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2009 (8) TMI 120

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..... on was computed at Rs. 48,41,034. However, while initiating the penalty proceedings, the AO imposed minimum penalty of Rs. 81,33,192. The maximum penalty leviable in this case, according to the AO is Rs. 2,43,99,576. However, the AO levied only minimum penalty. According to the AO, the tax and surcharge payable under s. 140A as per block return was to the tune of Rs. 48,41,034. However, no tax was paid under s. 140A while filing the block return. This is an admitted fact that even while filing the quantum appeal asked for only exemption from the payment of appeal fees before the CIT(A). The CIT(A) refused the same and the Tribunal accepted the plea and directed the CIT(A) to decide the appeal on merits. 4. The AO after thorough examination of the seized documents, cash flow statements and other documents seized, found that the block assessment of the assessee company was completed on 27th June, 2003 whereby the undisclosed income was fixed at Rs. 1,32,89,530. The penalty proceedings were, therefore, necessitated and the AO besides framing block assessment, levied penalty also. On appeal, the CIT(A) reduced the penalty against which the Revenue is in appeal before us. 5. We have con .....

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..... 199 CTR (Ker) 1 : (2005) 279 ITR 213 (Ker) decided the issue and laid down the ratio that s. 158BFA is constitutionally valid. Respectfully following the decision of the Hon ble jurisdictional High Court and that of the Mumbai Bench of the Tribunal cited supra, we set aside the order of the CIT(A) and restore that of the AO. 6. In the result, the appeal filed by the Revenue is allowed. N. BARATHVAJA SANKAR, A.M.: 18th Dec., 2008 I have carefully gone through the order proposed by my erudite Brother. After a careful perusal of the same, I regret that I am unable to concur with the reasonings and conclusions of my esteemed colleague. Hence, I propose to write my separate order in the succeeding paras. 2. The assessee filed its return, in response to the notice under s. 158BC in Form No. 2B and declared undisclosed income at Rs. 79,10,187 and the tax thereon amounted to Rs. 48,41,034. The AO determined the undisclosed income at Rs. 1,32,89,530 demanding a tax of Rs. 86,41,511. The assessee filed appeal before the CIT(A) but first appellate authority dismissed the appeal filed by the assessee as in limine on the reason that the assessee had not remitted the entire tax on the admitted .....

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..... at the assessee company did not deserve any immunity from the levy of penalty under s. 158BFA(2) of the Act. Therefore, he levied a minimum penalty of Rs. 81,33,192 on the total undisclosed income determined by the AO. Aggrieved by this order of the AO, assessee moved the matter in appeal before the CIT(A). The CIT(A) has observed that the payment of admitted tax is also a condition for admitting the appeal by the first appellate authority and that in the case of the assessee, the delay in payment of admitted tax had been condoned by the Hon ble Tribunal, Cochin Bench in IT(SS)A No. 12/Coch/2004 and the appeal had been restored for disposal on merits of the case. He has also noted that the assessee had remitted Rs. 84,50,000 as on 21st Dec., 2005 as evidenced by the Tribunal s order. As the Tribunal had condoned the delay in the payment of admitted tax for the purpose of admitting the appeal, according to the CIT(A), the same ratio is to be applied for arriving the undisclosed income for calculating the quantum of penalty. Hence, he was of the opinion that the disclosed income in the block return amounting to Rs. 79,10,187 has to be excluded for the purpose of arriving at the undis .....

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..... sessee did not file a return of income as required by notice under s. 158BC and has furnished the return after the expiry of the period specified in that notice or has not furnished the return of income, the assessee shall be liable to pay simple interest at the rate of two per cent of the tax on undisclosed income determined under cl. (c) of s. 158BC, for every month or part of a month comprised in the period commencing on the day immediately following the expiry of the time specified in the notice. Now coming to the provisions of s. 158BFA(2), we will analyse the section as under: (a) The AO or the CIT in the course of any proceedings; (b) May direct that a person shall pay by way of penalty; (c) An 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 AO under cl. (c) of s. 158BC of the Act. On a reading of the aforesaid provision, it is very obvious and patent that the legislature has miserably failed to bring on statute what nature of offence results in the penalty that is specified in that section. In other words, the legislature has not brought th .....

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..... in the penalty levied by the AO in the facts and circumstances of the case. 4.2 Further Mumbai Bench of Tribunal in the case of Dy. CIT vs. Koatex Infrastructure Ltd. (2006) 102 TTJ (Mumbai) 737 has held that penalty under s. 158BFA(2) is discretionary; assessee having explained that it was not humanly possible to compute the income from the voluminous record which was seized by the Department, and the AO having made the additions solely on the basis of assessee s letter offering certain undisclosed income, no mala fide intention can be attributed to the assessee and penalty under s. 158BFA(2) was not leviable. 4.3 In the following decisions also it has been held that penalty under s. 158BFA(2) is not mandatory: (i) Suhas K. Lunkad vs. Dy. CIT (2004) 82 TTJ (Pune) 934; (ii) Dy. CIT vs. Suresh Kumar (2005) 95 TTJ (Kol) 926; and (iii) Smt. Mala Dayanithi vs. Dy. CIT (2005) 92 TTJ (Bang) 270. 4.4 In the latest decision of the Bombay High Court in the case of CIT vs. Dodsal Ltd. (2008) 218 CTR (Bom) 430 : (2008) 10 DTR (Bom) 77 has also held that the penalty under s. 158BFA(2) is only discretionary and not mandatory. In the said decision the Hon ble High Court has made the following ob .....

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..... ot pay the tax on the admitted undisclosed income of Rs. 79,10,187. Further, the Tribunal had condoned the delay in the payment of admitted tax for the purpose of admitting the appeal. I also find reasonableness in the observation of the CIT(A) that the same ratio has to be applied for arriving at the undisclosed income for calculating the quantum of penalty. Hence, I am of the view that the disclosed income in block return amounting to Rs. 79,10,187 is to be excluded on which the tax has been paid by the assessee in instalments, at least before the appeal was taken up for hearing by the CIT(A), for arriving at the undisclosed income for calculating the penalty, under s. 158BFA(2) of the Act. In view of the above discussion I am of the view that the Revenue s appeal has to be dismissed. 7. In the result, the appeal of the Revenue is dismissed. REFERENCE UNDER S. 255(4) OF THE IT ACT, 1961 18th Dec., 2008 As there is a difference of opinion, the matter is being referred to the Hon ble President of the Tribunal with a request that following question may be referred to a Third Member or pass such order as the Hon ble President may think fit: Whether on the facts and circumstances of t .....

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..... , learned CIT(A) upheld the levy of penalty but directed the AO to deduct a sum of Rs. 79,10,187 from the amount taken for levy of penalty. In other words, the income, which was disclosed in the return of income filed in Form No. 2B, was not to be taken into account for the purposes of levy of penalty. 4. On further appeal, the learned JM agreed with the view taken by the AO. The learned AM, on the other hand, agreed with the view taken by the learned CIT(A). On account of the above difference, the matter has been placed before me. 5. Provisions of s. 158BFA(2), which is applicable, in this case are as under: The AO or the CIT(A) 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 AO under cl. (c) of s. 158BC. Provided that no order imposing penalty shall be made in respect of a person if- (i) such person has furnished a return under cl. (a) of s. 158BC; (ii) the tax payable on the basis of such return has been paid or, if the assets seized consi .....

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..... icted to the deduction of the sum of Rs. 79,10,182 shown in the return as undisclosed income in Form No. 2B. The said sum should not be taken into account for purposes of levy of penalty under s. 158BFA(2). It is not anybody s case that no order of penalty can be made in this case. Therefore, question of considering whether that four conditions/circumstances mentioned in the first proviso are satisfied does not arise at all. In my view, the learned CIT(A) and learned AM were not required to consider whether conditions/circumstances of first proviso are satisfied in this case or not. The case does not fall under the above proviso and therefore, in my humble opinion, discussion of question whether conditions are satisfied or not will not serve any purpose. For this reason, I am not referring to the detailed reasoning adopted by the learned CIT(A) and learned AM for holding that on facts conditions of first proviso should be taken to be satisfied. Second proviso to s. 158BFA(2) is applicable to cases where the provision of the preceding first proviso shall not apply. Therefore, both provisos cannot apply to the case. However, the learned CIT(A) and learned AM tried to apply both the p .....

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