2019 (4) TMI 567 - AT - Income Tax

Penalty u/s 271(1)(c) - Non recording of satisfaction - jurisdictional defect - addition of bogus sundry creditors and agricultural income as income from other sources and on addition of accrued interest on FD s - HELD THAT - Admittedly, as noticed from the assessment order, no such satisfaction as contemplated u/s.271(1)(c) have been recorded by the AO while completing the assessment that in which limbs, the issue is following. AO has simply mentioned that penalty proceedings u/s.271(1)(c) are initiated separately . See case of V.V.Projects and Investments Pvt Ltd. 2007 (12) TMI 97 - ANDHRA PRADESH HIGH COURT . - Decided in favour of assessee.

Summary

Issues:
Appeal against levy of penalty under section 271(1)(c) for addition of sundry creditors, agricultural income, and accrued interest on FDs.

Analysis:
The appeal before the Appellate Tribunal ITAT CUTTACK pertained to the levy of a penalty under section 271(1)(c) for various additions made by the Assessing Officer. The primary issue raised in the appeal was against the penalty confirmed by the Commissioner of Income Tax (Appeals) in relation to the addition of bogus sundry creditors, agricultural income treated as income from other sources, and accrued interest on fixed deposits. The counsel for the assessee argued that the penalty proceedings initiated by the Assessing Officer lacked jurisdiction as there was no recorded satisfaction regarding the concealment of income or furnishing inaccurate particulars. The Assessing Officer had merely mentioned the initiation of penalty proceedings without forming a proper opinion. The counsel relied on a decision of the Hon'ble A.P. High Court which emphasized the necessity of the Assessing Officer forming an opinion and recording satisfaction before initiating penalty proceedings under section 271(1)(c). The absence of such a finding in the assessment order was deemed a jurisdictional defect that could not be cured.

The Appellate Tribunal, after considering the arguments presented by both parties and examining the facts and circumstances of the case, concurred with the decision of the Hon'ble A.P. High Court. The Tribunal highlighted that the Assessing Officer must form an opinion and record satisfaction regarding concealment of income or furnishing inaccurate particulars before initiating penalty proceedings. Since no such satisfaction was evident from the assessment order in this case, the penalty proceedings were deemed to be without jurisdiction. Therefore, the Tribunal, in line with the legal precedent cited, deleted the penalty levied by the Assessing Officer under section 271(1)(c) and allowed the appeal of the assessee. The Tribunal's decision to delete the penalty was based on the jurisdictional defect arising from the absence of a recorded satisfaction by the Assessing Officer, as required by law.

In conclusion, the Appellate Tribunal ITAT CUTTACK ruled in favor of the assessee, allowing the appeal and deleting the penalty imposed under section 271(1)(c) due to the jurisdictional defect stemming from the Assessing Officer's failure to record satisfaction regarding the alleged concealment of income or furnishing of inaccurate particulars. The judgment emphasized the importance of complying with the statutory requirements before initiating penalty proceedings under the Income Tax Act, 1961, ensuring that the Assessing Officer forms a valid opinion and records satisfaction in the assessment order.