2007 (9) TMI 9 - HC - Income Tax

Penalty Assessing officer impose interest and penalty on the assessee after not responding the notice relating to addition of amount - Held that interest and penalty amount is sustainable

Summary

Issues:
Appeal under Section 260A of the Income Tax Act, 1961 regarding penalty proceedings under Section 271(1)(c) for the assessment year 1998-99.

Analysis:
The case involves an appeal by the Revenue against an order of the Income Tax Appellate Tribunal related to penalty proceedings under Section 271(1)(c) of the Income Tax Act for the assessment year 1998-99. The background facts reveal that an amount was credited in the Assessee's account without explanation for the assessment year 1997-98, which was added to the income by the Assessing Officer. However, the addition was later deleted by the Commissioner of Income Tax (Appeals). Subsequently, the Assessing Officer sought to add the same amount to the income for the assessment year 1998-99 through a notice under Section 148 of the Act, as the Assessee did not respond to the notice.

The Assessing Officer initiated penalty proceedings under Section 271(1)(c) for the assessment year 1998-99, which were upheld by the CIT (A) but later overturned by the Tribunal. The Tribunal based its decision on the requirement that the Assessing Officer must record satisfaction before initiating penalty proceedings, citing a precedent. The High Court noted that this requirement has been upheld by the Supreme Court in subsequent cases. However, another substantial question of law was referred to a larger Bench regarding the necessity of explicit satisfaction by the Assessing Officer for penalty proceedings.

The High Court decided to await the decision of the larger Bench on the referred question. If the larger Bench rules in favor of the Revenue, indicating that satisfaction need not be explicitly recorded, the assessment order in the present case would need to be examined to determine if the satisfaction is discernible. After reviewing the assessment order, the High Court found no explicit satisfaction recorded by the Assessing Officer except in the concluding paragraph. Consequently, the High Court concluded that no substantial question of law arises and dismissed the appeal.