Income Tax Appellate Tribunal - Delhi
Mewar Industries Ltd. vs Income Tax Officer on 30 May, 2007
Equivalent citations: (2007)109TTJ(DELHI)698
ORDER
B.R. Kaushik, A.M.
1. This appeal has been filed against the order dt. 13th July, 2005 of the learned CIT(A)-IX, New Delhi. The grounds of appeal are reproduced below:
1. That the learned CIT(A) is not justified in confirming the penalty imposed under Section 271(1)(c) amounting to Rs. 1,36,507 by AO.
2. It is contended that the assessee was under bona Me belief that requisite approval of CBDT will be received in due course for claiming the exemption under Section 10(23G) of the IT Act, that a belief constituted reasonable cause. The matter of approval from CBDT is still pending and it is in process of approval with Central Government.
2. The assessee filed written submissions which are placed on record. The learned Counsel further submitted that the AO did not record satisfaction in the assessment order under Section 143(3) before initiation of penalty proceedings and the order under Section 271(1)(c) dt. 24th March, 2005 and the impugned order of the learned CIT(A) confirming the same are not maintainable in law in view of decisions in the cases of (i) CIT v. Ram Commercial Enterprises , (ii) Diwan Enterprises v. CIT . It was also claimed that the bona fide claim made by the assessee for exemption under Section 10(23G) of the IT Act, 1961 was rejected by the AO because the approval of the CBDT was not received, and the action of the AO was, therefore, not justified and the learned CIT(A) has erroneously upheld the order of the AO.
3. The learned Departmental Representative relied on the orders of the lower authorities.
4. The brief facts of the case are that the assessee is, inter alia, engaged in the business of leasing and providing long-term finance. The assessee claimed exemption under Section 10(23G) of the IT Act on interest income of Rs. 3,82,377 received from infrastructure capital company. It was submitted that the assessee had given a loan of Rs. 32 lacs to M/s ATS Promoters & Builders, which was wholly engaged in the business of developing, maintaining and operating a housing project eligible for exemption under Section 10(23G) of the Act and the aforesaid interest income received by the assessee was, therefore, exempt under Section 10(23G) of the Act.
5. The AO rejected the claim of the assessee for the reason that the provisions of Section 10(23G) were not applicable to the case of the assessee. The AO initiated penalty proceedings under Section 271(1)(c) of the IT Act and levied the minimum penalty of Rs. 1,36,507 which was confirmed by the learned CIT(A).
6. On a careful consideration of the issue, we are of the considered opinion that since satisfaction for the initiation of penalty proceedings under Section 271(1)(c) was not recorded by the AO while completing the relevant assessment under Section 143(3) of the IT Act, penalty under Section 271(1)(c) could not be sustained in the case of the assessee in view of the decision of the Hon'ble jurisdictional High Court in the case of Ram Commercial Enterprises (supra) and other such cases relied upon by the assessee. The orders of the lower authorities are vacated. Since the impugned penalty is not leviable for failure of the AO to record satisfaction for the initiation of the penalty proceedings under Section 271(1)(c) of the IT Act, as discussed above, we do not consider it necessary to go into other submissions of the assessee.
7. The appeal of the assessee is accordingly allowed.