2010 (3) TMI 1235 - AT - Income Tax

Summary

Issues involved:
The issues involved in this legal judgment are related to the imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961, and the satisfaction required from the CIT(A) for initiating penalty proceedings.

Imposition of Penalty under Section 271(1)(c):
The Appellate Tribunal observed that the CIT(A) did not record any satisfaction regarding the imposition of penalty on the assessee under section 271(1)(c) of the Income Tax Act. It was emphasized that the satisfaction of the CIT(A) is a prerequisite before imposing a penalty, specifically related to whether the assessee concealed income particulars or furnished inaccurate particulars. The Tribunal found that the lack of satisfaction by the CIT(A) rendered the penalty unsustainable in the eyes of the law, leading to the cancellation of the penalty. Various case laws were cited to support this decision.

Application of Section 271(1B) of the Act:
The Department contended that the Tribunal's observation regarding the lack of satisfaction by the CIT(A) for penalty imposition was erroneous in light of the insertion of section 271(1B) with retrospective effect. Section 271(1B) specifies that the satisfaction for initiating penalty proceedings should be that of the Assessing Officer (AO), not the CIT(A). However, the Tribunal held that the definition of "AO" in the Act does not include the CIT(A), and therefore, the satisfaction required for penalty initiation in cases of enhancement, as ordered by the CIT(A), should be that of the CIT(A) and not the AO. The Tribunal concluded that the insertion of section 271(1B) did not affect the previous order, and the Department's application was dismissed.