COMMISSIONER OF INCOME-TAX Vs. RAMPUR ENGG. LTD.

JUDGEMENT

(1.) IN the relevant Income -tax Return filed by the assessee in the assessment year 1985 -86, it had claimed a deduction of purported consultancy fee of Rs. 14,45,927 allegedly paid to M/s. Turcon India (P.) Ltd. It was claimed that this amount was paid as consultancy fee to the aforesaid firm for getting some contracts from NTPC. The Assessing Authority in his assessment order disallowed the aforesaid expenditure on the ground that the assessee could not furnish sufficient evidence to justify the aforesaid expenditure for a genuine business cause and had not discharged the obligation placed on it as to the genuineness of the transaction. Thereafter, penalty proceedings were initiated and orders were passed by the Assessing Authority imposing penalty of Rs. 11,48,852 under Section 271(1)(c) of the Income -tax Act, 1961. Appeal of the assessee against that order filed to the CIT (Appeals) was dismissed vide its order dated 31 -3 -2005, however, on further appeal of the assessee before the Income -tax Appellate Tribunal, the assessee had succeeded inasmuch as vide impugned order dated 19 -8 -2005, appeal of the assessee has been allowed. The primary contention of the assessee before the ITAT was that before initiating proceedings under Section 271 of the Income -tax Act, no satisfaction was recorded by the Assessing Authority in the assessment order about the fulfilment of requirements contained in Section 271(1)(c) of the Act.

(2.) THIS matter along with certain other connected matters was referred to Full Bench for decision on the following questions of law: Whether satisfaction of the officer initiating the proceedings under Section 271 of the Income -tax 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?

(3.) IT is clear from the aforesaid judgment of the Full Bench that though it is not necessary for the Assessing Authority to use specifically words 'I am satisfied', at the same time, it should be inferred from the order that there is a satisfaction which was recorded about the existence of the conditions specified in Clauses (a), (b) and (c) of Section 271 of the Act, before the proceedings are concluded.