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TMI Blog2016 (2) TMI 1322X X X X Extracts X X X X X X X X Extracts X X X X ..... . The ld.AO initiated the penalty proceedings u/s. 271(1) ( c) of the Act for concealment of income and furnishing inaccurate particulars of income in the assessment order without mentioning the specific charge on which the said penalty proceedings have been initiated by him. The ld. AO vide his order dated 25-06-2010 levied the impugned penalty u/s. 271(1)( c) of the Act. This action of the ld.AO was upheld by the ld. CIT(A) on 1st appeal. Aggrieved, the assessee is in appeal before us on the following grounds:- "1. For that the penalty u/s 271(1) (c) of the Act is not exigible and is not tenable in fact nor in laws. 2. For that the Ld. CIT (A) erred in confirming the penalty u/s 271(1) (c) of the Act in respect of the addition of Rs. 6,88,277/-. 3. For that no proper opportunities were availed by the assessee. 4. For that appellant craves leave to amend, alter, add, delete or substitute any other grounds of appeal before or at the time of hearing of the appeal." 4. We have heard the rival submissions and perused the material available on record. We find lot of force in the arguments of the ld.AR of the assessee that the ld.AO had not mentioned any specific charge on whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty levied u/s. 271(1) ( c ) of the Act. The ITAT has held as under:- "6. We shall now deal with the question whether proper satisfaction was arrived at by the AO for initiating penalty proceedings u/s.271(1)(c), in the course of concluding the assessment proceedings, wherein the additions in respect of which penalty was imposed were made. On the above issue, the first aspect which, we notice is that in the order of assessment, which we have extracted in the earlier part of this order, nowhere spells out or indicates that the AO was of the view that the assessee was guilty of either concealing particulars of income or furnishing inaccurate particulars of income. The offer to tax of income by the assessee has just been accepted. It is no doubt true that it is not the requirement of the law that the satisfaction has to be recorded in a particular manner, especially after the introduction of the provisions of Sec.271(1B) of the Act with retrospective effect from 1.4.1989. Nevertheless, as laid down by the Hon'ble Delhi High Court in the case of Ms.Madhushree Gupta (supra), the position of law both pre and post Sec.271(1B) of the Act is similar, inasmuch, the AO will have to arrive a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for penalty proceedings under Section 271 read with Section 274 of the Income Tax Act, 1961. 10. The AO has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing......." 7. The Revenue places reliance only on the sentence appearing in para-10 of the judgment without reading it in the context of the observations in the last portion of para-9 of the said judgment. Therefore even the Hon'ble supreme court's decision suggests that the satisfaction need not be recorded in a particular manner but from a reading of the assessment order as a whole such satisfaction should be clearly discernible. If the AO accepts all the contentions of the assessee and the offer of income that has not been declared in the return of income to tax without indicating either directly or indirectly that the assessee has concealed particulars of income or furnished inaccurate particulars of income, it cannot be said that satisfaction for initiation of penalty proceedings is discernible from the order of assessment. If the assessee in good faith offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax liability is admitted is not automatic. k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the assessing officer in the assessment order. l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bona fide, an order imposing penalty could be passed. m) If the explanation offered, even though not substantiated by the assessee, but is found to be bona fide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without any ambiguity. o) ..... 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