TMI Blog2007 (12) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... f chemicals and also running a hotel in Kurnool Town. The Assessee Company filed its return of income for the Assessment Year 1995-96 on 30.11.1995 disclosing 'Nil' income. The return was processed under Section 143 (1) (a) of the Act on 30.8.1996. It is to be noted that in its return dated 30.11.1995 the assessee company claimed 50% depreciation on Rs.44,42,129/- on the Solar Equipment acquired by it for its hotel project. While stating that the solar equipment was acquired and installed after September, 1994, the Assessee Company claimed 50% depreciation amounting to Rs.22,21,065/- for the assessment year 1995-96. 4. While so, the assessee filed another return of income for the same Assessment Year 1995-96 on 4.5.1998 declaring total income of Rs.4,77,510/- stating that it gave up its claim for depreciation on the solar equipment since M/s. Solardur Energy Systems (P) Limited, Hyderabad, who supplied the solar equipment did not properly maintain its records and books and expressed its inability to produce evidence for the equipment supplied. It was also stated that with a view to avoid protracted litigation the revised return of income was being filed volunt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the penalty levied by the assessing officer. Challenging the said order, the assessee company preferred a further appeal before the Income-tax Appellate Tribunal, Hyderabad. After hearing both the parties, the Tribunal though upheld the order of the Commissioner of Income-tax (Appeals) on the issue of levy of penalty, expressed that the matter requires reconsideration so far as the quantification of penalty is concerned. Accordingly, by order dated 29.10.2004 while allowing the Appeal in part, the matter was remanded to the assessing officer to re-quantify the penalty after giving reasonable opportunity to the assessee in accordance with law. Aggrieved by the same, the assessee company preferred the present Appeal under Section 260-A of the Act. 9. We have heard the learned Counsel for both the parties and perused the material on record. 10. The learned Counsel appearing for the appellant / assessee company vehemently contended that the penalty of Rs.9,10,800/- purportedly levied under Section 271 (1) (C)of the Income-tax Act, 1961 by the respondents is contrary to law and unsustainable. 11. While submitting that recording of satisfaction of concealment of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (1) of Section 271 of the Act, it is clear that the assessing officer, in the course of any proceedings under the Act, is empowered to levy penalty in the circumstances specified in clauses (a) to (d), which included concealment of particulars of income or furnishing inaccurate particulars of income. However, the language of sub-section (1) of Section 271 of the Act itself makes it clear that recording of satisfaction of concealment of income by a person or furnishing inaccurate particulars of such income is a condition precedent for levying penalty invoking the power under Section 271 (1)of the Act. 16. While interpreting the object and intendment of Section 271 (1) of the Act, the Supreme Court in D.M. MANASVI v. C.I.T. (S.C.) [1972] 86 ITR 557 held as under (page561): "What is contemplated by clause (1) of Section 271 is that the Income-tax Officer or the Appellate Assistant Commissioner should have been satisfied in the course of proceedings under the Act regarding matters mentioned in the clauses of that sub-section. It is not, however, essential that notice to the person proceeded against should have also been issued during the course of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MMERCIAL ENTERPRISES LTD. (DELHI) [2000] 246 ITR 568 held that merely because the penalty proceedings have been initiated it cannot be assumed that such a satisfaction was arrived at in the absence of the same being spelt out by the order of the assessing authority. 20. In a recent decision reported in DILIP N. SHROFF v. JOINT CIT (SC)[2007] 291 ITR 519 the Supreme Court having reviewed all the decided cases relating to penalty proceedings under Section 271 (1) (C) of the Act held that the order imposing penalty under Section 271 (1) (C) being penal in nature, the rule of strict construction shall apply. 21. From the legal position noticed above, it is clear that the assessing officer has to form his own opinion and record his satisfaction of concealment of income or furnishing inaccurate particulars of income before initiating penalty proceedings under Section 271 (1)(C) of the Act. It is also clear that such satisfaction of the assessing officer must be spelt out in the order of assessment itself but cannot be assumed from the issue of a notice under Section 271 (1) (C) of the Act. Failure to record such satisfaction amounts to a jurisdictional defect which c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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