Commissioner of Income Tax, Delhi-II vs Monika Consultants (P.) Ltd.

In this appeal u/s 260A of the income tax Act, 1961 (''Act''), the revenue is aggrieved by an order dated 9-9-2005, passed by the income tax Appellate Tribunal, New Delhi Bench ''B'' (''Tribunal'') in ITA No. 1596/Delhi/2005 relevant for the assessment year 1998-99 in relation to penalty proceedings u/s 271(1)(c) of the Act. The background facts leading to the present appeal are that some amount was found credited in the books of account of the assessee for which no explanation was offered in respect of the assessment year 1997-98. Accordingly, the Assessing Officer added the amount to the income of the assessee.

Feeling aggrieved, the assessee filed an appeal before the Commissioner of income tax (Appeals) [''CIT(A)''] and the addition was deleted.

In view of the above, the Assessing Officer sought to add this amount to the income of the assessee in the present assessment year by issuing a notice u/s 148 of the income tax Act, 1961.

The assessee did not appear in response to the notice. In these circumstances, the Assessing Officer added the amount to the income of the assessee for the assessment year 1998-99.

In the concluding paragraph of the assessment order, the Assessing Officer recorded as follows:

Assessed on total income of Rs. 57,40,000. Issue necessary forms. Charge interest as per rules. Penalty proceeding u/s 271(1)(b), 271(1)(c) have been initiated separately.

Following this, the Assessing Officer issued a penalty order which was upheld by the CIT(A). The assessee''s appeal was allowed by the Tribunal by the impugned order. Applying the decision of this Court in Commissioner of Income Tax Vs. Ram Commercial Enterprises Ltd., the Tribunal held that penalty proceedings were invalid since the Assessing Officer had not recorded his satisfaction.

We may note at this stage that the decision of this Court in Ram Commercial Enterprises Ltd. 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, .

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 Limited:

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?" (p. 227)

He 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.

We have gone through the entire assessment order, but are unable to discern from any sentence therein that the Assessing Officer was satisfied that the penalty proceedings should be initiated against the assessee, except the concluding paragraph, which we have quoted above.

In view of the above, we are of the opinion that no substantial question of law arises. The appeal is dismissed.