TMI Blog2015 (1) TMI 1243X X X X Extracts X X X X X X X X Extracts X X X X ..... eet which were seized in the course of search contained the recording of the transaction of the sale of the shares and resulting capital gains. Further, whether long term capital gains can be treated as “undisclosed income” is debatable issue. The Hon’ble jurisdiction High Court has held in the case of CIT Vs. H.B. Leasing and Finance Co. Ltd. (2011 (2) TMI 434 - Delhi High Court ) that the issue can be said to be debatable when substantial question of law has been admitted and when quantum proceeding is debatable, the penalty cannot be imposed. - Decided in favour of assessee. - IT(SS) No.12/Del /2013 - - - Dated:- 13-1-2015 - SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER For the Appellant : Smt. A. Misra, CIT. D.R. For the Respondent: Shri Rohit Jain, Advocate and Ms. Deepashree Rao, CA ORDER PER SHRI GEORGE GEORGE K., JM: 1. This appeal, at the instance of the Department, is directed against the CIT(A) s order dated 01.02.2013, pertaining to Block Period 01.04.1989 to 13.01.2000. 2. The solitary issue that arises for our consideration is whether the CIT(A) is justified in cancelling the levy of penalty impose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO's order and considered the facts and evidences on record and judicial pronouncements on this issue. 4.1 It is an established preposition that the assessment proceedings and penalty proceedings are two all together different proceedings. An issue may call for an additions in the assessment proceedings, but that addition in itself cannot be the sole ground for imposition or levy of penalty. For the purpose of imposing a penalty, the AO has to walk a little extra mile to prove that the appellant has concealed or likely to conceal the income or furnished the inaccurate particular of its income. 4.2 Further before discussing the facts of the present case and to see whether the penalty under section 158BFA{2} is imposable, it is worth re-iterating here the general rules to be followed for the purpose of leving the penalty as laid down by the Hon'ble Supreme Court in the case of Dilip N. Shroff vs. CIT (2007) (291 ITR 519 (Se) and T. Ashoke Pai vs. CIT (2007) (292 ITR 11) (Se). i.e. (i) Both the expressions concealment of income and '1urnishing of inaccurate particulars indicate some deliberation on the part of the assessee, though the word detiberotetv an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposited in the declared bank account and also the investment in shares (which were sold in the year under consideration) were found to be duly recorded in the regular books of accounts, in my humble view all the these facts doesn't calls for imposition of penalty under section 158BFA{2}. The AD while considering the levy of penalty should not begin with the presumption that the appellant is guilty of concealing the particulars of income, the AD before levying the penalty must bring on record the primary evidence to establish that the appellant had undisclosed income which he was concealing or likely to conceal. The levy of penalty under section 158BFA(2) is not an automatic action, the words may direct mentioned in section 158BFA{2} has to be given its normal meaning. The word may cannot be read as shall . 4.5 Looking into the facts of the appellant's case, it is quite likely that the appellant might be waiting for the requisite details of shares sold and this may be the genuine reason for not been able to file the return of income by due date i.e. 31.12.1999, but the fact remains that he did file the return within the time allowed under section 139{4}. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. All these factors were very relevant for completing the quantum assessment and demanding the tax at 60 per cent from the assessee. But the above factors were not sufficient to impose penalty under section 158BFA. The reason that the assessee had not furnished any undisclosed income in the block return filed by it in pursuance of notice under section 158BO was not a grievous mistake when the earlier belated return filed by the assessee and available in the files of the assessing authority was also looked into. The fact that the assessee had not filed any return of income through its block return was a legal error but not a ground to impose penalty. The block assessment itself had been completed by the Assessing Officer by adopting the amount of capital gains offered by the assessee in its belated return filed immediately after the search operation . Therefore, even though legally and technically not valid, the assessee had already returned the capital gains liable for taxation in its hands. If that amount of capital gains was impregnated in the block return filed by the assessee, the equation would become completed. The only correction was calculating tax at 60 per cent ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is principle to the facts of the present case, it is seen that as per ITAT's decision dated 03.08.2007 in the facts of the appellant's case the capital gain on shares is not to be treated as undisclosed income , whereas the Hon'ble Delhi High Court vide their decision dated 29.11.2010, was of the view that since the return of income is not filed by due date, the capital gain in question has to be treated as undisclosed income , further even against the said order of High Court the appellant has filed an SLP before the Apex Court on 01.03.2011. Therefore in such an event as per the spirit of decision of Delhi High Court in the recent case of CIT vs. Sarla Fabrics P. Ltd. {ITA 788/2011} dated 20.07.2012} the Hon'ble court by relying on their own decision in the case of ClT-IV Delhi vs. IP India P. Ltd. (204 Taxman 368) (2012) have held that: where there is a difference of opinion either between different Benches of Tribunal or the High Courts, which is finally settled by the pending judgment of the Supreme Court and all necessary facts have been disclosed by the assesses in its return, the penalty is not warranted. 11 4.9 Thus in view of the above discussions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received during the A.Y. 1999-2000 was deposited in the Bank account which was duly disclosed to the Income Tax Department. Further, the unaudited P L account and balance sheet which were seized in the course of search contained the recording of the transaction of the sale of the shares and resulting capital gains. 7.2 Further, whether long term capital gains can be treated as undisclosed income is debatable issue. The assessee had succeeded in the quantum assessment before the Tribunal. On further appeal by the Revenue u/s 260A of the Act the Hon ble High Court reversed the Tribunal s order. It has been brought to our notice that SLP has been filed before the Hon ble Supreme Court (SLP No. 9018-022/2011) and notice has been issued on the same and the matter continues to be sub judice before the Hon ble Supreme Court. The Hon ble jurisdiction High Court has held in the case of CIT Vs. H.B. Leasing and Finance Co. Ltd. (334 ITR 367) that the issue can be said to be debatable when substantial question of law has been admitted and when quantum proceeding is debatable, the penalty cannot be imposed. The relevant finding of the Hon ble High Court read as follows: (at Page 369) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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