B.R. KAUSHIK, A.M.: This appeal has been filed against order dt. 13th July, 2005 of learned CIT(A)-IX, New Delhi. grounds of appeal are reproduced below: "1. That learned CIT(A) is not justified in confirming penalty imposed under s. 271(1)(c) amounting to Rs. 1,36,507 by AO. It is contended that assessee was under bona fide belief that requisite approval of CBDT will be received in due course for claiming exemption under s. 10(23G) of IT Act, that belief constituted reasonable cause. matter of approval from CBDT is still pending and it is in process of approval with Central Government " assessee filed written submissions which are placed on record. learned counsel further submitted that AO did not record satisfaction in assessment order under s. 143(3) before initiation of penalty proceedings and order under s. 271(1)(c) dt. 24th March, 2005 and impugned order of learned CIT(A) confirming same are not maintainable in law in view of decisions in cases of (i) CIT vs. Ram Commercial Enterprises (2001) 167 CTR (Del) 321: (2000) 246 ITR 568 (Del), (ii) Diwan Enterprises vs. CIT (2005) 196 CTR (Del) 462: (2006) 280 ITR 412 (Del). It was also claimed that bona fide claim made by assessee for exemption under s. 10(23G) of IT Act, 1961 was rejected by AO because approval of CBDT was not received, and action of AO was, therefore, not justified and learned CIT(A) has erroneously upheld order of AO. learned Departmental Representative relied on orders of lower authorities. brief facts of case are that assessee is, inter alia, engaged in business of leasing and providing long-term finance. assessee claimed exemption under s. 10(23G) of IT Act on interest income of Rs. 3,82,377 received from infrastructure capital company. It was submitted that assessee had given loan of Rs. 32 lacs to M/s ATS Promoters & Builders, which was wholly engaged in business of developing, maintaining and operating housing project eligible for exemption under s. 10(23G) of Act and aforesaid interest income received by assessee was, therefore, exempt under s. 10(23G) of Act. AO rejected claim of assessee for reason that provisions of s. 10(23G) were not applicable to case of assessee. AO initiated penalty proceedings under s. 271(1)(c) of IT Act and levied minimum penalty of Rs. 1,36,507 which was confirmed by learned CIT(A). On careful consideration of issue, we are of considered opinion that since satisfaction for initiation of penalty proceedings under s. 271(1)(c) was not recorded by AO while completing relevant assessment under s. 143(3) of IT Act, penalty under s. 271(1)(c) could not be sustained in case of assessee in view of decision of Hon ble jurisdictional High Court in case of Ram Commercial Enterprises (supra) and other such cases relied upon by assessee. orders of lower authorities are vacated. Since impugned penalty is not leviable for failure of AO to record satisfaction for initiation of penalty proceedings under s. 271(1)(c) of IT Act, as discussed above, we do not consider it necessary to go into other submissions of assessee. appeal of assessee is accordingly allowed. *** MEWAR INDUSTRIES LTD. v. INCOME TAX OFFICER