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TMI Blog2014 (6) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... him for initiating steps u/s 271(1)(c) – Relying upon MAK Data P. Limited Vs. Commissioner of Income Tax [2013 (11) TMI 14 - SUPREME COURT] - the AO has to satisfy himself whether penalty proceedings should be initiated or not during the course of assessment proceedings and he is not required to record his satisfaction in a particular manner or reduce it into writing - there is no direction whatsoever by the AO in respect of the specific head of interest on the SDF loan, on which the penalty was deleted by the Tribunal - The omission in the case of the SDF loan stands in sharp contrast to those items where the AO has specifically directed the initiation of penalty proceedings u/s 271(1)(c) – thus, the Tribunal was justified in deleting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty proceedings. 3. Whether the ITAT erred in law by interpreting new conditions in the language and provision of section 271(1)(c) which was not originally intended by the legislature and would amount to casus omissus . The Assessing Officer made an order of assessment under section 143(3) on 31 March 2003. At this stage, it would be material to note that the Assessing Officer specifically dealt with various items which are as follows:- (i) Software expenses ; (ii) provision for gratuity ; (iii) short charging of interest on loan/advance to sister concern ; (iv) interest on SDF loan ; (v) lease adjustment charges ; (vi) provision for cost of completion of jobs (vii) bad debts and amounts written off ; (viii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a specific direction to that effect. The Tribunal, while deleting the penalty under section 271(1)(c) on the interest on the SDF loan, observed as follows:- In view of above, we observe that in the original assessment order, the Assessing Officer has made multiple additions by making disallowances and after conclusion of every issue and addition, he has specifically mentioned his satisfaction about initiation of penalty proceedings related to that issue and at the end of the order, he stated that issue penalty notice u/s 271(1)(c) as discussed above. But at the same time, on careful reading of para 5 of assessment order pertaining to the interest on SDF loan, we observe that after para 5.4, there is nothing to show that the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in sub-section (1B) must apply, two requirements must be fulfilled. The first requirement is that an amount must have been added or disallowed in computing the total income or loss of an assessee in any order of assessment or reassessment. The second is that the order of assessment or reassessment must contain a direction for the initiation of penalty proceedings under clause (c) of sub-section (1) of section 271. Where both the conditions as aforesaid are fulfilled, the order of assessment must be deemed to constitute satisfaction of the Assessing Officer for initiating penalty proceedings under clause (c). In the present case, we have duly perused the entire order of assessment under section 143(3) which has been placed on record. From ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowed the provision of interest on loan from Sugar Development Fund u/s 43B holding SDF to be a financial institution. This year on checking the details of interest accrued but not due, it has been found that following amount of interest which have accrued during the year have either been not paid or paid after filling of Return: DEOBAND UNIT Amount Date of Payment (i) SDF SOFT LOAN Rs.88,767/-, 29.01.2001 (ii) SDF MODERN Rs.69,75,000/- Not yet paid (iii) SDF (CANE DEV) Rs.4,27,42 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as issued by him for initiating steps under section 271(1)(c). Undoubtedly, as held in the decision of the Supreme Court in Mak Data Private Limited Vs. Commissioner of Income Tax1, the Assessing Officer has to satisfy himself whether penalty proceedings should be initiated or not during the course of assessment proceedings and he is not required to record his satisfaction in a particular manner or reduce it into writing. However, in the present case, there is no direction whatsoever by the Assessing Officer in respect of the specific head of interest on the SDF loan, on which the penalty was deleted by the Tribunal. This omission in the case of the SDF loan stands in sharp contrast to those items where the Assessing Officer has specificall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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