The judgement of the Division Bench in CIT v. Ram Commercial Enterprises Ltd. (2000) 246 ITR 568 (Delhi) holding that penalty under Section 271(1)(c) of the Act cannot be levied where the authority initiating the penalty proceedings had not recorded its satisfaction regarding concealment of income or furnishing of inaccurate particulars thereof by the assessee is approved.

Where the assessee, Vodafone, a Dutch company, purchased shares of a Cayman Company (which in turn held shares of an Indian company ‘Hutch Essar’) from another foreign company (HTIL) and the AO issued a notice asking the assessee why it should not be treated as an assessee in default for failure to deduct tax at source on the capital gains and the assessee filed a writ petition to challenge the same on the ground that a transaction between two foreign companies did not attract the provisions of the Act, HELD dismissing the writ petition that:

Though Instruction No. 1914 dated 2nd Dec 1993 supercedes Instruction No. 96 dated 21st August 1969, it clearly provides that demand should be stayed in “exceptional circumstances e.g., where the assessment order appears to be unreasonably high-pitched or where genuine hardship is likely to be caused to the assessee”. A case where the assessed income is several times the returned income falls within the expression “unreasonably high pitched” and stay on recovery of demand must therefore be granted to the assessee.

It is incumbent upon the Tribunal, being the final authority of facts, to appreciate the evidence, consider the reasons of the authorities below and assign its own reasons as to why it disagrees with the reasons and findings of the lower authorities. The Tribunal cannot brush aside the reasons or findings recorded by the lower authorities. It must give reasons and its failure to do so renders its’ order unsustainable.

Amounts received towards reimbursement of expenses can, under no circumstances, be regarded as a revenue Receipt and is not chargeable to income-tax;