2005 (9) TMI 240 - AT - Income Tax

Summary

Issues Involved:
1. Jurisdiction and initiation of proceedings under Section 147 and 148 of the Income-tax Act.
2. Non-filing of income tax return by the assessee.
3. Levy of penalty under Section 271(1)(c) for concealment of income.
4. Validity of satisfaction recorded by the Assessing Officer for initiating penalty proceedings.

Detailed Analysis:

1. Jurisdiction and Initiation of Proceedings under Section 147 and 148:
The Assessing Officer observed that the assessee, an individual and Ex-Chief Justice, did not file a return of income despite having income from salary and royalty for the assessment year 1995-96. Consequently, proceedings under Section 147 were initiated by issuing a notice under Section 148, which was served on 7-2-2001. Despite this, the assessee did not file his return in response to the notice. Further notices under Section 142(1) also saw no compliance. The assessment was completed under Section 144/147 on a total income of Rs. 27,67,850.

2. Non-filing of Income Tax Return by the Assessee:
The assessee did not file a return for the assessment year 1995-96, which led to the initiation of proceedings under Section 147. The assessee's representative challenged the jurisdiction of the Assessing Officer and confirmed that no return was filed. The assessee later cited reasons for non-filing, including his retirement, relocation, and health issues, and stated that his tax matters were previously managed by his office staff.

3. Levy of Penalty under Section 271(1)(c) for Concealment of Income:
The Assessing Officer imposed a penalty of Rs. 1,87,610 under Section 271(1)(c), stating that the assessee deliberately concealed particulars of his income. The Ld. CIT(A) upheld this penalty. The assessee argued that there was no concealment as the income disclosed voluntarily and the income finally determined were the same. The Tribunal found that the assessee had paid TDS and advance tax, and there was no intention to conceal income. It was noted that the penalty under Section 271(1)(c) cannot be levied where no return of income is submitted, as supported by various case laws.

4. Validity of Satisfaction Recorded by the Assessing Officer:
The Tribunal observed that the assessment order did not record the satisfaction required by Section 271 for initiating penalty proceedings. The mere initiation of penalty proceedings does not imply that such satisfaction was arrived at. The Tribunal cited several judgments to support this view, including CIT v. Ram Commercial Enterprises Ltd and CIT v. B.R. Sharma, which emphasize the necessity of recording satisfaction for penalty initiation.

Conclusion:
The Tribunal concluded that the assessee had not concealed particulars of income or furnished inaccurate particulars. The penalty imposed by the Assessing Officer and sustained by the Ld. CIT(A) was directed to be deleted, allowing the appeal in favor of the assessee. The Tribunal's decision was influenced by the bona fide belief of the assessee, the absence of a recorded satisfaction for penalty initiation, and relevant case laws indicating that penalty under Section 271(1)(c) is not applicable where no return of income is filed.