TMI Blog2011 (2) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... e and surmise. The question of afterthought will arise when an explanation was asked to be given earlier but not given at the appropriate time and after having realized the mistake any document or affidavit is created or prepared subsequently it can be said to be an instance of afterthought. Explanation is required at the stage of initiation of the penalty proceedings, not at the time of the assessment made on discovery of concealment of income. On discovery of concealment of income the Assessing Officer is to collect materials and to add the amount of concealed income in the assessment. At that stage no explanation is required as to why there has been concealment of income. - Matter remanded back for fresh consideration. - IT APPEAL NO. 698 OF 2007 - - - Dated:- 18-2-2011 - KALYAN JYOTI SENGUPTA AND KANCHAN CHAKRABORTY, JJ. JUDGMENT Kalyan Jyoti Sengupta, J. By an order of this Court dated 10-1-2007 read with order dated 20-1-2008 the above appeal under section 260A of Income-tax Act, 1961 (hereinafter as the said Act) was admitted on the following substantial questions of law : (I) Whether the Assessing Officer had any jurisdiction to impose penalty under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st 25 per cent allowed by the CIT(A). Thus the revised total income of the assessee for the year under consideration after giving effect to the order of the Tribunal, stood at Rs. 9,86,070. After having assessed taxable income the Assessing Officer simultaneously initiated penalty proceeding under section 271(1)(c) on account of under-statement of professional income of Rs. 9,47,750 issuing a show-cause notice. The said penalty proceeding was contested by the assessee taking preliminary objection that the Assessing Officer without having recorded his satisfaction as required under the said section has initiated the proceeding. As such, this proceeding is bad on account of lack of jurisdiction. It was contended that there has been no mala fide on the part of assessee as he actually had to depend upon the Accountant who is new comer in the profession and under his guidance and advice he filed returns and accordingly the said income was not mentioned in the returns originally filed. The Accountant concerned has also sworn in an affidavit before the Notary Public taking upon himself the burden of failure and lapses. The said affidavit was filed before the Assessing Officer. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, he has relied on a number of decisions which are as follows : Mehta Parikh Co. v. CIT [1956] 30 ITR 181 (SC). 5. Learned Counsel for the revenue while supporting the judgment and order of the learned Tribunal submits that this Court shall not interfere with the concurrent fact findings of all the authorities below. On fact it has been found by all the authorities below that admittedly there has been a concealment of income which was not returned. When the affidavit of Accountant to support the case of the assessee was not accepted and further disbelieved this Court will not substitute its own assessment of belief or disbelief. 6. He submits that the recording of satisfaction for drawing up the proceedings under section 271(1)(C) is not required to be recorded formally. If in substance satisfaction is to be found obviously the mechanical formality under the said section is not required. It is possible for the Assessing Officer to draw up the proceedings simultaneously with the order of assessment. 7. He submits further that the Tribunal has passed the impugned order after having considered the large number of High Court's decisions in the subject, this Court should not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court took same view in case of Diwan Enterprises (supra). In this case the High Court has held that failure to record satisfaction in so many words that the assessee had concealed the particulars of his income or furnished inaccurate particulars of such income is non-curable jurisdictional defect, initiation of penalty proceeding without satisfaction being recorded had to be declared illegal and it must fail. 13. However, the Allahabad High Court in case of Shyam Biri Works (P.) Ltd. (supra) had not accepted the view expressed by the Delhi High Court and it has ruled as follows: "Whether the Assessing Officer had to record his satisfaction under the Income-tax Act, 1961 it is specifically mentioned, in section 148(2) of the Act which provides that the Assessing Officer before issuing any notice under this section will record the reason for doing so. Section 271 does not have similar provision requiring the record of reason for satisfaction. Hence it is to be inferred that Parliament never intended that before initiating penalty proceeding and issuing notice under section 271, the Assessing Officer must record his reason in writing for doing so. Although the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said to be invalid and without jurisdiction. However, without having any materials or any overt action leading to drawing inference of satisfaction of the Assessing Officer such proceedings under section 271 would obviously be bad. We are of the opinion satisfaction of the Assessing Officer must reflect from the order either with the expressed words recorded by the Assessing Officer himself or by his overt act and action. 15. In this case as rightly contended by the learned counsel for the respondents that while passing assessment order the Assessing Officer has recorded that there has been concealment of income and penalty proceeding should follow. Ultimately, when the Tribunal affirmed the order substantially about the concealment of income and while implementing the order of the Tribunal the Assessing Officer made it clear that the penalty proceeding is required to be initiated. The learned Tribunal has relied on the observation and reasoning of the Assessing Officer. We do not want to repeat the same as it is essentially question of fact. We have checked up from the records that the recording of the Tribunal of the observation of the Assessing Officer is accurately done. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned therein without the said Accountant being subjected to cross-examination, is unjust and improper. After cross-examination if it were found that at the instance of the assessee/appellant the said affidavit was filed intending to cover up his deliberate act of concealment, discarding of evidence would have been proper, the distinction has to be drawn whether it is a deliberate act of concealment of income on the part of the assessee or it is an omission on the part of the Accountant to record the same. Here fact clearly depicts that all records were available with the Nursing Home. Had there been any deliberate act of concealment on the part of the appellant relevant records and documents would not have been kept, and it could have been destroyed or secreted at some other place. This was not done. However, the aforesaid observation of ours is based on records as available and it is not final opinion. This could be found out only when the said Accountant is subjected to cross-examination. 22. It is settled position in law in view of number of decisions of the Hon'ble Supreme Court as well as by the various High Courts that the affidavit of the Accountant cannot be thrown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such matters the Court should adopt a liberal and justice oriented approach (Collector Special Land Acquisition Officer v. Mst Katiji AIR 1987 SC 1353)." 27. We accordingly hold that on this point the matter has to be reconsidered. We therefore set aside the findings of all the authorities below and remand the matter to the file of Commissioner of Income-tax who will if so thinks cross-examine the said deponent/Accountant as to correctness and truthfulness of the statement made by him. If it is found that such a statement is correct obviously it has to be held that explanation offered by the assessee appellant is acceptable so much so not to impose any penalty. If it is found that said statement is unbelievable and it was done in order to cover up the lapses of the appellant obviously the penalty imposed by all the fora below will be final. 28. Above exercise shall be initiated and completed within two months from the date of communication of this order. If no such step is taken it shall be presumed that statements made in the said affidavit are to be correct, consequently, the explanation given by the assessee appellant is adequate for not imposing any penalty and therefore th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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