TaxTMI 
TaxTMI 
2008 (1) TMI 446
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....------- Total 10,68,582 --------- 3. The aforesaid additions made by the AO were challenged by the assessee in an appeal filed before the learned CIT(A) and since there was 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 acce....
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....e purpose of business. (ii) All the relevant facts of the case clearly, show that the commission of Rs. 8,30,630 is booked as expenses by the assessee company and paid to the sister concern to reduce the income and evade tax. There were no such expenses in the past whereas the assessee has been into this business for many years. Accordingly, the commission expenses of Rs. 8,30,630 are disallowed under s. 40A(2) of the IT Act, 1961. 6. According to the learned Departmental Representative, the aforesaid observations/findings recorded by the AO in the assessment order were sufficient to show that the assessee had furnished inaccurate particulars of its income and the specific instances pointed out by the AO 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 "pe....
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....Enterprises Ltd. has to be reached during the course of assessment proceedings by the AO and the same has to be recorded by him in the assessment order. A similar issue again came before the Hon'ble Delhi High Court in the case of Diwan Enterprises wherein it was noted by the AO in the concluding portion of his assessment order that "penalty proceedings under s. 271(1)(c) for furnishing inaccurate particulars of income have been initiated separately" and despite such a noting, it was held by the Hon'ble Delhi High Court following the decision rendered in the case of Ram Commercial Enterprises that the AO had nowhere recorded till the conclusion of the assessment proceedings his satisfaction about the assessee 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 Fin....
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....he same, the initiation of penalty proceedings itself was bad in law. 9. It is no doubt true that the issue relating to the exact requirement of recording satisfaction in the context of initiation of penalty proceedings is now pending before the Full Bench of Hon'ble Delhi High Court in the case of CIT v. Rampur Engg. Co. Ltd./Indus Valley Promoters Ltd. [2006] 204 CTR (Del) 149 : [2006] 155 Taxman 223 (Del) wherein the following question has been referred to the Full Bench for decision : "Whether satisfaction of the officer initiating the proceedings under s. 271 of the IT Act can be said to have been recorded even in cases where satisfaction is not recorded in specific terms but is otherwise discernible 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 pendin....
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.... to the effect that "penalty proceedings under s. 271(1)(c) for furnishing inaccurate particulars of income have been initiated separately" and despite such a noting made by the AO which was similar to the noting made in the case of Smt. Santosh Sharma, it was held by the Hon'ble Delhi High Court having regard to the facts and circumstances involved in the case of Diwan Enterprises that the AO had nowhere recorded till the conclusion of the assessment proceedings his satisfaction about the assessee having concealed the particulars of his income or having furnished inaccurate particulars of such income. It was also held by the Hon'ble Delhi High Court that there was thus a jurisdictional defect which could 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 o....