Commissioner of Income Tax vs Mahabaleshwar Gas and Chemical (P) Ltd.

The revenue is aggrieved by an order dated 14-12-2006 passed by the Income Tax Appellate Tribunal (Tribunal''), Delhi Bench ''H'', New Delhi in ITA No. 2072/Delhi/2006 relevant for the assessment year 2000-01.

The assessing officer sought to initiate penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ''the Act) by his assessment order dated 31-3-2001 where at the foot of the order, he observed asunder:''

Assessed at Rs. 23,86,713. Issued demand notice and challan. Charged interest u/s 234B&C upto date of assessment as per ITNS 150. Initiated penalty proceedings u/s 271(1)(c) separately.

Following this, by a separate order dated 30-12-2004, the assessing officer levied a penalty of Rs. 9,20,100. The appeal against the said order filed by the assessee was allowed by the Commissioner (Appeals) on the ground that even though the assessing officer has recorded satisfaction but on merits of the case the disallowance and addition made do not amount to concealment of income. Against the said order, both the assessee and the revenue filed appeals before the Income Tax Appellate Tribunal.

The Tribunal upheld the order of the Commissioner (Appeals) on merits. Additionally, the Tribunal followed the decision of this court in Commissioner of Income Tax Vs. Ram Commercial Enterprises Ltd., and held that since there was no recording of satisfaction of the assessing officer in the order of assessment that penalty proceedings must be initiated, the appeal preferred by the revenue should be dismissed.

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 of the officer initiating the proceedings u/s 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?

She accordingly submits that this court should await the decision of the Larger Bench.

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 assessee u/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 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 assessee u/s 271(1)(c) of the Act is discernible therefrom.

Having gone through the assessment order, we find that it is not possible to discern any satisfaction of the assessing officer that penalty proceedings must be initiated against the assessee u/s 271(1)(c) of the Act. We may mention that we have adopted this procedure in large number of cases, some of which are Commissioner of Income Tax Vs. O.K. Hosiery Mills (P) Ltd., CIT v. Bharat Hotels Ltd. (2007) 165 Taxman 593 (Del), CIT v. Fibro Tech Chemicals IT Appeal No. 954 (Del) of 2006, dated 14-9-2007, CIT v. Preeti Aggarwala IT Appeal No. 850 (Del) of 2006, dated 15-9-2007 and CIT v. Smt. Santosh Sharma (2007) 166 Taxman 223 (Delhi).

Apart from the above, we also find that the revenue''s appeal has been dismissed on merits by the Tribunal. It has been held that the claim of the assessee for depreciation was based on a bona fide belief and that the disallowance of the said claim during assessment proceedings on a difference of opinion could not be treated as concealment of income by the assessee, particularly when all the particulars in respect of the said claim were fully furnished by the assessee in its return of income.

Having examined the matter on merits ourselves, we find no infirmity in the view taken by the Tribunal in this regard. Therefore on merits as well no case for interference is made out.

No substantial question of law arises.

Dismissed.