2010 (1) TMI 1176 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of penalty u/s 158BFA(2) on the amount of Rs. 1,50,30,137/-.
2. Deletion of penalty u/s 158BFA(2) on the amount of Rs. 27,90,294/-.
3. Levy of penalty on estimated commission income of Rs. 89,102/-.

Summary:

Issue 1: Deletion of penalty u/s 158BFA(2) on the amount of Rs. 1,50,30,137/-
The assessee disclosed Rs. 1,50,30,137/- in the regular return of income for AY 2000-01, filed on 30.11.2000, and paid taxes accordingly. The CIT(A) found that the bank accounts where the cheques were deposited were part of the regular books of account. The CIT(A) concluded that penalty could not be levied as the amount was disclosed prior to the search and there was no concealment of income. The Tribunal upheld the CIT(A)'s decision, stating that the amount could not be treated as undisclosed income and thus, no penalty u/s 158BFA(2) could be levied.

Issue 2: Deletion of penalty u/s 158BFA(2) on the amount of Rs. 27,90,294/-
The assessee filed a return for the block period declaring Rs. 27,90,294/- in response to notice u/s 158BD and paid the taxes due. The CIT(A) held that as per the proviso to section 158BFA(2), no penalty could be levied since the assessee had disclosed the amount and paid the tax. The Tribunal agreed with the CIT(A) and confirmed the deletion of the penalty.

Issue 3: Levy of penalty on estimated commission income of Rs. 89,102/-
The AO estimated the commission income at 1% of the undisclosed income, which was reduced by the CIT(A) to 0.5%. The Tribunal noted that the commission income was estimated and no direct evidence was found for the payment of commission. Citing the Hon'ble Punjab & Haryana High Court decisions, the Tribunal held that penalty u/s 158BFA(2) could not be levied on estimated income. Consequently, the Tribunal set aside the CIT(A)'s order regarding the penalty on commission income and allowed relief to the assessee.

Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection, confirming the deletion of penalties on the amounts of Rs. 1,50,30,137/- and Rs. 27,90,294/-, and setting aside the penalty on the estimated commission income of Rs. 89,102/-.