TMI Blog2008 (9) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... question of law: "Whether, on the facts and in the circumstances of the case, the hon'ble Tribunal has erred in law in deleting the penalty of Rs. 2,90,296 levied under section 271(1)(c) of the Act when concealed income had been brought to tax under section 147/148 of the Act?" 2. Original assessment in the case of the assessee for the assessment year 1982-83 took place on September 21, 1984, under section 143(3) of the Act. The assessment was reopened under section 147 of the Act and completed on July 28, 1989. Addition was made on account of interest income. Finally, the Assessing Officer completed the assessment on March 24, 2000, and also initiated penalty proceedings. After undergoing the procedure, penalty to the extent of 200 per cent. of the tax sought to be evaded, was imposed. On appeal, the Commissioner of Income-tax (Appeals) reduced the penalty to 100 per cent. The Tribunal set aside the penalty with the following observations: "7. We have examined the rival submissions. From the assessment order, we find that for the assessment year 1982-83, the Assessing Officer has only mentioned, 'penalty proceedings under sections 271(1)(c) and 273(2)(a) are being initiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said clause." 5. Learned counsel for the assessee submitted that penalty proceedings could not be initiated unless in the course of assessment, satisfaction that penalty was called for was specifically recorded, which condition cannot be held to be satisfied by mere mention being made in the order of assessment that penalty proceedings were being separately initiated. He submitted that unless there is express recording of satisfaction in the order of assessment and such satisfaction is also reflected in the findings of the Assessing Officer, initiation of penalty proceedings itself will be without jurisdiction. He relies upon the judgment of this court in CIT v. Munish Iron Store [2003] 263 ITR 484, the judgment of the Delhi High Court in CIT v. Ram Commercial Enterprises Ltd. [2000] 246 ITR 568 and the judgment of the hon'ble Supreme Court in Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519. 6. We have considered the rival submissions and perused the judgments relied upon. 7. A reference may be made. to the relevant statutory provision of section 271(1): "271. (1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in M. Sajjanraj Nahar [2006] 283 ITR 230, it has been observed as under (pages 250-51) "38 . . . that a mere indication as to the initiation of the penalty proceedings separately in the assessment order is tantamount to an indication as to the satisfaction of the authorities that the assessee has concealed income or furnished inaccurate particulars . . . There is no evidence on record that the Income-tax Officer was not satisfied in the course of the assessment proceeding that the firms had concealed its income. The assessment order is dated the 10th of November, 1951, and there is an endorsement at the foot of the assessment order by the Income-tax Officer that action under section 28 had been taken for concealment of income indicating clearly that the income-tax Officer was satisfied in the course of the assessment proceeding that the firm had concealed its income. 42. At the stage of initiating penalty proceedings, what is required is only a subjective satisfaction and not a finding as to the satisfaction based on materials. Therefore, penalty proceedings can be initiated only after an assessment order has been made. Therefore, passing of the assessment order cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion, be sufficient compliance with the provisions of the statute if the Income-tax Officer or the Appellate Assistant Commissioner is satisfied about the matters referred to in clauses (a) to (c) of sub-section (1) of section 271 during the course of proceedings under the Act even though notice to the person proceeded against in pursuance of that satisfaction is issued subsequently. We may in this context refer to a decision of five judges Bench of this court in the case of CIT v. S. V. Angidi Chettiar [1962] 44 ITR 739 Shah J., speaking for the court, while dealing with section 28 of the Indian Income-tax Act, 1922, observed: 'The power to impose penalty under section 28 depends upon the satisfaction of the Income-tax Officer in the course of proceedings under the Act; it cannot be exercised if he is not satisfied about the existence of conditions specified in clause (a), (b) or (c) before the proceedings are concluded. The proceeding to levy penalty has, however, not to be commenced by the Income-tax Officer before the completion of the assessment proceedings by the Income-tax Officer. Satisfaction before conclusion of the proceeding under the Act, and not the issue of a n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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