2005 (1) TMI 697 - HC - Income Tax

Penalty proceedings u/s 271(1)(c) - HELD THAT - Learned counsel appearing for the appellant contended that the AO has recorded satisfaction in the order itself. However, bare reading of the order of the AO shows that he has proceeded on the assumption that penalty is an automatic consequence of concealment or furnishing of inaccurate particulars. Not even a single reason has been recorded as to why in the opinion of the AO, it was just and proper to initiate penalty proceedings or in the alternative, the surrender by the assessee at the very first instance was not bona fide or voluntary. We do not consider it necessary to deal with this contention any further in view of the finding recorded by the Tribunal and would refer to the judgments of the Division Bench of this Court in the cases of CIT vs. Ram Commercial Enterprises Ltd. 1998 (10) TMI 13 - DELHI HIGH COURT . It is thus apparently clear that the question proposed by the Department as a substantial question of law has been squarely answered by different Division Benches of this Court and we see no reason to take a different view. Thus, we dismiss the appeal in limine.

Summary

Issues involved:
Assessment of total income, Penalty proceedings u/s 271(1)(c) of the IT Act, 1961, Challenge to Tribunal's order deleting penalty under s. 260A of the Act.

Assessment of Total Income:
The assessee filed their return of income for the assessment year 1992-93, declaring a total income. The Assessing Officer (AO) assessed the total income and initiated penalty proceedings u/s 271(1)(c) of the IT Act.

Penalty Proceedings u/s 271(1)(c) of the IT Act:
The AO levied a penalty on the assessee, which was challenged before the CIT(A) and subsequently by the Department in the present appeal u/s 260A of the Act. The Tribunal ordered deletion of the penalty based on the finding that the surrender of income by the assessee was voluntary and not made in bad faith.

Challenge to Tribunal's Order:
The High Court considered whether the appeal raised a question of law under s. 260A of the Act. The Court noted that the Tribunal's finding on the voluntary surrender of income by the assessee was a factual determination. The Court emphasized that the AO must record satisfaction before initiating penalty proceedings, as penalty is not an automatic consequence of concealment of income. The Court referred to previous judgments highlighting the necessity of recording satisfaction during assessment proceedings before initiating penalty proceedings. The Court dismissed the appeal, upholding the Tribunal's decision to delete the penalty.

This judgment clarifies the importance of the AO recording satisfaction before initiating penalty proceedings and emphasizes that penalty under s. 271(1)(c) of the IT Act is not automatic. The decision underscores the need for valid and proper reasons for imposing penalties, ensuring that the discretion exercised by authorities is in line with statutory provisions.