1978 (2) TMI 107 - AT - Income Tax

Summary

Issues:
1. Competency of the IAC to impose penalty without ITO's satisfaction on concealment.
2. Legal objection raised by the assessee regarding concealment of income.

Analysis:

Issue 1: Competency of the IAC to impose penalty without ITO's satisfaction on concealment
The assessee contended that the IAC lacked jurisdiction to impose a penalty on the item of Rs. 18,000 as the ITO did not record satisfaction about the concealment in the assessment order. The Tribunal agreed that a mistake arose as the ITO failed to specify concealment of Rs. 18,000. The Tribunal referred to the case of Niemal Textiles Finishing Mills (P) Ltd. vs. CIR Delhi, where it was held that the IAC cannot assume jurisdiction to impose a penalty if the ITO did not record satisfaction about concealment. The Tribunal concluded that the IAC exceeded his jurisdiction by imposing a penalty on the item of Rs. 18,000 without the ITO's satisfaction, thus canceling the penalty.

Issue 2: Legal objection raised by the assessee regarding concealment of income
The assessee's legal objection was twofold. Firstly, the revised return disclosed additional income of Rs. 16,500 before any concealment was detected by the ITO, indicating no concealment of the item of Rs. 18,000. Secondly, the ITO did not record satisfaction about the concealment of Rs. 18,000 in the assessment order, as required by law. The Tribunal upheld the legal objection, emphasizing that the IAC's jurisdiction to impose a penalty is contingent upon the ITO's satisfaction on concealment. As the ITO failed to record such satisfaction, the IAC's penalty imposition on the item of Rs. 18,000 was deemed illegal, leading to the cancellation of the penalty.

In conclusion, the Tribunal allowed the appeal, acknowledging the legal objection raised by the assessee and canceling the penalty of Rs. 18,000 imposed by the IAC due to the lack of ITO's satisfaction on concealment as required by law.