COMMISSIONER OF INCOME TAX vs. WISEE GLOBAL LIMITED

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?? . 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 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 .