Commissioner of Income Tax vs GKN Driveline India Ltd.

The revenue is aggrieved by an order dated 7-12-2006 passed by the Income Tax Appellate Tribunal (''Tribunal''), Delhi Bench ''E'', New Delhi in ITA No. 1760/Delhi/2006 relevant for the assessment year 1995-96.

The assessing officer sought to initiate penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 (''Act'') by his re-assessment order dated 28-3-2002 where at the foot of the order, he observed as under:

Assessed as above. Issue - demand notice and challan. Charge interest as per law. Penalty proceedings u/s 271(1)(c) have been separately initiated.

Following this, by a separate order dated 29-7-2005 u/s 271(1)(c) of the Act, the assessing officer levied a penalty of Rs. 53,88,695.

The appeal against the said order filed by the assessee was dismissed by the Commissioner (Appeals) on the ground that the assessee had furnished inaccurate particulars and, therefore, penalty was leviable. Further it was held that the satisfaction of the assessing officer was evident from the assessment order.

Allowing the appeal of the assessee, the Tribunal reversed the order of the Commissioner (Appeals). The Tribunal followed the decision of this court in CIT v. Ram Commercial Enterprises Ltd. (2000) 246 ITR 568 (Del) and held that since there was no recording of satisfaction of the assessing officer in the order of assessment, the penalty proceedings are illegal.

At the outset, it requires to be noted that the decision of this court in Ram Commercial Enterprises Ltd.''s case (supra) 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, And Sri T. Ashok Pai Vs. Commissioner of Income Tax, Bangalore, .

Learned Counsel for the revenue states that another Bench of this court has in CIT v. Indus Valley Promoters Ltd. (2006) 155 Taxman 223 (Del), referred the following substantial question of law to a larger Bench which according to the referring Bench was not considered in Ram Commercial Enterprises Ltd.''s case (supra):

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 the 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 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.

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 initialled against the assessee u/s 271(1)(c) of the Act. We may mention that we have adopted this procedure in large number of cases, some of which are CIT v. O.K. Hosiery Mills (P) Ltd (2007) 165 Taxman 515 (Del), CIT v. Bharat Hotels Ltd. IT Appeal No. 1074 of 2006 decided on 14-9-2007, CIT v. Bharat Hotels Ltd. (2007) 165 Taxman 593 (Del), CIT v. Fibro Tech Chemicals IT Appeal No. 954 of 2006 decided on 14-9-2007, CIT v. Preeti Aggarwala IT Appeal No. 850 of 2006 decided on 15-9-2007 and CIT v. Smt. Santosh Sharma IT Appeal No. 1088 of 2006 decided on 17-9-2007.

No substantial question of law arises.

Dismissed.