If the AO has not recorded any satisfaction, is the levy of penalty valid?

If the AO has not recorded any satisfaction, is the levy of penalty valid?

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S. 271(1)(c) penalty: If the AO has not recorded any satisfaction in absolute terms whether the assessee has concealed particulars of income or has furnished inaccurate particulars of income, the levy of penalty is invalid. The judgement of the Bombay High Court in Maharaj Garage cannot be read out of context or in a manner to mean that there is no need for mentioning the specific limb of section 271(1)(c) of the Act for which the penalty was intended to be imposed, as such issue never came up for consideration before the High Court.

Section 271 reads as under

271. (1) If the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner in the course of any proceedings under this Act, is satisfied that any person—

(a)  [***]

(b)  has failed to comply with a notice under sub-section (2) of section 115WD or under sub-section (2) of section 115WE or under sub-section (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 142, or

(c)  has concealed the particulars of his income or furnished inaccurate particulars of such income, or

(d)  has concealed the particulars of the fringe benefits or furnished inaccurate particulars of such fringe benefits,

he may direct that such person shall pay by way of penalty,—

 (i)  [***]

(ii)  in the cases referred to in clause (b), in addition to tax, if any, payable by him, a sum of ten thousand rupees for each such failure ;

(iii)  in the cases referred to in clause (c) or clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits.


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