Delhi High Court
Cit vs Edwards Life Sciences India P. on 15 September, 2007
Bench: M B Lokur, S Muralidhar
ORDER
1. The revenue is aggrieved by an order dated 12-8-2005 passed by the Income Tax Appellate Tribunal ('Tribunal'), New Delhi Bench 'E' in ITA No. 1002/Delhi/2005 relevant for the assessment year 2001-02.
2. The Tribunal came to the conclusion that penalty proceedings against the assessee were vitiated in view of the failure of the assessing officer to record his satisfaction that penalty proceedings ought to be initiated. Reliance was placed on a decision of this Court in CIT v. Ram Commercial Enterprises Ltd. .
It may be noted that the decision in Ram Commercial Enterprises Ltd.'s case (supra) has been approved by the Supreme Court in Dilip N. Shroff v. Jt. CIT and T. Ashok Pai v. CIT .
3. Learned Counsel for the revenue nevertheless raised an alternative contention that the satisfaction of the assessing officer can be discerned from a reading of the assessment order. She submits that the issue whether such discernment is permissible in law is pending consideration before this Court in CIT v. Indus Valley Promoters Ltd. (2006) 155 Taxman 223(Del).
4. Without in any manner accepting the contention raised by the learned Counsel we have nevertheless examined in detail the assessment order assuming that the question raised before the Larger Bench is answered in the affirmative. We are unable to discern any satisfaction having been recorded by the assessing officer to initiate the penalty proceedings against the assessee and none has been pointed out to us. All that has been said in the concluding paragraph of the assessment order is as follows:
Assessed at loss of Rs. 1,49,16,760. Issue ITNS 150, Demand Notice. Penalty proceedings under Section 271(1)(c) have been initiated.
5. We may also note that since the assessee was assessed at a loss for the assessment year in question, no question of penalty arises by virtue of the decision of the Supreme Court in Virtual Soft Systems Ltd. v. CIT (2007) 289 ITR 834(SC). Nevertheless, learned senior standing counsel for the revenue insisted in arguing the matter and referred to the assessment order in which the assessing officer has recorded that the assessee-company failed to give any "elaborate" details about the hospitals where deposits were made while applying for tenders for supply of cardiovascular products. The names and addresses of the hospitals were not given and it was not explained by the assessee what prompted the hospitals to forfeit the deposits made by the assessee.
6. We find that the assessing officer himself concluded that it is quite possible that the hospitals might have refused to refund the deposits on account of misconduct or supply of inferior articles or non-compliance on the part of the assessee on various provisions described in the contract. On this, assessing officer concluded that it could not be accepted that advances written off are a trading loss. The assessing officer has nowhere mentioned in this regard that he was satisfied that the assessee had either concealed any particular information or had furnished inaccurate particulars. We are unable to appreciate how learned Counsel for the revenue can raise a contention that this conclusion of the assessing officer warranted initiation of penalty proceedings against the assessee.
7. Learned Counsel for the revenue also drew our attention to disallowance of fees for human resource services paid by the assessee to M/s. Baxter India Pvt. Ltd. The amount paid was Rs. 9.87 lakhs which was debited under the head of 'Legal and professional fee'. The assessing officer disallowed the amount on the basis of certain expenses that were paid by the assessee to M/s. Baxter India Pvt. Ltd.
8. From reading of this paragraph of the assessment order, we are unable to discern any satisfaction having been suggested by the assessing officer, much less arrived at by the assessing officer, that penalty proceedings should be initiated against the assessee. We are unable to appreciate how learned Counsel for the revenue can advance such a contention in the face of the language used in the assessment order.
9. No other portion of the assessment order was pointed out by learned Counsel for our consideration.
10. We do not find it possible to discern from the assessment order that there was any satisfaction arrived at the assessing officer to initiate the penalty proceedings. There is no merit in the appeal.
11. No substantial question of law arises.
Dismissed.
