COMMISSIONER OF INCOME TAX III V. M/S SIEL INDUSTRIAL ESTATE LTD

ITA/751/2006

AI Insights

The case involves two appeals by the Commissioner of Income Tax-III against M/s SIEL Industrial Estate Ltd., concerning penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961. The appeals were based on a common order by the Income Tax Appellate Tribunal, which had ruled in favor of the assessee, stating that the Assessing Officer had not recorded his satisfaction regarding the penalty in the assessment orders. This decision was influenced by the precedent set in CIT v. Ram Commercial and later affirmed by the Full Bench in CIT v. Rampur Engineering Co. Ltd. The Finance Act, 2008, introduced a provision that deemed an assessment order with a direction for penalty proceedings as constituting the satisfaction of the Assessing Officer. However, in this case, no such direction was present in the assessment orders, leading to the dismissal of the appeals.

• Counselvise Citation: [2008] 140 COUNSELVISE.COM (IT) 727914 (HC-DELHI)
• Appeal Type: Others
• Pronouncement Date: 04-12-2008
• Assessment Year: misc
• Other Referred Cases: CIT v. Ram Commercial; 246 ITR 568, CIT v. Rampur Engineering Co. Ltd and other cases being ITA no. 211/06 and other connected matters
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: VP GUPTA; BASANT KUMAR
• Assessee Lawyers: SANJEEV SABHARWAL
• Keywords: Deeming Provision; Income Tax; Penalty; Satisfaction of the Assessing Officer
• Section: 271(1)(c)

Judgement Text

"ITA-751, 752-2006 Page 1 of 3 * THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on : 04.12.2008 + 1. I.T.A. NO. 751/2006 The Commissioner of Income Tax-III ....Appellant versus M/s SIEL Industrial Estate Ltd. .....Respondent 2. I.T.A. NO. 752/2006 The Commissioner of Income Tax-III ....Appellant versus M/s Siel Industrial Estate Ltd. .....Respondent Advocates who appeared in this case: Present for the Appellant : Mr Sanjeev Sabharwal Present for the Respondent :Mr. V.P. Gupta & Mr Basant Kumar. CORAM :- HON'BLE MR JUSTICE BADAR DURREZ AHMED HON'BLE MR JUSTICE RAJIV SHAKDHER 1. Whether the Reporters of local papers may be allowed to see the judgment ? 2. To be referred to Reporters or not ? 3. Whether the judgment should be reported in the Digest ? BADAR DURREZ AHMED, J (ORAL) These two appeals arise out of the common order passed by the Income Tax Appellate Tribunal on 08.12.2005. They relate to the question of penalty under Section 271(1)(c) of the Income Tax Act, 1961. The Tribunal had decided in favour of the assessee by holding that in the assessment order the Assessing Officer had not recorded his ITA-751, 752-2006 Page 2 of 3 satisfaction with regard to penalty. The Tribunal followed the decision in the case of CIT v. Ram Commercial; 246 ITR 568 . The said decision has been considered by the Full Bench in CIT v. Rampur Engineering Co. Ltd and other cases being ITA no. 211/06 and other connected matters and a decision was rendered by the Full Bench on 27.11.2008 whereby the view expressed in Ram Commercial (supra) in so far as the period prior to 01.04.1989 is concerned, has been confirmed. With regard to the period post 01.04.1989, the Finance Act, 2008 has introduced sub-section 1B in Section 271. The said provision reads as under:- “where any amount is added or disallowed in computing the total income or loss of an assessee in any order of assessment or reassessment and the said order contains a direction for initiation of penalty proceedings under clause (c) of sub- section (1), such an order of assessment or reassessment shall be deemed to constitute satisfaction of the Assessing Officer for initiation of the penalty proceedings under the said clause (c). By virtue of the above provision it is clear that where a direction for initiation of penalty proceedings under clause (c) of sub- section (1) is made in the assessment order, such assessment order is deemed to constitute the satisfaction of the Assessing Officer for initiation of penalty proceedings under the said clause. It is clear that for the deeming provision to apply, there must be a direction for initiation of penalty proceedings. It is an admitted position that in the assessment orders, in these two appeals, there is no such direction for initiation of penalty proceedings. Consequently the deeming provision does not get ITA-751, 752-2006 Page 3 of 3 triggered. The result is that the penalty orders cannot be sustained in the absence of any satisfaction of the Assessing Officer with regard to penalty in the course of the assessment proceedings. Thus, although the Tribunal adopted a different reasoning, since the conclusion is the same, that is, that the penalty proceedings cannot be held to be valid, the Tribunal’s order setting aside the penalty order/proceedings does not call for any interference. The appeals are dismissed. BADAR DURREZ AHMED, J December 04, 2008/kk RAJIV SHAKDHER, J "