Law:

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Section 271(1)(c) of the Income-tax Act, 1961 - Penalty - For concealment of income - Whether where Assessing Officer had not recorded satisfaction that a case of initiation of penalty proceedings was made out as there was concealment of income, or that incorrect particulars had been furnished by assessee with intention to avoid payment of tax, no penalty could be levied - Held, yes FACTS Pursuant to a survey under section 133A at the assessee's premises, certain loose slips showing sale to different parties pertaining to the assessment years 1992-93 and 1993-94 were detected. Thereupon, the assessee surrendered Rs. 38.37 lakhs. Finally, the Assessing Officer, besides making certain additions, added a sum of Rs. 3.21 lakhs to the total income of the assessee on account of suppression of sales and also added a sum of Rs. 40,630 paid as commission to one Mrs. 'A' as the same was not genuine as she had no experience in that line of business. The Assessing Officer also imposed penalty upon the assessee under section 271(1)(c). On appeal, the Commissioner (Appeals) deleted the penalty levied on account of suppression of sales, on the ground that no penalty could be levied on the basis of assessment which had been set aside by the Tribunal. He, however, upheld the order of penalty in respect of commission paid to Mrs. 'A'. On second appeal, the Tribunal granted relief to the assessee in respect of penalty relating to commission amount also as no satisfaction, contemplated under section 271(1)(c), had been recorded. On further appeal : HELD It is a settled principle of law that the provisions of section 271(1)(c) on their plain reading would require proper application of mind and recording of at least bare minimum opinion on the part of the Assessing Officer that a case for initiation of penalty proceedings was made out as there was concealment of income, or that incorrect particulars had been furnished by the assessee, with intention to avoid payment of tax. In the instant case, the Assessing Officer had recorded satisfaction with regard to one sum while with regard to the other, he made no such indication. [Para 4] There was no merit in the appeal as it raised no…

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