TMI Blog2008 (1) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... s no compliance from the assessee's side to the notices of hearing issued by him during the course of appellate proceedings, the learned CIT(A) dismissed the appeal of the assessee thereby sustaining the aforesaid additions made by the AO. Thereafter, penalty proceedings under s. 271(1)(c) were initiated by the AO and since the explanation offered on behalf of the assessee in response to the show cause notice issued during the course of penalty proceedings was not found acceptable by him, the AO imposed a penalty of Rs. 4,22,624 under s. 271(l)(c). The penalty so imposed by the AO was confirmed by the learned CIT(A) dismissing the appeal filed by the assessee by his appellate order which has been impugned by the assessee in the present appeal filed before the Tribunal. 4. At the time of hearing before us, the learned counsel for the assessee filed a copy of the order of Delhi 'E' Bench of Tribunal passed on 4th April, 2007 in ITA No. 4485/Del/2004 showing that the appellate order passed by learned CIT(A) in the quantum proceedings has already been set aside by the Tribunal and the matter has been remanded to the learned CIT(A) for disposing of the appeal of the assessee afresh on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein were sufficient to show his satisfaction as required for initiation of penalty proceedings under s. 271(1)(c). In support of this contention, the learned Departmental Representative relied on the decision of Hon'ble Delhi High Court in the case of Smt Santosh Sharma rendered vide a judgment delivered on 17th Sept., 2007 in IT Appeal No. 1088 of 2006 wherein it was held by their Lordships that the observations recorded by the AO in the last part of the assessment order "penalty proceedings under s. 271(1)(c) for furnishing inaccurate particulars of income have separately been initiated" read with a noting made by him in the earlier portion of the assessment order about the failure on the part of the assessee to explain the source of credits in her bank account as well as her failure to adduce any evidence to support the genuineness of such credits, were sufficient to show his satisfaction as required by law for initiation of penalty proceedings. 7. We have considered the rival submissions in the light of material available on record and the various judicial pronouncements cited by learned Representatives of both the sides. The penalty imposed under s. 271(1)(c) by the AO a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see having concealed the particulars of his income or having furnished inaccurate particulars of such income. It was also held by their Lordships that there was thus a jurisdictional defect in initiating the penalty proceedings which could not be cured and consequently all the subsequent proceedings leading upto the passing of the penalty order must fail. 8. Following the aforesaid decisions, it was again reiterated by the Hon'ble Delhi High Court in the case of Shri Bhagwant Finance Co. Ltd. v. CIT [2005] 196 CTR (Del) 462 : [2006] 280 ITR 412 (Del) that satisfaction of the AO is a condition precedent for initiation of penalty proceedings under s. 271(1)(c) and as such penalty proceedings initiated as a coercive measure to recover the revenue without arriving at subjective satisfaction that the assessee has concealed the particulars of income or furnished inaccurate particulars were not sustainable. Explaining further, it was also observed by the Hon'ble Delhi High Court that the established cannons of law impose a duty upon the concerned authorities to apply their mind, record satisfaction and then alone initiate penalty proceedings in conformity with the provisions of s. 271. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible from the order passed by the authority ?" A perusal of the aforesaid question referred to the Full Bench, however, clearly shows that the issue regarding requirement of recording the satisfaction for initiating the penalty proceedings under s. 271(1)(c), which has already been concluded by a series of judgments of the Hon'ble Delhi High Court, has not been referred to the Full Bench for reconsideration and what has been actually referred to the Special Bench and which is pending for disposal is only the issue relating to the manner and method of recording such satisfaction in the absence of any specific provisions contained in the statute in this regard. The issue referred to the Full Bench of Hon'ble Delhi High Court thus is incidental to the main issue of satisfaction inasmuch as after having held that there is a mandatory requirement of recording the satisfaction by the AO before initiating the penalty proceedings under s. 271(1)(c), the consequential issue which arises is whether such satisfaction has to be recorded in so many words or in the absence of any manner or method prescribed in the statute for recording such satisfaction, would it be sufficient if the same is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not be cured and the initiation of penalty proceedings was itself bad. 11. It is observed that in the case of CIT v. Jai Bharat Marutt Ltd. [2007] 212 CTR (Del) 250, a similar issue relating to the recording of satisfaction in the context of initiation of penalty proceedings arose for consideration before the Hon'ble Delhi High Court and when a reference made in the context of similar issue to the larger Bench in the case of Indus Valley Promoters Ltd. was pointed out on behalf of the Revenue, it was observed by their Lordships after referring to the question referred to the larger Bench that the view expressed by the Court in Ram Commercial Enterprises Ltd. and other several decisions to the same effect has been accepted as correct while making the said reference, but the alternative contention raised on behalf of the Revenue was referred to a larger Bench. The contention raised on behalf of the assessee that the issue referred to the larger Bench is no more res Integra in view of the judgment of Hon'ble Supreme Court in the case of Dilip N. Shroff v. Jt. CIT [2007] 210 CTR (SC) 228 : [2007] 291 ITR 519 (SC) approving the view taken by the Hon'ble Delhi High Court in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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