The Commissioner Of Income ... vs M/S Siel Industrial Estate ...
2008 Latest Caselaw 2161 Del

*             THE HIGH COURT OF DELHI AT NEW DELHI

%                                Judgment delivered on : 04.12.2008
+
1.                              I.T.A. NO. 751/2006

The Commissioner of Income Tax-III                         ....Appellant

                                       versus

M/s SIEL Industrial Estate Ltd.                            .....Respondent

2. I.T.A. NO. 752/2006

The Commissioner of Income Tax-III ....Appellant

versus

M/s Siel Industrial Estate Ltd. .....Respondent

Advocates who appeared in this case:

Present for the Appellant : Mr Sanjeev Sabharwal Present for the Respondent :Mr. V.P. Gupta & Mr Basant Kumar.

CORAM :-

HON'BLE MR JUSTICE BADAR DURREZ AHMED HON'BLE MR JUSTICE RAJIV SHAKDHER

1. Whether the Reporters of local papers may be allowed to see the judgment ?

2. To be referred to Reporters or not ?

3. Whether the judgment should be reported in the Digest ?

BADAR DURREZ AHMED, J (ORAL)

These two appeals arise out of the common order passed by the

Income Tax Appellate Tribunal on 08.12.2005. They relate to the

question of penalty under Section 271(1)(c) of the Income Tax Act,

1961. The Tribunal had decided in favour of the assessee by holding

that in the assessment order the Assessing Officer had not recorded his

satisfaction with regard to penalty. The Tribunal followed the decision

in the case of CIT v. Ram Commercial; 246 ITR 568 . The said

decision has been considered by the Full Bench in CIT v. Rampur

Engineering Co. Ltd and other cases being ITA no. 211/06 and other

connected matters and a decision was rendered by the Full Bench on

27.11.2008 whereby the view expressed in Ram Commercial (supra) in

so far as the period prior to 01.04.1989 is concerned, has been

confirmed. With regard to the period post 01.04.1989, the Finance Act,

2008 has introduced sub-section 1B in Section 271. The said provision

reads as under:-

"where any amount is added or disallowed in computing the total income or loss of an assessee in any order of assessment or reassessment and the said order contains a direction for initiation of penalty proceedings under clause (c) of sub- section (1), such an order of assessment or reassessment shall be deemed to constitute satisfaction of the Assessing Officer for initiation of the penalty proceedings under the said clause

(c).

By virtue of the above provision it is clear that where a direction

for initiation of penalty proceedings under clause (c) of sub- section (1)

is made in the assessment order, such assessment order is deemed to

constitute the satisfaction of the Assessing Officer for initiation of

penalty proceedings under the said clause. It is clear that for the

deeming provision to apply, there must be a direction for initiation of

penalty proceedings. It is an admitted position that in the assessment

orders, in these two appeals, there is no such direction for initiation of

penalty proceedings. Consequently the deeming provision does not get

triggered. The result is that the penalty orders cannot be sustained in the

absence of any satisfaction of the Assessing Officer with regard to

penalty in the course of the assessment proceedings. Thus, although the

Tribunal adopted a different reasoning, since the conclusion is the same,

that is, that the penalty proceedings cannot be held to be valid, the

Tribunal's order setting aside the penalty order/proceedings does not

call for any interference.

The appeals are dismissed.

                                         BADAR DURREZ AHMED, J




December 04, 2008/kk                            RAJIV SHAKDHER, J