COMMISSIONER OF INCOME TAX Vs. TAL
HIGH COURT OF DELHI
COMMISSIONER OF INCOME TAX
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(1.) THE Income -tax Tribunal ('Tribunal') Delhi Bench "F", New Delhi in ITA No. 1041/Del/2003 for the asst. yr. 1999 -2000.
(2.) BY the impugned order, the Tribunal allowed the appeal filed by the assessee challenging the levy of penalty under s. 271(1)(c) of the Act. The penalty was set aside by the Tribunal on the ground that the AO had not recorded any satisfaction in the assessment order, that there was either concealment or inaccurate particulars furnished by the
Ms. Prem Lata Bansal, learned senior standing counsel for the Revenue submits that in CIT vs. Ram Commercial
Enterprises Ltd. (2001) 167 CTR (Del) 321 : (2000) 246 ITR 568 (Del) this Court has taken the view that if the AO does
not record his satisfaction in the assessment order that penalty proceedings should be initiated against the assessee the
subsequent order levying penalty would be bad in law. However, she says that another Bench of this Court has in CIT
vs. Indus Valley Promoters Ltd. (2006) 204 CTR (Del) 149 : (2006) 155 Taxman 223 (Del) referred the following
substantial question of law to a larger Bench which according to the referring Bench was not considered in Ram
Commercial Enterprises Ltd :
"Whether satisfaction of the officer initiating the proceedings under s. 271 of the IT Act can be said to have been recorded even in cases where satisfaction is not recorded in specific terms but is otherwise discernible from order passed by the authority - She accordingly submits that this Court should await the decision of the larger Bench.
(3.) WE find that the decision of this Court in Ram Commercial Enterprises Ltd. has been approved by the Supreme Court in Dilip N. Shroff vs. Jt. CIT (2007) 210 CTR (SC) 228 : (2007) 291 ITR 519 (SC) and T. Ashok Pai vs. CIT (2007) 210
CTR (SC) 259 : (2007) 292 ITR 11 (SC).
Assuming the Revenue were to succeed before the Larger Bench, and the question referred to it is answered in the affirmative, it would mean that it is sufficient that the satisfaction of the AO for initiating penalty proceedings against an
assessee under s. 271(1)(c) of the Act is discernible from the assessment order itself and that such satisfaction need not
be separately or expressly indicated in the assessment order. In that event the assessment order in the present case
would have to be examined to find out if the satisfaction of the AO is discernible. Therefore, without expressing any view
on the issue pending consideration by the larger Bench, and presuming that the question referred to it is answered in
the affirmative, we proceed to examine the assessment order in the instant case in order to find out whether the
satisfaction of the AO that penalty proceedings should be initiated against the assessee under s. 271(1)(c) of the Act is
On a perusal of the assessment order, we find that the AO has, in regard to initiation of penalty proceedings, observed
as follows :
"Assessed. Issue necessary forms. Charge interest under s. 234B. Allow credit for prepaid taxes as per copy of challan on file. Penalty proceedings under s. 271(1)(c) of the IT Act has been initiated separately."
The above recording does not satisfy the requirement of s. 271(1)(c) of the Act as explained by this Court in Ram
Commercial Enterprises Ltd. (supra). Further even on a detailed perusal of the assessment order no satisfaction of the
AO that penalty proceedings are required to be initiated against the assessee is discernible. None has also been pointed
out to us.
No substantial question of law arises.
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