COMMISSIONER OF INCOME TAX vs. WISEE GLOBAL LIMITED

IN THE HIGH COURT OF DELHI AT NEW DELHI . 6 ITA 1110/2007 . COMMISSIONER OF INCOME TAX ..... Appellant Through Mrs. P.L. Bansal, Advocate versus . WISEC GLOBAL LIMITED ..... Respondent Through : None. . . CORAM: HON'BLE MR. JUSTICE MADAN B. LOKUR HON'BLE DR. JUSTICE S. MURALIDHAR . O R D E R 19.11.2007 . The Revenue is aggrieved by an order dated 27th November, 2006 passed by the Income Tax Appellate Tribunal ('Tribunal'), Delhi Bench `H', New Delhi in ITA No. 161/Del/2006 relevant for the Assessment Year 1998-99. The Assessing Officer sought to initiate penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961 (`Act') by his assessment order dated 16th March, 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 24th March, 2005 under Section 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 of Income Tax (Appeals) [CIT(A)]. Dismissing the appeal of the Revenue, the Tribunal followed the decision of this Court in Commissioner of Income Tax Vs. Ram Commercial Enterprises Ltd., [2000] 246 ITR 568 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. has been approved by the Supreme Court in Dilip N. Shroff Vs. Joint Commissioner of Income Tax, [2007] 291 ITR 519 (SC) and T.Ashok Pai Vs. Commissioner of Income Tax, [2007] 292 ITR 11 (SC). Learned counsel for the Revenue states that another Bench of this Court has in Commissioner of Income Tax, Delhi IV v. Indus Valley Promoters Limited (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 under section 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 under Section 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 under Section 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 under Section 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 Del Vs. O.K. Hosiery Mills P. Ltd. (ITA No. 12/2007 decided on 14th September, 2007), Commissioner of Income Tax Vs. M/s Bharat Hotels Ltd. (ITA NO. 1074/2006 decided on 14th September, 2007), Commissioner of Income Tax Vs. M/s Bharat Hotels Ltd. (ITA No. 935/2006 decided on 14th September, 2007), Commissioner of Income Tax Del Vs. Fibro Tech Chemicals (ITA No. 954/2006 decided on 14th September, 2007), Commissioner of Income Tax Vs. M/s Preeti Aggarwala (ITA NO. 850/2006 decided on 15th September, 2007) and Commissioner of Income Tax Vs. Smt. Santosh Sharma (ITA No. 1088/2006 decided on 17th September, 2007). 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 Limited v. Commissioner of Income tax JT 2007 (3) SC 125 no penalty can be levied. No substantial question of law arises. Dismissed. MADAN B. LOKUR, J . . November 19, 2007 S. MURALIDHAR, J rk .