2015 (3) TMI 497 - HC - Income Tax

Penalty u/s 271(1)(c) - whether Assessing Officer has not recorded any positive and categorical satisfaction about concealment in the assessment order? - ITAT deleted penalty levy - Held that - What is required in law is satisfaction of assessing officer which should be apparent from the order, regarding concealment of particulars of income or furnishing of inaccurate particulars of such income. The provisions of section 271(1)(c) are penal in nature, thus must be strictly construed, and the element of satisfaction should be apparent from the order itself. It is not for the courts to go into the mind of the authorities or trace the reasons from the file of such authorities. - Decided in favour of assessee

Summary

Issues:
- Interpretation of Section 271(1)(c) of the Income Tax Act
- Requirement of recording satisfaction for initiating penalty proceedings

Analysis:
1. The case involved a substantial question of law regarding the legality of canceling a penalty under Section 271(1)(c) of the Income Tax Act based on the Assessing Officer's satisfaction of concealment of income, as mentioned in the assessment order.

2. The appellant argued that the Tribunal erred in setting aside the penalty order due to the Assessing Officer's failure to explicitly record satisfaction for invoking Section 271(1)(c) of the Act, citing a Supreme Court judgment in a different case.

3. The High Court clarified that the Supreme Court judgment referred to by the appellant did not apply to the present case, emphasizing that the Assessing Officer's satisfaction regarding concealment of income must be apparent from the order itself, irrespective of explicit mention.

4. Referring to previous decisions, the Court highlighted that the Assessing Officer must form an independent opinion and record satisfaction during assessment proceedings to initiate penalty proceedings under Section 271(1)(c) of the Act.

5. The Court cited various cases, such as C.I.T. Vs. Auto Lamps Ltd. and C.I.T. Vs. Vikas Promoters P. Ltd., emphasizing the mandatory requirement for the Assessing Officer to record satisfaction before levying penalties, as the provisions of Section 271(1)(c) are penal in nature and must be strictly construed.

6. Relying on a Division Bench decision in a similar case, the Court concluded that if the Assessing Officer fails to record satisfaction in the assessment order regarding the levy of penalty, then no penalty can be imposed under Section 271(1)(c) of the Act.

7. Ultimately, the Court upheld the Tribunal's decision to cancel the penalty, ruling in favor of the assessee based on the established legal principles and lack of merit in the appeal.

8. The judgment serves as a reminder of the importance of the Assessing Officer's independent satisfaction and the necessity of clearly reflecting such satisfaction in the assessment order before initiating penalty proceedings under Section 271(1)(c) of the Income Tax Act.