as levied is unmerited and unlawful and against the principles of equity, natural justice and fair play. Accordingly also, the penalty deserves to be quashed. (4) That there is no mens rea or contumacious conduct. Penalty is not justified on bona fide difference of law. (5) That the penalty order under section 271(1)( c ) as sustained by the learned CIT (Appeals) is based on erroneous views and/or non-appreciation of the facts and law involved without properly considering the material on record and without following case law that clearly support the appellant. (6) That the penalty as levied is against law and facts of the case involved because no satisfaction as to any concealment of income or furnishing any inaccurate particulars of income wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he penalty is not conferred on the assessing authority by reference to clause ( c ) to section 271(1)( c ) of the Act. The decision of Hon ble Supreme Court in CIT v. S.V. Angidi Chettiar [1962] 44 ITR 739 and D.M. Manasvi v. CIT [1972] 86 ITR 557 were also referred wherein it was held that the assessing authority has to form his opinion and record his satisfaction before initiating the penalty proceedings, and merely because the penalty proceedings having been initiated, it cannot be assumed that such a satisfaction was arrived at. 4. In Dewan Enterprises v. CIT [2000] 246 ITR 571 (Delhi), it was observed by Delhi High Court that non-recording of satisfaction in the assessment order is jurisdictional defect which cannot be cured. The initiation of penalty proceedings was itself bad in law and consequently all the subsequent proceedings leading up to the passing of the penalty order must fail. 5. In CIT v. Vikas Promoters (P.) Ltd. [2005] 277 ITR 337 , it was observed by Delhi High Court that recording of satisfaction before drawing an inference for purpose of levying penalty while completing the assessment under section 143(3) is mandatory for the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of penalty proceedings, the assessee is entitled to show and establish by the material and relevant facts, which may go to affect and having direct hearing on the liability for penalty. Whether there is a concealment to make the penalty exercisable is normally a question of fact. Where the burden of proof in a given case has been discharged on a set of facts, is also a question of fact. The burden is cast on the assessee to offer a bona fide explanation. There are also plethora of judgments to the effect that findings recorded or conclusion drawn in deciding the quantum appeal, are neither conclusive nor binding. For this proposition reliance may be placed on the judgment of Hon ble Kerala High Court in the case of CIT v. Pawan Kumar Dalmia [1987] 168 ITR 1 and the judgment of the Hon ble Allahabad High Court in the case of Banaras Textorium v. CIT [1988] 169 ITR 782 and also the judgment of the Hon ble Delhi High Court in the case of CIT v. Chetan Dass Lachhman Dass [1995] 214 ITR 726. 9. The considerations in penalty proceedings are different from those in quantum proceedings. It is trite law that merely because an addition has been made and confirmed in the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n terms of section 271(1)( c ) of the Act. All the particulars relating to the impugned expenditure were undisputedly furnished before the Assessing Officer as well as in its return of income and the audited annual accounts for the year ended on 31-3-2002. All these documents were enclosed with and forming part of the return of income filed with the department. Thus, there was no concealment nor furnishing of any inaccurate particulars of income. The offence of concealment is a direct attempt to hide an item of income from the knowledge of the Income-tax Department. Whereas in the instant case the assessee has furnished full details in the return of income and the same were verified as correct by the auditor of the company. There is no dispute to the well-settled legal proposition that the penalty proceedings are distinct and different from assessment proceedings. Findings in the assessment proceedings are not conclusive. The entire material available should be considered afresh by the authorities before imposing penalty under section 271(1)( c ). The Explanation to section 271(1)( c ) provides a rule of evidence raising a rebuttable presumption in certain circumstances. No subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessed as income, and ( ii ) the circumstances must show that there was animus i.e., conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. The Explanation has no bearing on factor No. 1 but it has bearing only on factor No. 2. The Explanation does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does. If an assessee given an explanation which is unproved but not disproved i.e., it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee s case is false, the explanation cannot help the Department because there will be no material to show that the amount in question was the income of the assessee. Alternatively, treating the Explanation as dealing with both the ingredients ( i ) and ( ii ) above, where the circumstances do not lead to the reasonable and positive inference that the assessee s explanation is false, the assessee must be held ..... X X X X Extracts X X X X X X X X Extracts X X X X
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