CIT v. Becharbhai P. Parmar - Taxpublishers.in

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The Tax Publishers2012 TaxPub(DT) 0903 (Guj-HC) : (2012) 048 (I) ITCL 0215 : (2012) 341 ITR 0499 : (2012) 248 CTR 0086 : (2012) 067 DTR 0367 INCOME TAX ACT, 1961 --Search and seizure--Penalty under section 158BFA(2)Satisfaction of condition precedent vis-a-vis penalty under section 271(1)(c)--In case of the respondent-assessee, search and seizure operation under section 132 was carried out on 31-5-2001 at his residence, giving rise to the block assessment proceedings. The assessee filed return of income. The AO, while carrying out the assessment proceedings vide its order dt. 30-5-2003, made various additions over and above the income disclosed by the assessee in his return. The AO determined the undisclosed income at Rs. 4.08 crores (rounded off) against the disclosed income of the assessee of Rs. 45,00,000 in the return for the block period. Assessee carried the issue in appeal. CIT(A) vide its order dt. 27-2-2004, restricted the additions and assessed the net income of the assessee at Rs. 97.30 lakhs (rounded off). In further appeal by the assessee, the Tribunal granted further relief. By virtue of the Tribunal's order, the assessee's total income for the block period came to Rs. 71.30 lakhs (rounded off). After giving benefit of the returned total income for the block period of Rs. 52.94 lakhs (rounded off), which included Rs. 45 lakhs of income declared by the assessee during the block assessment, the additions as per the Tribunal's final order worked out to Rs. 18.35 lakhs (rounded off), assessee did not carry the matter any further. Tribunal's order thus became final. On the basis of such concluded additions, the AO issued notice for imposing penalty under section 158BFA(2), calling upon the assessee why penalty of Rs. 11 lacs being minimum @ 100 per cent of the tax sought to be evaded should not be imposed on the assessee. No reply was received from the assessee. The AO thereupon passed his order dt. 10-4-2006 confirming the penalty of Rs. 11.01 lacs (rounded off). Held: Concept of concealment as applicable under section 271(1)c) could not be applied while imposing penalty under section 158BFA(2) thus the Tribunal was not justified in interfering in the order of penalty passed by AO under section 158BFA(2) and confirmed by the CIT(A). Proviso to sub-section (2) of section 158BFA, however, provides for four conditions, upon satisfaction of which, the assessee would get immunity from such penalty. Such conditions are to be satisfied cumulatively. In essence, it provides that the penalty shall not be imposed if the assessee furnishes a return under clause (a) of section 158BC; also pays tax on the basis of such return, or offers for adjustment any money seized, or produces evidence of having paid such tax, and also does not file appeal against assessment on that part of the income which is shown in the return. In other words, in cases of proceedings for block assessment, the assessee would have an additional chance to avoid penalty by furnishing a return, paying tax on such undisclosed return and accepting finality with respect to the same. [Para 8.1] Further proviso to sub-section (2) of section 158BFA is merely in nature of clarification and provides that the first proviso would not apply where undisclosed income determined by the assessing officer 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. [Para 8.2] Closely seen, sub-section (2) of section 158BFA makes it clear that it is well within the discretion of the assessing officer, while framing the assessment for the block period, whether or not to impose any penalty or not. The words, 'may direct' have to be given its normal meaning, leaving discretion to the officer. In absence of any special reason the word, 'may' cannot be read as 'shall'. [Para 8.3] The contention of the revenue that only upon satisfaction of the conditions contained in proviso to sub-section (2) that the assessee, in case of the block assessment can be spared of the penalty cannot be accepted. It is, of course, true that upon satisfying such conditions, the assessee would get immunity from penalty. Nevertheless, this is not a thing as to suggest that in no other case, or on no other ground, the AO may at his discretion, not impose penalty the moment additions under clause (c) of section 158BC are sustained. In other words, we are unable to hold that the penalty under section 158BFA(2) is mandatory in nature. [Para 9] It is true that section 273B which provides that penalty shall not be imposed in certain cases on the assessee proving that there was reasonable cause for failure to pay tax refers to several provisions such as sections 271, 271A, etc., makes no mention of section 158BFA(2). This still does not mean that penalty under section 158BFA(2) is mandatory. [Para 9.1] Coming to the facts of the case, the reasons recorded by the Tribunal for deleting the penalties under different heads. Principally, the Tribunal deleted the penalties on three grounds : firstly, that the addition was made only on estimation; secondly, there was no concealment proved by the Revenue, and thirdly, that according to the Tribunal, certain additions would not give rise to penalty proceedings. [Para 11] Court is afraid, none of the grounds were sufficient in facts of this case to permit the Tribunal to delete the penalties. Firstly, that the concept of proving concealment of Income can nowhere be traced in section 158BFA(2). The penalty envisaged and imposable under section 271(1)(c) of the Act is different from the one that can be imposed under section 158BFA. Section 271(1)(c) provides for penalty in case an assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. It can be easily seen that during the course of assessment proceedings for normal assessment, large number of claims and deductions may be put forth by the assessee which may or may not be accepted in facts or on law by the AO. Mere disallowance of a claim, therefore, would not give rise to the penal proceedings unless as provided in section 271(1)(c), the assessee had concealed the income or provided inaccurate particulars of such income. Under sub-section (2) of section 158BFA, no such requirement is provided. None can be read therein. Significantly, as already noted, the said proviso is part of Chapter XIV-B of the Act which makes special procedure for assessment of search cases. Additionally, we also notice that section 158BF provides, inter alia, that no penalty under section 271(1)(c) shall be leviable with respect to undisclosed income determined in the block assessment. Thus, statutorily also, penalty provided under sub-section (2) of section 158BFA is set apart from one imposable under section 271(1)(c). The concept of the onus on the Revenue to prove concealment of the income, therefore, cannot be imported while considering the question of penalty under sub-section (2) of section 158BFA. [Para ] The Tribunal deleted penalty on the grounds which were simply not permissible. Penalty on the grounds of addition of Rs. 7.23 lakhs and Rs. 2 lakhs was deleted observing that the finding of the AO is mere presumption and that nothing incriminating was found which would reveal that the assessee had incurred such an expenditure. One is afraid, such an observation would amount to reopening the question of quantum addition which had attained finality by virtue of the decision of the Tribunal. [Para 13] The Tribunal committed a grave error in interfering with the penalties imposed by the assessing officer and confirmed by the CIT(A) on the grounds mentioned in the order. In other words, exercise of discretion by the Tribunal cannot be sustained. Therefore, the Tribunal's order is inclined to set aside and restore it to the Tribunal for fresh consideration and disposal in accordance with law. [Para 14] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 0903 (Guj-HC) : (2012) 048 (I) ITCL 0215 : (2012) 341 ITR 0499 : (2012) 248 CTR 0086 : (2012) 067 DTR 0367

INCOME TAX ACT, 1961

--Search and seizure--Penalty under section 158BFA(2)Satisfaction of condition precedent vis-a-vis penalty under section 271(1)(c)--In case of the respondent-assessee, search and seizure operation under section 132 was carried out on 31-5-2001 at his residence, giving rise to the block assessment proceedings. The assessee filed return of income. The AO, while carrying out the assessment proceedings vide its order dt. 30-5-2003, made various additions over and above the income disclosed by the assessee in his return. The AO determined the undisclosed income at Rs. 4.08 crores (rounded off) against the disclosed income of the assessee of Rs. 45,00,000 in the return for the block period. Assessee carried the issue in appeal. CIT(A) vide its order dt. 27-2-2004, restricted the additions and assessed the net income of the assessee at Rs. 97.30 lakhs (rounded off). In further appeal by the assessee, the Tribunal granted further relief. By virtue of the Tribunal's order, the assessee's total income for the block period came to Rs. 71.30 lakhs (rounded off). After giving benefit of the returned total income for the block period of Rs. 52.94 lakhs (rounded off), which included Rs. 45 lakhs of income declared by the assessee during the block assessment, the additions as per the Tribunal's final order worked out to Rs. 18.35 lakhs (rounded off), assessee did not carry the matter any further. Tribunal's order thus became final. On the basis of such concluded additions, the AO issued notice for imposing penalty under section 158BFA(2), calling upon the assessee why penalty of Rs. 11 lacs being minimum @ 100 per cent of the tax sought to be evaded should not be imposed on the assessee. No reply was received from the assessee. The AO thereupon passed his order dt. 10-4-2006 confirming the penalty of Rs. 11.01 lacs (rounded off). Held: Concept of concealment as applicable under section 271(1)c) could not be applied while imposing penalty under section 158BFA(2) thus the Tribunal was not justified in interfering in the order of penalty passed by AO under section 158BFA(2) and confirmed by the CIT(A).

Proviso to sub-section (2) of section 158BFA, however, provides for four conditions, upon satisfaction of which, the assessee would get immunity from such penalty. Such conditions are to be satisfied cumulatively. In essence, it provides that the penalty shall not be imposed if the assessee furnishes a return under clause (a) of section 158BC; also pays tax on the basis of such return, or offers for adjustment any money seized, or produces evidence of having paid such tax, and also does not file appeal against assessment on that part of the income which is shown in the return. In other words, in cases of proceedings for block assessment, the assessee would have an additional chance to avoid penalty by furnishing a return, paying tax on such undisclosed return and accepting finality with respect to the same. [Para 8.1] Further proviso to sub-section (2) of section 158BFA is merely in nature of clarification and provides that the first proviso would not apply where undisclosed income determined by the assessing officer 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. [Para 8.2] Closely seen, sub-section (2) of section 158BFA makes it clear that it is well within the discretion of the assessing officer, while framing the assessment for the block period, whether or not to impose any penalty or not. The words, 'may direct' have to be given its normal meaning, leaving discretion to the officer. In absence of any special reason the word, 'may' cannot be read as 'shall'. [Para 8.3] The contention of the revenue that only upon satisfaction of the conditions contained in proviso to sub-section (2) that the assessee, in case of the block assessment can be spared of the penalty cannot be accepted. It is, of course, true that upon satisfying such conditions, the assessee would get immunity from penalty. Nevertheless, this is not a thing as to suggest that in no other case, or on no other ground, the AO may at his discretion, not impose penalty the moment additions under clause (c) of section 158BC are sustained. In other words, we are unable to hold that the penalty under section 158BFA(2) is mandatory in nature. [Para 9] It is true that section 273B which provides that penalty shall not be imposed in certain cases on the assessee proving that there was reasonable cause for failure to pay tax refers to several provisions such as sections 271, 271A, etc., makes no mention of section 158BFA(2). This still does not mean that penalty under section 158BFA(2) is mandatory. [Para 9.1] Coming to the facts of the case, the reasons recorded by the Tribunal for deleting the penalties under different heads. Principally, the Tribunal deleted the penalties on three grounds : firstly, that the addition was made only on estimation; secondly, there was no concealment proved by the Revenue, and thirdly, that according to the Tribunal, certain additions would not give rise to penalty proceedings. [Para 11] Court is afraid, none of the grounds were sufficient in facts of this case to permit the Tribunal to delete the penalties. Firstly, that the concept of proving concealment of Income can nowhere be traced in section 158BFA(2). The penalty envisaged and imposable under section 271(1)(c) of the Act is different from the one that can be imposed under section 158BFA. Section 271(1)(c) provides for penalty in case an assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. It can be easily seen that during the course of assessment proceedings for normal assessment, large number of claims and deductions may be put forth by the assessee which may or may not be accepted in facts or on law by the AO. Mere disallowance of a claim, therefore, would not give rise to the penal proceedings unless as provided in section 271(1)(c), the assessee had concealed the income or provided inaccurate particulars of such income. Under sub-section (2) of section 158BFA, no such requirement is provided. None can be read therein. Significantly, as already noted, the said proviso is part of Chapter XIV-B of the Act which makes special procedure for assessment of search cases. Additionally, we also notice that section 158BF provides, inter alia, that no penalty under section 271(1)(c) shall be leviable with respect to undisclosed income determined in the block assessment. Thus, statutorily also, penalty provided under sub-section (2) of section 158BFA is set apart from one imposable under section 271(1)(c). The concept of the onus on the Revenue to prove concealment of the income, therefore, cannot be imported while considering the question of penalty under sub-section (2) of section 158BFA. [Para ] The Tribunal deleted penalty on the grounds which were simply not permissible. Penalty on the grounds of addition of Rs. 7.23 lakhs and Rs. 2 lakhs was deleted observing that the finding of the AO is mere presumption and that nothing incriminating was found which would reveal that the assessee had incurred such an expenditure. One is afraid, such an observation would amount to reopening the question of quantum addition which had attained finality by virtue of the decision of the Tribunal. [Para 13] The Tribunal committed a grave error in interfering with the penalties imposed by the assessing officer and confirmed by the CIT(A) on the grounds mentioned in the order. In other words, exercise of discretion by the Tribunal cannot be sustained. Therefore, the Tribunal's order is inclined to set aside and restore it to the Tribunal for fresh consideration and disposal in accordance with law. [Para 14]