The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that mere initiation of penalty proceedings cannot be challenged unless the formal order has been passed.
The matter was called for hearing the counsel for the assessee pointed out that the assessee individual filed his return of income for Assessment Year 2015-16 declaring total income at ‘Nil’ where exempt income shown was Rs.18,26,202/- being interest on land compensation from NOIDA Authority.
Subsequently, the assessee submitted a revised return stating a taxable income of ‘Nil’ and asserted that the entire interest on land compensation amounting to Rs. 18,26,202/- should be exempted. Following this, a notice was issued under Section 148 of the Income Tax Act, 1961 to assess the potential undisclosed income concerning the interest on land compensation.
In response to notice under Section 148 of the Income Tax Act, the tax consultant of the assessee filed a return of income declaring a total income of Rs.9,19,070/-.
Thus, the counsel of the assessee submitted that the revised return in response to 148 proceedings included the escaped income in terms of the provision of Section 56(2)(vii) read with Section 45A of the Income Tax Act and 50% of the interest received on compensation was offered for tax as per the mandate of law.
The revised return under section 148 of the Income Tax Act was purportedly neither e-verified nor ITR-V was sent for verification out of inadvertence and ignorance.
The counsel however asserted the tax amount on the revised return under Section 148 of the Income Tax Act was duly paid. The Assessing Officer treated the revised return in response to Section 148 of the Income Tax Act as invalid due to an error in e-verification etc. and added Rs.9,13,101/- to the taxable income offered and assessed the income at Rs.9,13,100/-.
It was also submitted that he has no objection to the assessed income rather the assessee himself had offered the aforesaid income in the revised return remaining unverified and also paid taxes. The counsel thus submitted that so far as the assessment of interest on compensation amount is concerned, the assessee has no objection whatsoever.
Further states that the present appeal has been filed primarily for the purposes of exoneration from the clutches of penalty proceedings when he has acted bona fide all along.
The counsel thus submitted that he sought to challenge the initiation of penalty proceedings. As a consequence of the assessment framed under Section 147 of the Income Tax Act, the counsel urged for suitable relief in the matter.
Based on the arguments presented by the assessee, as well as the first appellate order and the assessment order, the two-member bench comprising Chandra Mohan Garg (Judicial member) and Pradip Kumar Kedia (Accountant member) concluded that the current appeal filed by the assessee in relation to the quantum proceedings is unnecessary. It was determined that both the assessee and the Revenue are in agreement regarding the taxability of the interest on income compensation received from the NOIDA Development Authority.
Thus, the mere initiation of penalty proceedings cannot be challenged unless some formal order on the point has been passed in accordance with the law. The assessee may challenge the imposition of a penalty if so, legally advised at the appropriate stage.
The appeal of the assessee was dismissed as infructuous.
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