2017 (6) TMI 590 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - From the plain reading of section 271(1B), it clearly indicates that mere direction of the AO for initiating penalty proceedings under clause (c) of Sub-Section (1) of Section 271 of the Income-tax Act, 1961, is sufficient compliance. It is observed that the assessee s case pertains to AY 2013-14, and the assessing officer has made the direction in the assessment order for initiation of penalty proceedings u/s 271(1)(c) and it sufficient compliance for recording the satisfaction for initiation of penalty proceedings. Therefore we hold that the Ld.CIT(A) is not correct in cancelling the penalty holding that there was no satisfaction of the AO for initiating the penalty and accordingly we set aside the orders of the CIT(A). The Ld.CIT(A) has not decided the case on merits and during the appeal hearing the Ld.DR did not place the statement recorded during the course of survey and the incriminating material found and seized. Therefore we remit the matter back to the file of the CIT(A) to decide appeal on merits.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act, 1961 for alleged concealment of income during assessment year 2013-14.

Detailed Analysis:

Issue 1:
The Revenue's appeal against the deletion of penalty under section 271(1)(c) by the CIT(A).

Analysis:
The Revenue contended that the AO had sufficient evidence to prove concealment of income by the assessee. The AO imposed a penalty of ?33,41,977, representing 100% of the tax sought to be evaded. The assessee argued that the additional income was declared with the belief that no penalty would be levied. The CIT(A) relied on case laws and canceled the penalty, citing a lack of satisfaction recorded by the AO, which she deemed a jurisdictional defect. The Revenue challenged this decision.

Issue 2:
Interpretation of satisfaction recorded by the AO for initiating penalty proceedings under section 271(1)(c).

Analysis:
The Revenue argued that the AO had indeed recorded satisfaction in the assessment order regarding the concealment of income. They highlighted that the assessee admitted additional income only after a survey revealed incriminating evidence. The assessee, on the other hand, claimed ignorance of tax provisions and argued that the additional income was disclosed to avoid prolonged litigation. The ITAT observed that the direction for initiating penalty proceedings in the assessment order was sufficient compliance with the requirement of recording satisfaction. They cited relevant case laws and set aside the CIT(A) decision, remitting the matter back for a decision on merits.

In conclusion, the ITAT allowed the Revenue's appeal for statistical purposes, emphasizing that the CIT(A) erred in canceling the penalty without considering the satisfaction recorded by the AO. The case was remitted back to the CIT(A) for a decision on the appeal based on merits.