Commissioner of Income Tax vs Eicher Goodearth Ltd.

This appeal u/s 260A of the Income Tax Act, 1961 (hereinafter referred to as ''the Act) has been filed by the revenue against an order dated 15-2-2007 passed by the Income Tax Appellate Tribunal, Delhi Bench ''IT, New Delhi (''Tribunal'') in ITA No. 1421/Delhi/2005 relevant for the assessment year 1996-97.

In completing the assessment of the assessee for the assessment year in question, the assessing officer by an order dated 18-12-1998 observed at the foot of the order as under:

Assessed at income of Rs. 2,23,16,920. Issue necessary forms. Penalty proceeding u/s 271(1)(c) are separately initiated.

The assessing officer, while passing the assessment order, disallowed the claim on account of depreciation and the deduction u/s 80M of the Act. Thereafter by a separate order dated 20-9-2004 u/s 271(1)(c) of the Act, the assessing officer levied a penalty of Rs. 4,54,242 after concluding that the assessee had ''concealed or furnished an inaccurate particulars of income to the extent of Rs. 1,69,55,590''.

The appeal filed by the assessee before the Commissioner (Appeals) (''Commissioner (Appeals)'') was partly allowed by an order dated 23-12-2004. The Commissioner (Appeals) held that the penalty levied by the assessing officer on excess depreciation claimed by the assessee was justified and, therefore, confirmed a penalty to that extent. As regards the penalty levied for the excess deduction claimed u/s 80M of the Act, the Commissioner (Appeals) cancelled the penalty.

In the further appeal by the assessee before the Tribunal, i.e., ITA No. 1421/Delhi/2005, the assessee urged an additional ground that the penalty order was without jurisdiction since there was no recording by the assessing officer in the assessment order of his satisfaction that the penalty proceedings should be initiated. Allowing the assessee''s appeal, the Tribunal concluded that the failure of the assessing officer to record his satisfaction in the assessment order that the penalty proceedings should be initiated was fatal to the penalty order. The Tribunal followed the decision of this court in Commissioner of Income Tax Vs. Ram Commercial Enterprises Ltd., .

The Tribunal also examined the merits of the penalty order and held that both as regards the claim for depreciation and the deduction u/s 80M of the Act, the assessing officer had not found fault with the particulars furnished by the assessee nor had he shown them to be false. The assessing officer had also not unearthed any material facts or particulars which had not been disclosed by the assessee. The Tribunal accordingly found the penalty on both counts to be unsustainable in law.

At the outset, it requires to be noted that the decision of this court in Ram Commercial Enterprises Ltd. s case (supra),has been approved by the Supreme court in Dilip N. Shroff Karta of N.D. Shroff Vs. Joint Commissioner of Income Tax, Special Range Mumbai and Another, and Sri T. Ashok Pai Vs. Commissioner of Income Tax, Bangalore, .

Learned counsel for the revenue states that another Bench of this court has in CIT v. Indus Valley Promoters Ltd. (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. ''s case (supra):

Whether satisfaction