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2016 (1) TMI 712 - ITAT VISAKHAPATNAM

2016 (1) TMI 712 - ITAT VISAKHAPATNAM - TMI - Penalty imposed u/s 158BFA(2) - delay of 10 days in filing the return - Held that:- Levy of penalty under s. 158BFA(2) is not automatic. Before levying penalty, the concerned officer is required to find out that even if there was any failure referred to in the concerned provision the same was without a reasonable cause. The initial burden is on the assessee to show that there existed reasonable cause which was the reason for the failure referred to i .....

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and avoid payment of taxes. Hence, the AO, is not right in levying penalty on the assessed income including returned income by invoking first proviso to section 158BFA(2).

In the present case, the undisclosed income finally assessed at ₹ 42,59,151/- as per the consequential order passed by AO, giving effect to ITAT order. The assessee admitted a undisclosed income of ₹ 35,00,000/- in the block return. Thus, there was difference of ₹ 7,59,151/- in the assessed income .....

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ed by the AO in excess of undisclosed income shown in the block return. Hence, we inclined to up held the order of CIT(A). - Decided against revenue - I.T.(SS)A.No.2/Vizag/2013 - Dated:- 29-10-2015 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Appellant by : Shri G.V.N. Hari, AR For The Respondent : Shri M.N. Murthy Naik, DR ORDER PER G. MANJUNATHA, Accountant Member: This appeal filed by the revenue is directed against the order of learned Co .....

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and seizer operation u/s 132 of the Income Tax Act, 1961 was conducted in the business premises of the firm as well as residential premises of the partners on 13-03-2003. Subsequently, a notice u/s 158BC was issued on 6-6-2003, which was served on the managing partner of the firm and asked to file the return for the block period within 30 days from the date of receipt of notice. In response to notice, the firm has filed return for the block period on 11- 08-2003, declaring undisclosed income of .....

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undisclosed income of ₹ 85,30,933/-. The assessment travelled to ITAT and consequent to the order of ITAT, the AO determined the undisclosed income of ₹ 42,59,159/-. 3. The Assessing Officer, initiated penalty proceedings u/s 158BFA(2). In response to show cause notice, the assessee filed a detailed replay and requested to drop the penalty proceedings. The Assessing officer, after considering the explanations, levied the penalty of ₹ 26,83,300/- vide his order dated 19-03-2010 .....

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rred appeal before the CIT(A) and challenged the levy of penalty. Before CIT(A), the assessee reiterated the submissions made before the Assessing Officer and argued against levy of penalty on assessed income and has not argued that penalty is not leviable at all on the merits of the case. During the appellate proceedings before the CIT(A), the assessee draw the attention of the CIT(A) on the second proviso to section 158BFA(2) and argued that penalty can be levied only on the undisclosed income .....

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before us. 4. The Departmental representative, strongly supported the order of the Assessing Officer. He further, argued that the first proviso to section 158BFA(2) is very clear that if, the return is not filed under clause (a) of section 158BC and the taxes payable on the basis of such return has not been paid before furnishing the return of income and furnished the proof of payment of tax, penalty can be levied on the assessed income. He also drew our attention to the second proviso to sectio .....

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n 158BFA(2) second proviso, penalty can be levied only on the undisclosed income over and above the returned and assessed income. He further, argued that though there is marginal delay of 10 days in filing the return of income, the Assessing Officer proceeded to assess the income on the basis such return, therefore, it cannot be held as not furnishing the return within the time allowed in the notice. He further argued that the assessee has paid the total tax due on the undisclosed income finally .....

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isclosed income assessed and returned and his order should be upheld. He also relied upon the following judgments. ACIT vs. Gebilal Kanhailal HUF (2012) 348 ITR 561 CIT vs. Dodsal Ltd (2009) 312 ITR 112 (Bom -HC) CIT vs. Satyendra Kumar Dosi (2009) 315 ITR 172(Raj -HC) CIT vs. Harkaran Das Ved Pal (2011) 336 ITR 8 (Delhi -HC) DCIT vs. Heera Constructions Co P. Ltd 125TTJ 589 6. We have heard both the parties and perused the materials available on record. We also considered the case laws cited by .....

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ed income. The revenue contention is that, the first proviso to section 158BFA(2) is applicable, as the assessee does not fulfilled the two conditions stipulated by the section. The assessee contention is that no penalty can be levied on the undisclosed income assessed based on estimation basis, if at all penalty is leviable, it can be levied only on the portion of undisclosed income assessed over and above the returned income. Therefore, the CIT(A), rightly deleted the penalty on the portion of .....

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nent to mention here the provisions of section 158BFA(2), which reads as under. (2) The AO or the Commissioner (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 Section 158BC : Provided that no order imposing penalty shall be made in .....

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receding proviso shall not apply where the undisclosed income determined by the AO is in excess of the income shown in the return and in such cases the penalty shall be imposed on that portion of undisclosed income determined which is in excess of the amount of undisclosed income shown in the return. 8. A careful study of section 158BFA(2) the first proviso made it clear that the Assessing Officer may direct the assessee to pay a penalty in respect of undisclosed income determined by the AO unde .....

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return, the same was considered by the AO and completed the assessment based on such return and the assessee paid the taxes on the assessed income which is evident from the order giving effect to ITAT order. The assessee pleaded that, the delay in late filing of return and payment of taxes is unintentional. The assessee filed a letter along with return and requested for time to pay taxes as it is unable to mobilise funds for payments of taxes, the fact was not disputed by the revenue. The quest .....

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e cause. The initial burden is on the assessee to show that there existed reasonable cause which was the reason for the failure referred to in the concerned provision. Thereafter, the officer dealing with the matter has to consider whether the explanation offered by the assessee or the person, as the case may be, as regards the reason for failure, was on account of reasonable cause. In our opinion, the delay of 10 days in filing the return is well within the knowledge of the assessee and the ass .....

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the present case, the undisclosed income finally assessed at ₹ 42,59,151/- as per the consequential order passed by AO, giving effect to ITAT order. The assessee admitted a undisclosed income of ₹ 35,00,000/- in the block return. Thus, there was difference of ₹ 7,59,151/- in the assessed income in excess of returned income. The CIT(A), after considering the factual position and also considering the third member decision of ITAT Cochin bench in the case of DCIT vs. Heera Constru .....

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ybody 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 .....

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