2008 (7) TMI 111 - HC - Income Tax

Assessee has received interest on FDRs, which was not included in the original return filed in response to notice u/s 148 AO initiating the penalty proceedings u/s 271(1)(c ) - Tribunal has found that penalty proceedings were initiated by the AO without recording the satisfaction that the assessee has concealed the income - Tribunal has also found that penalty is not imposable if there is no conscious breach of law - questions of law as raised by the revenue do not arise

Summary

Issues:
Assessment under Section 143(3)/147 - Inclusion of interest on FDRs in assessable income - Initiation of penalty proceedings under Section 271(1)(c) - Appeal against penalty order - Imposition of penalty - Appeal before Income Tax Appellate Tribunal - Tribunal's decision on penalty imposition - Appeal under Section 260-A of the Income Tax Act, 1961 - Substantial questions of law raised - Tribunal's findings on penalty imposition - Merits of the present appeal.

Analysis:
1. The judgment pertains to an assessment conducted under Section 143(3)/147 of the Income Tax Act, where interest income on Fixed Deposit Receipts (FDRs) amounting to Rs.1,28,232 was not initially included in the assessable income but was later added during assessment. The Assessing Officer also initiated penalty proceedings under Section 271(1)(c) for alleged concealment of income, resulting in a penalty of Rs.82,436 imposed on the assessee by the Assistant Commissioner of Income Tax. However, the Commissioner of Income Tax (Appeals) accepted the assessee's appeal against the penalty order, leading to the penalty being directed to be deleted.

2. Subsequently, the revenue filed an appeal before the Income Tax Appellate Tribunal challenging the deletion of the penalty. The Tribunal, upon review, found that the penalty was not warranted as there was no conscious breach of law by the assessee. The Tribunal's order dated 5.6.2007 dismissed the revenue's appeal, noting the absence of any specific flaw in the Commissioner of Income Tax (Appeals)'s decision.

3. The present appeal under Section 260-A of the Income Tax Act, 1961, was filed by the revenue against the Tribunal's decision. The substantial questions of law raised included whether the Tribunal was correct in canceling the penalty based on a previous judgment and whether the Assessing Officer's satisfaction for initiating penalty proceedings was adequately recorded in the assessment order itself.

4. During the hearing, the Court considered the arguments presented by the revenue's counsel and reviewed the impugned order. The Tribunal's findings were discussed, emphasizing that penalty imposition requires a conscious breach of law, which was not established in this case. The Court noted that the revenue failed to pinpoint any specific flaw in the Commissioner of Income Tax (Appeals)'s conclusion and did not challenge the Tribunal's factual findings.

5. Consequently, the Court held that the questions of law raised by the revenue were not relevant as the Tribunal's findings stood unchallenged. Since there was no conscious breach of law by the assessee, the Court found no merit in the revenue's appeal and dismissed it accordingly.