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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’
Before: SHRI G. D. AGRAWAL, & SHRI CHANDRA MOHAN GARG
ORDER PER CHANDRA MOHAN GARG, JM
This appeal by the assessee has been filed against the order of the CIT(A) XXXIII, New Delhi dated 2/7/2012 passed in First Appeal No. 65/2010-11/61 for the Block Period from 1/4/1995 to 20/12/2001.
2. The grounds raised by the appellant read as follows:
“ 1 . That in the facts and circumstances of the case, the Ld. ACIT, CC-XIV, New Delhi grossly eared in imposing the penalty of Rs.191,700/- u/s 158BFA (2) of the I.T, Act, 1961 which has been wrongly upheld by the Ld.CIT(A) – XXXIII.
That the provisions laid down in proviso 1 & 2 appended to Section 158 BFA (2) have not been properly applied.
3. That the Ld.CIT(A) has grossly erred in holding that the undisclosed income determined by the A.O is Rs.6,62,880/- as against the addition of Rs.3,19,475/- made by the Ld. ACIT, CC-XIV.”
We have heard arguments of both the sides and carefully perused the relevant materials placed on the record of the Tribunal, inter alia, impugned assessment orders, penalty order, order of the CIT(A) and paper book filed by the assessee spread over 91 pages. The Ld. Counsel of the assessee pointed out that the A.O passed penalty order without application of mind as he imposed penalty on the total assessed income including returned in case of the assessee which cannot be taken for imposing penalty u/s 158 BFA (2) of the Income- tax Act, 1961 (for short the Act). The Ld. Counsel pointed out that the CIT(A) wrongly upheld penalty in contravention to provisions of Section 158BFA (2) of the Act as proviso 1 & 2 to said section have not been properly applied to the facts of the case. The Ld. Counsel placing reliance on the rating of the following decisions contended that penalty is not sustainable thus the same may be deleted: i. CIT Vs. Harkaran Das Ved Pal. Dated 12.11.2008 Delhi High Court iii Super Cassettes Industries Ltd Vs JCIT, ITAT, Delhi dated 11.7.2013 iv. Dr. G. Ravindranath Sorma Kadapa Vs. ACIT dated 29.10.2010
The Ld. Departmental Representative (DR) supported the action of the A.O as well as impugned First Appellate Order and contended that the CIT(A) was quite correct and justified in upholding the penalty order.
On careful consideration of above submissions, at the very outset we note that the provision of Section 158BFA (2) of the Act and First & Second Proviso thereto reads as follows:
“2) The Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this Chapter, may direct that a person shall pay by way of penalty a sum which shall not be less than the amount of tax leviable but which shall not exceed three times the amount of tax so leviable in respect of the undisclosed income determined by the Assessing Officer under clause (c) of section 158BC :
Provided that no order imposing penalty shall be made in respect of a person if—
(i) such person has furnished a return under clause (a) of section 158BC; (ii) the tax payable on the basis of such return has been paid or, if the assets seized consist of money, the assessee offers the money so seized to be adjusted against the tax payable; (iii) evidence of tax paid is furnished along with the return; and (iv) an appeal is not filed against the assessment of that part of income which is shown in the return :”
In view of section provision to Section 158BFA (2) of the Act the first provision shall not apply where the undisclosed income determined by the A.O is in excess of the income shown in the return and in such cases penalty shall be imposed on that portion of the undisclosed income determined which is in excess of the amount of undisclosed income shown in the return.
In the present case, as per facts noted by the A.O in Para 2 of the penalty order assessment u/s 158BC of the Act was completed at an income of Rs.6,62,880/- against the returned income of Rs.3,43,404/- and thus addition of undisclosed income was made of Rs.3,19,475/-.
From the para 7 of the penalty order it is vivid that the A.O has imposed penalty on the entire assessed income i.e. on Rs.6,62,880/- which is not correct as per mandate of second provision to Section 158BFa(2). In our considered opinion penalty u/s 158 BFA(2) of the Act can only be imposed on that portion of undisclosed income determined which is in excess of the grant of undisclosed income shown in the return i.e on Rs. 3,19,475/- as the assessed income u/s 158BC of the Act Rs.6,62,880/- includes returned amount of Rs.3,43,404/- and total additions uphold by the CIT(A) on 5 issues, as noted by the A.O in the penalty order para 2, are of Rs.3,19,475/-. Therefore, we are inclined to hold that the penalty was wrongly calculated and imposed on the total assessed income and penalty u/s 158 BFA (2) of the Act can only be imposed on the amount of undisclosed income determined which is in excess of the amount of undisclosed income shown in the return filed by the assessee for the relevant block period.
Now, we proceed to evaluate the penalty order and First Appellate Order as to whether the penalty imposed and upheld by the CIT(A) is not sustainable.
First of all, we find it appropriate to consider the ratio of the decision relied by the assessee, as listed above, in the light of the facts and circumstances of the present case. In the case of CIT Vs. Harkarandas Vedpal (Supra), the Hon'ble High Court of Delhi upheld the order of the Tribunal which cancelled the penalty on the ground that the assessee himself had surrendered the amount and therefore, it could not be said that the assessee had either concealed or furnished inaccurate particulars of its income which is not case here as the A.O has assessed income u/s 158BC of the Act which is in excess of Rs.3,19,475/- to the returned income.
In the case of DCIT Vs. M/s A.I. Infovin Pvt. Ltd (Supra) it was held that the audited balance sheet and P & L a/c which have were seized in the course of search contained in the recording of the transaction of sale of shares resulting capital gains. In this case it was evident from the undisputed fact that the investment of impugned shares were duly reflected in the financial statements of the assessee in the year of purchase and the sale consideration/gain received was deposited in the back account which was duly disclosed to the Revenue by way of filing return. However, the due to delay in filing return the long term capital gain was assessed as undisclosed income within the meaning of 158 BB(1)(c) which is also not the factum of the present case. On careful perusal of the orders of the Coordinate Bench of the Tribunal in the case of Super Cassettes Industries Ltd. u/s JCIT (Supra) and Dr. G. Ravinder Nath Sorang Vs. ACIT (Supra) it apparent that these are the cases wherein penalty u/s 158 BFA (2) of the Act was deleted by holding that there was material within the A.O to show that the impugned income which was basis of imposing penalty was not disclosed in the return of income meaning there by the impugned income on which penalty was imposed was shown in the return of income thus penalty is not leviable which is not the factum of the present case as in the present case the assessed income u/s 158BC of the Act was in excess of returned income to the tune of Rs.3,19,475/- which certainly attracts penalty u/s 158BFA (2) of the Act.
He may also point out that ion the provision of Section 158 BFA (2) of the Act the word “May” has been used which shows that in the very case penalty is not mandatory but it is pure discretion of the Revenue Authorities as per facts of a particular case. In the present case, the A.O assessed taxable income u/s 158BC of the Act on five counts viz. (i) unexplained cash, (ii) expenditure incurred on the occasion of the marriage of the children of the assessee (iii)
Expenditure incurred on the Foreign visits by the two sons and incidental expenses, (iv) investment made in pursuance of jewellery and (v) extra commission income.
From the facts it is apparent that addition on account of cash found of Rs.25,000/- was based on the cash found during the search of Rs.87,750/- which is not estimated. Addition on account of marriages of two sons has been made on the basis of bills and vouchers found during the search which cannot be said on pure estimate basis.
Addition on account of foreign visit is again also on the basis of actual expenditure incurred on foreign travel including Air Ticket, incidental charges of stay and local tour and pocket expenses including expenses incurred towards purchase of Sony Music System which was also not purely on estimate basis but based on the facts and documents revealed during the search and post search enquiries during the assessment. The addition on account of purchase of jewellery is also based on the seized material annexure A-5 and other details which was also not on purely estimated basis. The income of commission was also made on the basis of seized documents/papers found during the course of search in the premises of the assessee in the shape of bunch of loose papers, spiral note book, pocket note book etc. Thus it was also based on the incriminating material found and seized during the course of search thus it was also not to the estimated basis but was made on the premise of sound evidence found from the possession of the assessee.
From the penalty order is apparent that the penalty u/s 158BFA(2) has been imposed by observing that the assessee has not filed the return showing his correct income before the search and thereafter he imposed penalty on the assessed income including returned income which is not a proper approach and application of the mandate of secured proviso to Section 158BFA(2) of the Act. Since in the earlier part of this order we have observed that the penalty u/s 158BFA (2) of the Act can be imposed on the income assessed u/s 158BC of the Act which was in excess to the returned income. From the relevant operative part of the First Appellate order we also observe that it was the argument of the assessee that since the undisclosed income assessed by the A.O was not in excess of the returned income penalty u/s 158 BFA (2) of the Act cannot be imposed.
But there were no other arguments on the imposition of penalty on the merits showing that the penalty imposed on the additions made in excess to returned amount cannot be imposed.
On the basis of foregoing discussion we respectfully note that the benefit of ratio of the decisions, relied by the assessee, is not available for the assessee as the facts and circumstances of the present case are clearly distinct from the factum of cases relied by the assessee.
Secondly, as there was additions in excess of returned income which is clearly undisclosed income not purely based on the estimation but was based on the seized material found during the counsel of search those penalty u/s 158BFA (2) of the Act is leviable. On the account of additions made as undisclosed income. But not on the entire taxable amount assessed u/s 158BC of the Act including returned income as per second proviso to Section 158 BGFA (2) of the Act. Thus penalty u/s 158 BFA (2) of the Act is directed to be imposed only on the account of additions made in excess to returned income and thus the A.O is directed to recalculate the penalty. Accordingly, therefore, appeal of the assessee is dismissed with the above directions to the A.O to recalculate penalty as per letter and spirit of second proviso to Section 158BFA (2) of the Act.
In the result, appeal of the assessee is dismissed.
Order Pounced in the Open Court on 29/08/2016.