2017 (11) TMI 964 - AT - Income Tax

Penalty u/s. 271(1)(C) - non recording of satisfaction by AO - Held that - We find that the AO while passing the assessment order dated 6.6.2005 has stated that notice u/s. 271(1) for the additions have been issued separately, without recording the satisfaction for initiation of penalty proceedings. We further find that in the penalty order dated 6.2.2007 the AO mentioned that subsequently a show cause notice u/s. 271(1) has been issued dated 29.11.2006 fixing date of hearing 14.12.2006, but assessee failed to make the compliance the said notice. It is therefore presumed that assessee has nothing to say in this regard. As per AO it is fit case for imposition of penalty u/s. 271(1) of the I.T. Act. Minimum and Maximum imposable penalty comes to ₹ 4,47,900/- and ₹ 14,13,700/-. I imposed the minimum penalty of ₹ 4,47,900/- with the approval of Addl. CIT, Range-I, Meerut. , which shows that penalty proceedings ought to fail, ambiguous and vague in as much as in the penalty order it is nowhere stated that the penalty was imposed on which account i.e. concealment of particulars of income or furnishing of inaccurate particulars. In view of the above, we are of the considered view that the entire penalty proceedings stand vitiated as the same is not in accordance with law and without recording of satisfaction. - Decided in favour of assessee.

Summary

Issues:
1. Assessment of unexplained cash deposit.
2. Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:

Issue 1: Assessment of unexplained cash deposit
The appeal was against the order of the Ld. Commissioner of Income Tax (Appeals) regarding the assessment year 2003-04. The Assessee contended that the ancestral property was jointly owned by two individuals, and the deposit in the bank account was joint. The assessment order made additions based on cash deposits, and penalty proceedings were initiated for concealment of income. The Assessee's appeal was dismissed by the Ld. CIT(A), confirming the addition. The penalty was imposed by the Assessing Officer, and subsequent appeals upheld the penalty.

Issue 2: Imposition of penalty under section 271(1)(c)
The Assessee argued that the penalty proceedings were flawed as the satisfaction for initiation of penalty proceedings was not recorded. The Assessee contended that the penalty order did not specify the grounds for imposing the penalty, rendering the proceedings ambiguous and vague. The Assessee cited legal precedents where it was held that the power to impose a penalty under section 271 depends on the satisfaction of the Assessing Officer, which must be recorded before concluding the proceedings. The absence of a clear finding on concealment of income or furnishing inaccurate particulars would render the penalty proceedings without jurisdiction.

Judgment:
The Tribunal found that the penalty proceedings were vitiated as the satisfaction for initiating the penalty was not recorded. Citing legal precedents, the Tribunal held that the law required a clear finding on concealment of income or furnishing inaccurate particulars before imposing a penalty. As such findings were absent in this case, the penalty proceedings were deemed to be without jurisdiction. Consequently, the penalty in dispute was deleted, and the issue was decided in favor of the Assessee against the Revenue. The appeal filed by the Assessee was allowed, and the penalty was canceled.

This detailed analysis of the legal judgment addresses the issues involved, the arguments presented by both parties, the legal precedents cited, and the final decision rendered by the Tribunal.