TMI Blog2011 (6) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... - ITA No. 622/2008 - - - Dated:- 3-6-2011 - A.K. Sikri and M.L. Mehta, JJ. O.S. Bajpai, Sr. Adv. with V.N. Jha, Adv. for the Appellant Anshul Sharma, Adv. for the Respondent JUDGMENT M.L. Mehta, J 1. This appeal under Section 260A of the Income Tax Act, (for short 'the Act') is filed by the assessee against the order of the Income Tax Appellate Tribunal (for short 'the Tribunal'). dated 25th January, 2008, whereby the Tribunal set aside the order of the CIT(A) deleting the penalty of Rs.10,01,684/-, levied by the Assessing Officer. This appeal is admitted on the following substantial question of law:- "Whether on the facts and circumstances of the case the Tribunal was justified in reversing the order of the CIT(A) who deleted the penalty of Rs.10,01,684/- under Section 271(1)(c) of the Act?" 2. We propose to dispose of this appeal and for its disposal, the facts need to be narrated for proper understanding of the issue involved. 3. A search and seizure operation was conducted at the premises of the appellant/Shri Rajiv Bhatia, Director of the assessee company and certain documents were seized, including annexures A-2, A-3 and A-10. Notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, before the CIT(A), who upheld the additions made by the Assessing Officer, and disbelieved the plea of the assessee that its Director, Rajeev Bhatia spent the sum recorded in the above mentioned three annexures from the imprest amount on behalf of the assessee. It was observed that said expenditure was not debited even till 1st April, 2001 in the imprest account of Mr. Rajiv Bhatia in the books of account maintained by the assessee. The entries in this regard were made only in September, 2001 i.e., much after the date of search which took place on 4th April, 2000. While upholding the additions made by the Assessing Officer, the CIT(A) vide order dated 29th August, 2003 observed as under:- "6.4 I have considered the issue carefully. During the search operation the Director of the appellant company, Shri Rajeev Bhatia has submitted that a sum of Rs.15 to 20 lakhs have been spent on the construction of the Golden Tulip Tourist Resort outside the account books. This evidence which is spontaneous expression of truth carries much weightage. The theory of imprest account appears to be clearly an after-thought. There was nothing to prevent Shri Bhatia from stating the truth i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue that the imprest account was an after thought is correct. The plea put forth by the assessee has not been substantiated. Admittedly the expenditures in question were incurred on behalf of the assessee. The same are, therefore, to be considered as undisclosed income. In our view, the revenue authorities were fully justified in making the aforesaid addition and their orders on this issue does not call for any interference. The same is confirmed and grounds 4 to 4.3 and 5 are dismissed." 6. After the above order dated 16th September, 2005 of the Tribunal in quantum proceedings, the Assessing Officer gave specific opportunity to the assessee in response to which written explanation dated 17th March, 2006 was filed, wherein the submissions made in the assessment proceedings were reiterated in the sense that no extra cash was found by the search party; imprest amount was given to the Director, which was spent by him; and the fact that addition had been made in the quantum proceedings, could not be a reason to leavy penalty. The Assessing Officer rejected the pleas of the assessee and maintained the penalty. Against this, matter was carried in appeal before the CIT(A), wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee which has been assessed by the AO and the addition on which has been upheld by ITAT in the quantum proceedings. The explanation given by the assessee was found to be incorrect. In this view of the situation, it is held that the ld. CIT(A) has erred in deleting the penalty which was rightly levied by the Assessing Officer The order of CIT(A) is set asdie and that of AO is restored." 9. It is against this impugned order of the Tribunal that the assessee is before us in appeal in ITA No. 622/2008. 10. The order of the Tribunal with regard to penalty as levied by the Assessing Officer, has been assailed by the learned counsel for the assessee, mainly on the ground that in the given facts and circumstances, it could not be said to be a case of concealment of income or furnishing of inaccurate particulars by the assessee. He also submitted that the primary burden of proof was on the Revenue and that satisfaction was required to be recorded by the Assessing Officer in this regard before proceedings to levy any penalty under Section 27(1)(c). Learned counsel relied upon various judgments in support of his submissions. A reference can be made to those, viz., Dilip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to initiate penalty proceedings the following pre-requisites should obtain: (i) The Assessing Officer should be "satisfied" that: (a) the assessee had either concealed particulars of his income; or (b) furnished inaccurate particulars of his income; or (c) infracted both (a) and (b). (ii) This "satisfaction" should be arrived at during the course of "any" proceedings. These could be assessment, reassessment or rectification proceedings, but not penalty proceedings. (iii) If ingredients contained in (i) and (ii) are present a notice to show cause under Section 274 of the Act shall issue setting out therein the infraction the assessee is said to have committed. The notice under Section 274 of the act can be issued both during or after the completion of assessment proceedings, but the satisfaction of the Assessing Officer that there has been an infraction of clause (c) of sub-section (1) of Section 271 should precede conclusion of the proceedings pending before the Assessing Officer. (iv) the order imposing penalty can be passed only after assessment proceedings are complete. At the stage of initiation of penalty proceedings the order passed by the Assessing Officer need not reflect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of accounts of the assessee and even uptill September 2001. From the above-noted order of the authorities below, it is clearly discernible that the AO had recorded prima facie satisfaction that the unexplained amount of expenditure recorded in the seized document was the unexplained income. It could not be said to be a mistake committed by the assessee in not making entries for such a long time. It was a clear case of furnishing inaccurate particulars of the income by the assessee. From all this, it is established that the AO had arrived at satisfaction during the course of proceedings before initiating penalty proceedings. We have found the prima facie satisfaction discernible from the order of AO. In view of our agreeing with the finding that there existed prima facie satisfaction discernible from the order of the AO, the contention of the learned counsel for the Revenue that no such satisfaction was required for imposing penalty under Section 158BFA(2), wherein the penalty was automatic would only be an academic discussion and need not to be gone into. It is also because the question of law on which the appeal was admitted was under Section 271(1)(c) and not under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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