2007 (1) TMI 282 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of penalty u/s 271(1)(c) for furnishing inaccurate particulars of income.
2. Recording of requisite satisfaction by the Assessing Officer.

Summary:

Issue 1: Deletion of penalty u/s 271(1)(c) for furnishing inaccurate particulars of income

The department appealed against the CIT(A)'s decision to delete the penalty of Rs. 19,88,845 imposed u/s 271(1)(c) for allegedly furnishing inaccurate particulars of income by not disclosing the true and fair market value of perquisites enjoyed by the assessee. The assessee, a director in a company, declared an income of Rs. 54,78,610 for the assessment year 1991-92, which was later assessed at Rs. 2,67,99,554, including an addition of Rs. 24,27,402 under "Income from other sources" for benefits and perquisites enjoyed as a director. The CIT(A) upheld the addition but canceled the penalty, noting that the employer was responsible for computing the perquisite value u/s 192, and there was no conscious or deliberate concealment by the assessee. The Tribunal agreed with the CIT(A), emphasizing that penalty proceedings are distinct from assessment proceedings and require reappraisal of the entire material. The Tribunal found that the assessee had disclosed all relevant facts and documents, and the addition was based on the Assessing Officer's interpretation of section 2(24)(iv), which was debatable and did not indicate mens rea or guilty mind on the part of the assessee.

Issue 2: Recording of requisite satisfaction by the Assessing Officer

The assessee contended that the Assessing Officer did not record the requisite satisfaction in the assessment order that the assessee had furnished inaccurate particulars of income, rendering the penalty order invalid. The Tribunal permitted the assessee to invoke Rule 27 of the Tribunal Rules to defend the CIT(A)'s decision on this ground. The Tribunal found no observation in the assessment order indicating that the Assessing Officer had reached the requisite satisfaction. The mere mention of initiating penalty proceedings separately did not meet the requirement of section 271(1), as held by the Delhi High Court in CIT v. Ram Commercial Enterprises Ltd. and Diwan Enterprises v. CIT. The Tribunal concluded that the omission to record satisfaction was a jurisdictional defect that could not be cured, agreeing with the CIT(A)'s ultimate conclusion that the penalty was not justified.

Conclusion:

The Tribunal confirmed the CIT(A)'s decision to cancel the penalty u/s 271(1)(c) and dismissed the department's appeal, emphasizing the absence of mens rea and the jurisdictional defect in recording satisfaction by the Assessing Officer.