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Section 271C of the Income-tax Act, 1961 - Penalty - For failure to deduct tax at source - Assessment years 1989-90 to 1998-99 - Whether Assessing Officer can pass an order under section 271C without giving any reasons whatsoever - Held, no FACTS The Assessing Officer passed an order whereby he dropped the penalty proceedings initiated in the assessee's case under section 271C, read with section 274. The Commissioner exercised power conferred under section 263 and concluded that the Assessing Officer did not verify several issues and facts as mentioned in the order passed by him, nor did he carry out necessary investigations to come to a conclusion that penalty was not leviable. Consequently, he found that the order was erroneous and prejudicial to the interest of the revenue. The Commissioner then set aside the order passed by the Assessing Officer under section 271C to be reframed afresh. On appeal, the Tribunal, however, held that the Assessing Officer had carried out due verification of relevant facts and the assessee had also shown its bona fides and its reasonable belief in not deducting tax at the appropriate stage. The penalty proceedings were not dropped casually by the Assessing Officer but after verification of full facts disclosed by the assessee in the reply. On appeal : HELD The reasoning given by the Tribunal could not be accepted simply because the Assessing Officer himself did not say any such thing in his order. There is no doubt that the proceedings before the Assessing Officer are quasi-judicial proceedings and a decision taken by him in this regard must be supported by reasons. Otherwise, every order, such as the one passed by the Assessing Officer, could result in a theoretical possibility that it may be revised by the Commissioner under section 263. Such a situation is clearly impermissible. [Para 9] It is also necessary for the parties to know the reasons that have weighed with the adjudicating authority in coming to a conclusion. The order passed by the Assessing Officer should be a self-contained order giving the relevant facts and reasons for coming to the conclusion based on those facts and law. [Para 10] It was found that the order…

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