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2006 (6) TMI 510 - DELHI HIGH COURT

2006 (6) TMI 510 - DELHI HIGH COURT - TMI - IT Appeal Nos. 791, 1015, 1044, 1120, 1138, 1155 & 1159 of 2005 45, 79, 80, 127, 211, 221, 252, 323, 326, 329, 339, 490, 491, 492, 548, 562, 583, 590, 591, 647, 664, 751 & 752 of 2006 - Dated:- 2-6-2006 - T.S. THAKUR AND SHIV NARAYAN DHINGRA, JJ. R.D. Jolly, JR. Goel, Sanjeev Sabharwal, Mrs. P.L. Bansal, Vishnu Sharma, Ms. Rashmi Chopra and Ms. Sonia Mathur for the Appellants. O.P. Sapra, Sandeep Sapra, Ajay Vohra, Ms. Kavita Jha, Anil Sharma, Arun Kho .....

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prises Ltd. (2000) 246 ITR 568 (Del) and held that the authority initiating the penalty had not recorded its satisfaction regarding concealment of income or furnishing of inaccurate particulars thereof by the assessee. The revenue has assailed the correctness of the said orders in these appeals. 2. Learned counsel for the revenue advanced a two-fold submission in support of these appeals. Firstly it was contended that the issue of a notice proposing to initiate penalty proceedings against the as .....

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Merely because the authority had not used the words 'I am satisfied that the assessee has concealed his income or furnished inaccurate particulars thereof, would be of no consequence according to the learned counsel. The true test is whether a reading of the order demonstrates application of mind by the authority to the question of concealment and whether satisfaction about such concealment or furnishing of inaccurate particulars is discernible from the same. 3. We have given our anxious co .....

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o be wrong as these cannot be said to have followed the decision in Ram Commercial's case-Ed) and CIT v. JK Synthetics Ltd. (1996) 219 ITR 267 (Del). From a conspectus of these decisions, it is evident that the following propositions of law relevant to levy of penalty under section 271(1)(c) of the Income Tax Act are fairly well settled : (i) That the officer initiating the penalty proceedings must record his satisfaction that the assessee has concealed his income or furnished inaccurate par .....

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. If no satisfaction is recorded, the initiation of penalty proceedings is itself incompetent. 4. The contention urged on behalf of the revenue, that the issue of a notice initiating penalty proceedings should in itself constitute satisfaction of the authority initiating the proceedings, must fail. The decision of this court and those of the apex court in D.M Manasvi v. CIT (1972) 86 ITR 557 (SC) and CIT v. S.V. Angidi Chettiar (1962) 44 ITR 739 (SC) do not support that proposition. As a Bench o .....

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e authority initiating the proceedings has in the course of the order made by it recorded findings which would in themselves constitute not only proper application of mind but satisfaction of the authority that the assessee has either concealed his income or furnished inaccurate particulars of such income. Recording of satisfaction before initiating proceedings is in our opinion a requirement that ensures that penalty proceedings are not initiated as a matter of course and in a mechanical fashio .....

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y the authority doing so. Application of mind is thus the very essence of the requirement of recording satisfaction. The statute does ,not, however, prescribe any format in which satisfaction may be recorded or application of mind demonstrated. It would, therefore, depend upon the facts and circumstances of each case whether or not the authority has applied its mind to the question of concealment of income or furnishing of inaccurate particulars of any such income. It follows that the question w .....

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