Case Law Details
Tekchand Vs ITO (ITAT Delhi)
Introduction: In a recent judgement involving Tekchand and the Income Tax Officer (ITO) issued by the Income Tax Appellate Tribunal (ITAT) in Delhi, it was declared that the mere initiation of penalty proceedings cannot be challenged unless a formal order has been passed. This conclusion arose in relation to an appeal filed by the appellant (Tekchand) concerning the assessment year 2015-16, disputing an addition to taxable income due to a perceived error during the assessment process.
Analysis: The case revolved around the addition of Rs 9,13,100 to the appellant’s taxable income due to interest received on land compensation from the Noida Authority. The appellant argued that the addition wouldn’t have been made if the ITR-V filed against the notice issued under section 147 had been appropriately processed. The appellant contended that the additional income had already been declared in their ITR, and the applicable taxes had been adjusted, resulting in a refund.
The ITAT, however, dismissed the appeal on the grounds that both the appellant and the Revenue agreed on the taxability of the interest on income compensation. They further clarified that the appeal is considered ‘infructuous’, meaning futile or unfruitful, as no formal penalty order had been issued. This ruling underscores the necessity of a formal order for any challenge to penalty proceedings.
FULL TEXT OF THE ORDER OF ITAT DELHI
The captioned appeal has been filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi (‘CIT(A)’ in short) dated 09.02.2023 arising from the assessment order dated 14.09.2021 passed by the Assessing Officer (AO) under Section 144 r.w. Section 147 of the Income Tax Act, 1961 (the Act) concerning AY 2015-16.
2. The grounds of appeal raised by the assessee read as under:
“1. Addition of Rs 9,13,100 was made on account of interest received on land compensation from Noida Authority. If the ITR-V filed against notice issued u/s 147 had been processed the addition of Rs 9,13,100 would not have been made since this income was already shown in the ITR filed against this notice and applicable taxes were adjusted from TDS claimed resulting in a refund of Rs. 70,540. The ITR was not verified or sent for verification due to the negligence of his tax consultant.
2. The appellant reserves the right to modify, withdraw or substitute any point in the Statement of facts and Grounds of appeal.”
3. When the matter was called for hearing, the ld. counsel for the assessee pointed out that the assessee individual filed his return of income for Assessment Year 2015-16 on 12.07.2016 declaring total income at ‘Nil’ where exempt income shown was Rs.18,26,202/- being interest on land compensation from NOIDA Authority. The assessee thereafter filed revised return on 21.03.2017 again reporting ‘Nil’ taxable income and claimed the entire interest on land compensation of Rs.18,26,202/- as exempt. Thereafter, a notice under Section 148 dated 17.07.2019 was issued to assess the escapement of income on account of interest on land compensation. In response to notice under Section 148, the tax consultant of the assessee filed return of income on 16.08.2019 declaring total income of Rs.9,19,070/-. The ld. counsel thus submitted that the revised return in response to 148 proceedings included the escaped income in terms of provision of Section 56(2)(vii) r.w. Section 45A of the Act and 50% of the interest received on compensation was offered for tax as per the mandate of law. However, the revised return under section 148 was purportedly neither e-verified nor ITR-V (acknowledgement of ITR) was sent for verification out of inadvertence and ignorance. The ld. counsel however asserted the tax amount on revised return under Section 148 was duly paid. The Assessing Officer treated revised return in response to Section 148 is invalid due to error in e-verification etc. and added Rs.9,13,101/- to the taxable income (as per original return of income) offered and assessed the income at Rs.9,13,100/-.
4. In this factual backdrop, the ld. counsel 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 thereon. The ld. counsel thus submitted that in so far as the assessment of interest on compensation amount is concerned, the assessee has no objection whatsoever. The ld. counsel for the assessee submitted 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 ld. counsel thus submitted that he seeks to basically challenge the initiation of penalty proceedings. As a consequence of the assessment framed under Section 147 of the Act, the ld. counsel thus urged for suitable relief in the matter.
5. On consideration of the submissions made on behalf of the assessee and also the first appellate order and the assessment order, it is manifest that the present appeal filed by the assessee in quantum proceedings is infructuous as both assessee and the Revenue are ad idem on taxability of the interest on income compensation from NOIDA Development Authority. Hence, mere initiation of penalty proceedings cannot be challenged unless some formal order on the point has been passed in accordance with law. The assessee may challenge the imposition of penalty if so legally advised at appropriate stage. The present appeal is infructuous in effect and substance and thus dismissed in limine.
6. In the result, the captioned appeal of the assessee is dismissed as infructuous.
Order pronounced in the open Court on 13/06/2023
