Commissioner of Income Tax vs Wisec Global Ltd.

The revenue is aggrieved by an order dated 27-11 -2006 passed by the Income Tax Appellate Tribunal (''Tribunal''), Delhi Bench ''H'', New Delhi in IT Appeal No. 161/Delhi/2006 relevant for the assessment year 1998-99.

The assessing officer sought to initiate penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 (''Act'') by his assessment order dated 16-3-2001 where at the foot of the order, he observed as under:

Penalty proceedings u/s 271(1)(c) have been initiated separately. Assessed as above. Issue necessary forms.

Following this, by a separate order dated 24-3-2005 u/s 271(1)(c) of the Act, the assessing officer levied a penalty of Rs. 32,98,708.

The appeal against the said order filed by the assessee was allowed by the Commissioner (Appeals)

Dismissing the appeal of the revenue, 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 penalty proceedings are illegal.

At the outset, it requires to be noted that the decision of this Court in Ram Commercial Enterprises Ltd. (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 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 section271 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 ? (p. 227)

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(l)(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., Commissioner of Income Tax Vs. Bharat Hotels Limited, CIT v. Fibro Tech Chemicals (IT Appeal No. 954 of 2006, decided on 14-9-2007), CIT v. Preeti Aggarwala (TT Appeal No. 850 of 2006, decided on 15-9-2007) and CIT v. Smt. Santosh Sharma (200T) 166 Taxman223 (Delhi).

There is yet another ground on which this appeal should be dismissed. The assessee''s return was finalized at a loss for the assessment year in question. In view of the decision of the Supreme Court in Virtual Soft Systems Ltd v. CIT (2007) 159 Taxman 155 no penalty can be levied.

No substantial question of law arises. Dismissed.