Vagueness and Ambiguity in recording of Satisfaction would nullify Penalty Proceedings: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Pune bench has held that the vagueness and ambiguity in recording of satisfaction would nullify the entire penalty proceedings under section 271(1)(c) of the Income tax Act.

During the course of re-assessment proceedings, the Assessing Officer made addition of Rs.46,66,665/- on account of amount received by the assessee by way of Sales Tax Exemption claimed as capital receipts.

The assessing officer held that the same would amount to revenue receipt and imposed penalty under section 271(1)(c) of the Act. Being unsuccessful in contesting the appeal before the First Appellate Authority, the assessee approached the Tribunal.

Allowing the contentions of the assessee, the Tribunal noted the decision of the Karnataka High Court in the case of Commissioner of Income Tax Vs. Manjunatha Cotton and Ginning Factory wherein it was held that the “assessee should know the grounds which he has to meet specifically.

“Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty should be imposed to the assessee”. The manner in which the Assessing Officer has initiated penalty in the instant case clearly shows vagueness in the mind of Assessing Officer with regard to the charge to be invoked for levy of penalty u/s. 271(1)(c) of the Act. Thus, the satisfaction recorded by the Assessing Officer falls short of legal requirement as envisaged by the Hon’ble High Court. The Tribunal in various decisions has held such recording of satisfaction as unsustainable in the eye of law. Thus, we are of considered opinion that the penalty proceedings in this case are liable to be set aside on account of vagueness and ambiguity in recording of satisfaction,” the Tribunal said.