2005-VIL-375-DEL-DT
Equivalent Citation: [2005] 277 ITR 337, 194 CTR 384, 145 TAXMANN 30
DELHI HIGH COURT
Date: 07.01.2005
COMMISSIONER OF INCOME-TAX
Vs
VIKAS PROMOTERS P. LTD.
BENCH
Judge(s) : SWATANTER KUMAR., MADAN B. LOKUR
JUDGMENT
This is an appeal under section 260A of the Income-tax Act, 1961, against the order dated July 7, 2004 passed by the Income-tax Appellate Tribunal, Delhi Bench. It is not necessary for us to state in greater detail the facts giving rise to the present appeal. Suffice it to note that the order under section 143(3)(i) of the Act was passed by the Assessing Officer and at the end of the said order he also issued demand notice and challan for imposition of penalty as assessed under section 271(1)(c) of the Act. The relevant part of the order reads as under:
"Assessed. Charge interest. Issue demand notice and challan accordingly.
Penalty proceedings under section 271(1)(c) are initiated separately.
(Sd.) A. Joseph,
Income-tax Officer
Ward 17(3), New Delhi."
Against this order an appeal was filed and the order was sustained by the appellate authority. However on a further appeal by the assessee the Income-tax Appellate Tribunal vide its order dated July 7, 2004 accepted the appeal and set aside all the orders of the Assessing Officer as well as the first appellate authority holding that there was no satisfaction recorded by the concerned authorities and as such the order was bad in law.
The relevant part of the order reads as under:
"3. After considering the rival submissions of both the parties and perusing the other material on record, I find that these assessees deserve to succeed in their respective appeals. I noted that disallowing the claim of loss by passing order under section 143(3), the Assessing Officer has not recorded any satisfaction as contemplated under section 271(1)(c) for the purpose of levying penalty. The hon'ble Delhi High Court in the case of Diwan Enterprises v. CIT [2000] 246 ITR 571 and in the case of CIT v. Ram Commercial Enterprises Ltd. [2000] 246 ITR 568 (Delhi) has held that it is mandatory to record satisfaction before drawing an inference for the purpose of levying penalty which completing the assessment under section 143(3). I have seen the orders of the Assessing Officer passed under section 143(3) and found that no such satisfaction as contemplated under section 271(1)(c) have been recorded by the Assessing Officer as the Assessing Officer, has mentioned simply that 'penalty proceedings under section 271(1)(c) are initiated separately'. Therefore, in view of the decisions of the jurisdictional High Court, both the assessees deserve to succeed on the legal ground alone.
4. Even on the merits I found that the assessees have disclosed all the particulars and only due to wrong advice the assessee treated the expense as revenue whereas they were of capital in nature. This is a case of change of opinion. As in the view of counsel for the assessee, the expenses claimed were revenue in nature, whereas in the opinion of the Assessing Officer, these expenses were capital in nature. As stated above that these assessees have disclosed all the material facts while filing their respective returns, therefore, this is not a case of furnishing inaccurate particulars from which it can be inferred that these assessees have concealed their income."
Learned counsel appearing for the petitioner while relying upon CIT v. S.V. Angidi Chettiar [1962] 44 ITR 739 (SC) contended that it was not necessary for the authorities to record reasons of satisfaction before issuing the demand notice as the proceedings taken by the Assessing Officer per se reflected the ingredients of section 271(1)(c) of the Act that there was concealment of income and as such the assessee was liable for penal action within the provision of the said Act.
Having perused the judgment of the Supreme Court aforereferred, we are of the opinion that the argument of learned counsel appearing for the Department is misconceived. Their Lordships of the Supreme Court have repeatedly emphasised the word "satisfaction" and the satisfaction is not to be in the mind of the Assessing Officer but must be reflected from the record. It is a settled rule of law that the authorities performing quasi-judicial or judicial function must give reasons in support of its order so as to provide in the order itself the ground which weighed with the authorities concerned for passing an order adverse to the interest of the assessee. Further more the provisions of section 271(1)(c) are penal in nature thus must be strictly construed, the element of satisfaction should be apparent from the order itself. It is not for the courts to go into the mind of the authorities or trace the reasons from the files of such authorities.
The order ex facie suffers from the vice of non-application of mind. We are further of the opinion that the judgment of this court in the case of CIT v. Ram Commercial Enterprises Ltd. [2000] 246 ITR 568 (Delhi) is squarely applicable to the facts of the present case.
No merit. Dismissed.
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