2007 (8) TMI 386 - ITAT DELHI-G

Penalty levied u/s 27(1)(b) - Absence of recording of the satisfaction - non-compliance of notice u/s 142(1) - HELD THAT:- Under cl. (a), the levy of penalty is dependent upon the findings of the appellate authorities, which is not the case under cl. (c). In this case, the default of non-attendance to notices was not the subject-matter in the quantum appeal and it in no way depended upon the outcome in the appeal. The penalty depends upon whether the default was willful or not. Therefore, we are of the view that the ratio of the case of Hissaria Bros.[2006 (7) TMI 163 - RAJASTHAN HIGH COURT] will be applicable in this case also. Consequently, it is also held that the order ought to have been passed on or before 31st Sept., 2001, failing which the levy will become barred by limitation.

Issue of recording of satisfaction, it may be mentioned that mere initiation of penalty does not amount to satisfaction as held in the case of CIT v. Ram Commercial Enterprises Ltd.[1998 (10) TMI 13 - DELHI HIGH COURT]. In absence of recording of the satisfaction in the assessment order, mere initiation of penalty will not confer jurisdiction on the AO to levy the penalty.

We also find that finally the order was passed u/s 143(3) and not u/s 144 of the Act. This means that subsequent compliance in the assessment proceedings was considered as good compliance and the defaults committed earlier were ignored by the AO. Therefore, in such circumstances, there could have been no reason to come to the conclusion that the default was willful.

Thus, it is held that the learned CIT(A) was not right in upholding the levy of penalty. Thus, the appeal is allowed.