Commissioner of Income Tax vs Miles Travellers (P.) Ltd.

ITA No. 99/2007

The revenue is aggrieved by an order dated 24-3-2006 passed by the income tax Appellate Tribunal, Delhi Bench ''SMC'' in ITA No. 362/Delhi/2006 relevant for the assessment year 2002-03. By the order under appeal, the Tribunal has cancelled the penalty levied against the assessee in view of the decision of this Court in CIT v. Ram Commercial Enterprises Ltd. [2000] 246 ITR 5681. It was held by the Tribunal that the Assessing Officer had failed to record his satisfaction that penalty proceeding should be initiated against the assessee.

The Assessing Officer has in the concluding paragraph of the assessment order observed as follows:--

Assessed u/s 115JB. Issue necessary forms. Charge intt. Accordingly. Give credit of pre-paid taxes. Penalty proceedings u/s 271(1)(c) are initiated separately.

We are of the view that, it cannot be discerned that the Assessing Officer had applied his mind to the question of initiation of penalty proceedings. The decision in Ram Commercial Enterprises Ltd.''s case (supra) squarely applies.

We find 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 T. Ashok Pai v. CIT [2007] 292 ITR 113 (SC).

Learned Counsel for the revenue has raised an alternative contention that from a reading of the assessment order it can be discerned that there was some application of mind and recording of satisfaction by the Assessing Officer to the question of initiation of penalty proceedings. He submitted that this alternative contention is the subject-matter of reference before a Larger Bench of this Court in CIT v. Indus Valley Promoters Ltd. [2006] 155 Taxman 223.

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 entire assessment order with the assistance of learned Counsel for the revenue, we do not find anything to suggest that the Assessing Officer has at all applied his mind to the initiation of penalty proceedings against the assessee. We are not able to discern any satisfaction having been recorded in the assessment order and none has been pointed out to us.

No substantial question of law arises. The appeal is dismissed.