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Issues Involved:
1. Validity of penalty orders under Section 271(1)(c) due to lack of recorded satisfaction by the Assessing Officer (AO). 2. Timeliness of penalty orders for assessment years 1996-97, 1997-98, and 1998-99. 3. Merits of penalties imposed under Section 271(1)(c) for various assessment years. Detailed Analysis: 1. Validity of Penalty Orders under Section 271(1)(c): The primary issue raised by the assessee was the validity of the penalty orders under Section 271(1)(c) due to the AO's failure to record any satisfaction in his assessment orders about the assessee having concealed particulars of income or having furnished inaccurate particulars of income. The Tribunal analyzed various judicial precedents, including decisions from the Hon'ble Delhi High Court, emphasizing that the AO must record satisfaction during the assessment proceedings. It was noted that the satisfaction must be apparent from the assessment order itself and cannot be presumed. The Tribunal found that the AO's notings in the assessment orders, such as "penalty proceedings under s. 271(1)(c) are being initiated separately," were insufficient to meet the statutory requirement. Consequently, the initiation of penalty proceedings was deemed invalid, and the penalties imposed were canceled. 2. Timeliness of Penalty Orders for Assessment Years 1996-97, 1997-98, and 1998-99: The assessee contended that the penalty orders for these years were barred by time as per Section 275(1). The CIT(A) rejected this contention, explaining that the penalty proceedings were initiated by the AO in the assessment orders passed on 23rd February 2004, following the Tribunal's order to make fresh assessments. The CIT(A) noted that the appeals against these assessments were disposed of by the CIT(A) on 28th January 2005, and the penalty orders were passed on 30th March 2006, within the prescribed period under the proviso to Section 275(1)(a). Thus, the penalty orders were found to be within the time limit. 3. Merits of Penalties Imposed under Section 271(1)(c): The merits of the penalties were also contested by the assessee, who argued that it was under a bona fide belief that the income from engineering and ground handling services was exempt under Article 8 of the DTAA and thus not taxable in India. The assessee claimed full disclosure of the income and argued that the issue was debatable, and merely because the AO disagreed with its stand, it did not imply concealment or furnishing of inaccurate particulars. The CIT(A), however, relied on Explanation 1 to Section 271(1)(c), which raises a presumption in favor of the Revenue that the additions made represent concealed income. The CIT(A) found that the assessee failed to rebut this presumption and upheld the penalties. However, since the Tribunal annulled the initiation of penalty proceedings on the preliminary ground of lack of recorded satisfaction by the AO, the merits of the penalties were rendered academic and were not adjudicated upon. Conclusion: The Tribunal allowed the appeals of the assessee, canceling the penalties imposed under Section 271(1)(c) for all the assessment years under consideration due to the AO's failure to record the requisite satisfaction in the assessment orders, thus invalidating the initiation of penalty proceedings. The timeliness of the penalty orders for the years 1996-97, 1997-98, and 1998-99 was upheld by the CIT(A), but this issue became moot due to the cancellation of penalties on the primary ground. The merits of the penalties were not addressed due to the preliminary decision on the invalid initiation of penalty proceedings.
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