Commissioner of Income Tax vs Aravali Securities and Finance Ltd.

The revenue is aggrieved by an Order dated 23-6-2006 passed by the Income Tax Appellate Tribunal, Delhi Bench ''F'' in ITA No. 1264/ Delhi/ 2004 relevant for the assessment year 1994-95.

After hearing learned Counsel for the parties, we are of the opinion that this appeal ought to be admitted.

We frame the following substantial question of law for consideration:

Whether the Income Tax Appellate Tribunal was correct in law in deleting the penalty imposed by the assessing officer u/s 271(1)(c) of the Income Tax Act, 1961?

Filing of paper books is dispensed with.

The penalty imposed by the assessing officer was deleted by the Tribunal by relying on a judgment of this Court in Commissioner of Income Tax Vs. Ram Commercial Enterprises Ltd., .

The question of law framed by us suggests that the Tribunal did not go into the question whether the penalty was actually leviable on the assessee or not. The Tribunal came to the conclusion that in view of the decision of this Court in Ram Commercial Enterprises Ltd. ''s case (supra), Diwan Enterprises Vs. Commissioner of Income Tax, and CIT v. B.R. Sharma (2005) 275 ITR 3032 (Del), if the assessing officer has not recorded his satisfaction that penalty proceedings ought to be initiated against the assessee, then there is a good ground for setting aside the penalty proceedings against the assessee.

In view of this, we have gone through the assessment order passed by the assessing officer, wherein it has been recorded as follows:

Since the assessee has furnished inaccurate particulars of its income and has deliberately reduced its income liable to tax as discussed in paras 1A to 1D and para 2. Hence, penalty proceedings u/s 271(1)(c) have been initiated separately.

We are of the opinion that this meets the requirement of law as laid down by the Supreme court in Commissioner of Income Tax, Madras, and Another Vs. S.V. Angidi Chettiar, inasmuch as there is a prima facie satisfaction recorded by the assessing officer that penalty proceedings ought to be initiated against the assessee. Whether, in fact, the penalty should or should not be levied has to be decided after the proceedings are initiated.

Under these circumstances, we are of the view that the Tribunal erred in law in coming to the conclusion that the assessing officer had not recorded his prima facie satisfaction about the initiation of penalty a proceedings. Since we hold that there is a recording of a prima facie satisfaction by the assessing officer and since the Tribunal has not gone into the merits of the case, we set aside the Order dated 23-6-2006 and remit the matter back to the Tribunal for a decision on merits.

The parties are directed to appear before the Tribunal on 9-10-2007 for directions with regard to hearing of the appeal on merits.

The appeal is disposed of.