Delhi High Court
Cit vs Chohal Investments Ltd. on 18 September, 2007
Bench: M B Lokur, S Iwuralidhar
ORDER
1. In these appeals under Section 260A of the Income Tax Act, 1961 ('Act'), the revenue is aggrieved by an order dated 8-8-2005 passed by the Income Tax Appellate Tribunal, Delhi Bench 'C in ITA Nos. 2425 and 2426/Delhi/2005 relevant for the assessment years 1995-96 and 1996-97 respectively.
2. By the impugned order, the Tribunal allowed the appeals filed by the assessed challenging the levy of penalty under Section 271(1)(c) of the Act for both years. The penalty was set aside by the Tribunal on the ground that the assessing officer had not recorded any satisfaction in the assessment orders regarding the initiation of penalty proceedings against the assessed.-
3. On a perusal of the assessment order for the assessment year 1995-96, we find that the assessing officer has, in regard to initiation of penalty proceedings, observed as follows:
Assessed at total income of Rs. 3,29,31,390. Issue necessary forms. Charge interest under Sections 234A, B, C. Penalty proceedings under Section 271(1)(c) may also be initiated.
4. The above recording does not satisfy the requirement of Section 271(1)(c) of the Act as explained by this Court in CIT v. Ram Commercial Enterprises Ltd. (2000) 246 ITR 5681 (Delhi).
5. It may be noted that this decision has been approved by the Supreme Court in Dilip N. Shroff v. Joint CIT (2007) 291 ITR 5192 (SC) and T. Ashok Pai v. CIT (2007) 292 ITR IP (SC).
6. Mr. J.R. Goel learned senior standing counsel for the revenue makes an alternative submission that another Bench of this Court has in CIT v. Indus Valley Promoters Ltd. (2006) 155 Taxman 223 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. 's case (supra):
Whether satisfaction of the officer initiating the proceedings under Section 271 of the Income Tax 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?
7. He accordingly submits that this Court should await the decision of the larger Bench.
8. 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 assessing officer for initiating penalty proceedings against an assessed under Section 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 assessing officer 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 assessing officer that penalty proceedings should be initiated against the assessed under Section 271(1)(c) of the Act is discernible there from.
9. On a detailed perusal of the assessment order no satisfaction of the assessing officer that penalty proceedings are required to be initiated against the assessed is discernible.
10. Mr. Goel, learned senior counsel submits that since the assessing officer has, while finalizing the assessment, adopted the reasons contained in the assessment order for the earlier assessment year 1994-95, the said assessment order will have to be examined in order to discern if any satisfaction has been recorded by the assessing officer for initiating the penalty proceedings.
11. Learned Counsel for the assessed has drawn our attention to an order dated 12-5-2005 passed by the Tribunal in ITA No. 93 (Delhi) of 2005 for the assessment year 1994-95 in which the penalty levied against the assessed under Section 271(1)(c) has been cancelled. It has been noticed in the order that the assessed was assessed at a loss and, therefore, no penalty was leviable. In view of the decision of the Supreme Court in Virtual Soft Systems v. CIT (2007) 289 ITR S31, this conclusion is unexceptionable. So the assessment order for assessment year 1994-95 is of no assistance to the revenue. Therefore, the appeal of the revenue as regards assessment year 1995-96 is without merit.
12. As regards the assessment year 1996-97, it has been pointed out by learned Counsel for the assessed that pursuant to the appeal effect given by the Joint Commissioner of Income-tax by his order dated 30-4-1999, the assessed income is a loss. Consequently, even for this assessment year, D there can be no penalty.
13. No substantial question of law arises in these appeals.
14. These appeals are dismissed.
