Commissioner of Income Tax, Delhi-VI Vs Virgo Marketing (P.) Ltd.

Madan B. Lokur, J.@mdashThe revenue is aggrieved by an order dated 26-4-2007 passed by the income tax Appellate Tribunal, Delhi Bench ''C'', New Delhi (''the Tribunal'') in ITA Nos. 1547, 1548 and 1549/Delhi/2006 relevant for the assessment years 2000-01, 2001-02 and 2002-03. The sole question that has arisen for consideration in this appeal u/s 260A of the income tax Act, 1961 (''the Act'') is whether the Assessing Officer had recorded a valid satisfaction for initiating penalty proceedings u/s 271(1)(c) of the Act.

2. Learned counsel for the revenue accepted the fact that this Court has taken the view in Commissioner of Income Tax Vs. Ram Commercial Enterprises Ltd., that the Assessing Officer must record his satisfaction in specific terms for initiating penalty proceedings u/s 271(1)(c) of the Act. She also accepted the fact that the view taken by 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, nd T. Ashok Pai v. CIT [2007] 292 ITR 11 3 (SC).

3. Nevertheless, it was contended that the matter should be referred to a Larger Bench because the following issue has been referred to a Larger Bench in CIT v. Indus Valley Promoters Ltd. [2006] 155 Tax 223 (Del) on the ground that one aspect of the contention of the revenue was not considered in Ram Commercial Enterprises:

"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 order passed by the authority?"

4. In view of above submission of learned counsel for the revenue, we have proceeded on the basis that the question will be answered in the affirmative in favour of the revenue by the Larger Bench of this Court and have considered and decided the matter in that light.

5. From a perusal of the assessment order, it is found that for the purpose of initiating penalty proceedings, the Assessing Officer has stated as follows:

"Assessed at Rs. 25,25,680. Issue demand notice and challans. Charge interest as per rules. Penalty proceedings u/s 271(1)(c) have been initiated separately."

6. It is now settled that penalty proceedings are penal in nature. Section 271(1)(c) of the Act postulates penalty being imposed either for furnishing inaccurate particulars of income or for concealing the income.

7. There is nothing to suggest that the Assessing Officer had applied his mind to the question about which facet of Section 271(1)(c) of the Act is applicable to the case and for what act of omission or commission by the assessee. The assessee had filed its returns and had disclosed all material facts of the case and had concealed nothing in its returns. If the Assessing Officer takes a view contrary to that expressed by the assessee, it does not per se mean that the assessee has adopted an illegal device for reducing its tax liability.

8. Against the order imposing penalty, the assessee preferred an appeal before the Commissioner of income tax (Appeals) [''CIT(A)''] and in order dated 27-1-2006, the CIT(A) was of the view that the Assessing Officer had not properly recorded his satisfaction before initiation of penalty proceedings. This view was upheld by the Tribunal.

9. We are unable to discern from a reading of the assessment order why the Assessing Officer chose to initiate penalty proceedings against the assessee and under which part of section 271(1)(c) of the Act. In other words, we are unable to discern from the assessment order the reason for initiating penalty proceedings. Therefore, the concurrent view held by both the authorities below must be accepted.

10. The procedure that we have adopted has been consistently followed by us in a large number of cases, some of which are CIT v. O.K. Hosiery Mills (P.) Ltd. [2007] 165 Tax 515 (Del), CIT v. Bharat Hotels Ltd. [IT Appeal No. 1074 of 2006, dated 14-9-2007], CIT v. Bharat Hotels Ltd. [2007] 165 Tax 593 (Del) decided on 14-9-2007, 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], CIT v. Smt. Santosh Sharma [2007] 166 Tax 223 (Del) and CIT v. O.P. Lohia [2008] 167 Tax 217 (Del).

11. Even though the law has been settled by this Court in a very large number of cases, apart from Ram Commercial Enterprises such as Diwan Enterprises Vs. Commissioner of Income Tax, and CIT v. B.R. Sharma [2005] 275 ITR 303 (Del), the Revenue is still filing these sort of appeals for no apparent reason. By this casual attitude of the revenue, the Registry (apart from this Court) has been put under severe pressure in dealing with a large influx of appeals, which prima facie do not have any merit. By this flood of litigation, the revenue is ensuring that more important cases, where stakes are much higher and where perhaps the revenue has a better case, get receded into the background and their turn cannot come up in the near future. We have been repeatedly observing this but to no effect.

12. Under the circumstances, we are constrained to dismiss this appeal with costs of Rs. 5,000, which will be deposited by the revenue by way of a cheque in favour of the Registrar General of this Court within four weeks from today to be utilized for juvenile justice. List on 14-3-2008 for compliance.