C.I.T vs. O.P.LOHIA


IN THE HIGH COURT OF DELHI AT NEW DELHI

ITA 1052/2007

COMMISSIONER OF INCOME TAX

..... Appellant

Through Mrs. P.L. Bansal, Advocate

versus

O.P. LOHIA

..... Respondent

CORAM:

HON'BLE MR. JUSTICE MADAN B. LOKUR HON'BLE DR. JUSTICE S.MURALIDHAR

ORDER

\_ 01.11.2007

The Revenue is aggrieved by an order dated 25^th January, 2007 passed by the Income Tax Appellate Tribunal ('Tribunal'), Delhi Bench 'H', New Delhi in ITA No. 4488/Del/2005 relevant for the Assessment Year 2002-2003.

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 December, 2002 where at the foot of the order he observed as under :-

> "Assessed at Rs.39,54,223/-. Issue necessary documents and challan. Give credit for prepaid taxes."

> "Penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 have been initiated separately."

Following this, by a separate order dated 29th March, 2005, the Assessing Officer levied a penalty of Rs.4,22,963/-.

The appeal against the said order filed by the Assessee was dismissed by the Commissioner of Income Tax (Appeals) [CIT(A)] on the ground that the Assessee had not offered any bonafide explanation for claiming deduction in respect of expenditure incurred, in the form of interest on borrowed funds, for investment in shares the income from which did not form part of the total income. The CIT(A) also negatived the plea that the penalty proceedings were bad for the reason that the Assessing Officer had not recorded his satisfaction in the Assessment Order that penalty


proceedings should be initiated against the Assessee.

.05

Allowing the appeal of the Assessee, the Tribunal reversed the order of the CIT(A). The Tribunal followed the decision of this Court in Commissioner of Income Tax Vs. Ram Commercial Enterprises Ltd.,

[2000] 246 ITR 568. It 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 appeal preferred by the Assessee should be allowed. It also allowed the appeal on merits.

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

3 of 7

not be separately or expressly indicated in the assessment order. In tha 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,


No substantial question of law arises.

Dismissed.

MADAN B. LOKUR, J

November 01, 2007

S.MURALIDHAR, J