(1.) The Commissioner of Income Tax questions the validity and correctness of the Order dated 4.2.2003 in this appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the 'Act'). Learned Counsel appearing for the appellant contended that the Tribunal has fallen in error of law in coming to the conclusion that the Assessing Officer had not recorded his satisfaction for initiation of penalty as contemplated under Section 271(l)(c) of the Act. It is also contended that the following findings recorded by the Tribunal in the impugned order are perverse and as such should be set aside:
(2.) The necessary facts are that the assessee filed return of his income for the assessment year 1994-95 disclosing the income of Rs. 10.13 lacs. The assessment was completed on 31.1.1997 at a total income of Rs. 88,74,860/-. An addition was made on account of receipt of compensation of acquisition of agricultural land. The assessee indicated that it was credited by an amount of Rs. 74,16,406/-. He was called upon to explain this credit entry which was explained during the proceedings. The Assessing Officer vide his order dated 30.1.1997 made an addition of the amount to the payable income and passed the following orders:
(3.) The assessee being aggrieved from the order of the Assessing Officer preferred an appeal which was allowed by the Commissioner of Income Tax Appeals vide order dated 18.12.1997. The Appellate Authority was of the view that there was neither concealment nor Inaccurate particulars have been furnished Inasmuch as that the assessee has acted bom fidely and if the disclosure has been made before assessment as such the penalty has been imposed by the Assessing Officer of Rs. 27,53,878/- was not sustainable. Against the order of the Appellate Authority, the Deputy Commissioner, Income Tax preferred an appeal before the Income Tax Appellate Tribunal, which as already noticed above, met the same fate with the observations as aforerecorded. We have perused the order of the Assessing Officer initiating the penalty proceedings under Section 271(l)(c). In this order there is no reasoning much less an appropriate reasoning has been given which could in any way demonstrate that the Assessing Officer has recorded its satisfaction at the time of initiation of the penalty proceedings. The provisions of Section 271(l)(c) of the Act contemplates recording of a satisfaction by the Assessing Officer which would form basis of discretion exercisable by such authority under the provisions of that Act. The discretion that is indicated by the Legislature by using the expression 'may' is of wide connotation. It is a settled cannon of interpreted jurisprudence that the exercise vested in the authorities performing particularly quasi judicial or judicial functions has to be exercised for just and proper reasons and in consonance with the settled principles of law. A very order initiating the penalty proceedings at the face of it shows that there was no application of mind much less proper application of mind in furtherance to which the Assessing Officer has passed an order imposing penalty of Rs. 27,53,878/- under Section 271(1)(c) of the Act. In the order imposing the penalty certain issues have been discussed by the Assessing Officer but they are obviously consequential to the decision already taken by the Assessing Officer to initiate penalty proceedings. To some extent it will amount to pre-determine of issue without recording satisfaction. Even in the order imposing penalty all that has been discussed by the Assessing Officer is that the assessee had disclosed the amount already paid the entire payment raised as a result of addition during the course of assessment proceedings. This fact according to the Officer clearly established that taxability of the same was never in dispute. On these premises the Assessing Officer concludes that the case falls under provision of Section 271(1)(c) and imposes penalty of the afore-indicated sum.