2007 (9) TMI 250 - HC - Income Tax

Penalty was set aside by the Tribunal on the ground that the AO had not recorded any satisfaction in the assessment order that there was either concealment or inaccurate particulars furnished by the Assessee no satisfaction of the Assessing Officer that penalty proceedings are required to be initiated against the Assessee is discernible - requirement of Section 271(1)(c) as explained by this Court in Ram Commercial Enterprises Ltd. not satisfied penalty was rightly set aside by ITAT

Summary

Issues:
- Appeal against penalty under Section 271(1)(c) of the Income Tax Act, 1961
- Requirement of recording satisfaction by Assessing Officer in assessment order for initiating penalty proceedings
- Interpretation of the requirement of satisfaction under Section 271(1)(c) of the Act
- Consideration of decision in Commissioner of Income Tax v. Ram Commercial Enterprises Limited
- Reference to a larger Bench regarding satisfaction of the officer initiating penalty proceedings

Analysis:
In this judgment, the High Court dealt with an appeal under Section 260A of the Income Tax Act, 1961, where the revenue challenged the order of the Income Tax Appellate Tribunal setting aside the penalty imposed under Section 271(1)(c) for the assessment year 1984-85. The Tribunal had ruled in favor of the Assessee, stating that the Assessing Officer did not record satisfaction in the assessment order regarding concealment or inaccurate particulars provided by the Assessee.

The senior standing counsel for the Revenue referred to a previous decision of the Court in Commissioner of Income Tax v. Ram Commercial Enterprises Limited, highlighting the necessity of the Assessing Officer recording satisfaction in the assessment order to initiate penalty proceedings. However, she also mentioned a subsequent reference to a larger Bench regarding the discernibility of satisfaction from the assessment order itself.

The Court noted that the Supreme Court had approved the decision in Ram Commercial Enterprises Limited and emphasized the requirement of the Assessing Officer's satisfaction being discernible from the assessment order. The Court acknowledged the pending consideration by the larger Bench but proceeded to examine the present assessment order to determine if the satisfaction for initiating penalty proceedings was evident.

Upon reviewing the assessment order, the Court found that the recording made by the Assessing Officer did not meet the criteria set out in Section 271(1)(c) as explained in the previous judgment. Despite a detailed perusal, the Court concluded that no satisfaction of the Assessing Officer to initiate penalty proceedings against the Assessee was discernible from the assessment order.

Ultimately, the Court held that no substantial question of law arose and dismissed the appeal, affirming the Tribunal's decision to set aside the penalty. The judgment underscored the importance of the Assessing Officer's explicit satisfaction being reflected in the assessment order for initiating penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961.