TMI Blog2016 (9) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... d deleted the penalty. Revenue is aggrieved on this part of ld. CIT(A)’s order. On due consideration of the record, we are of the view that once the assessee has loans and advances whose recovery was not in doubt and assessee applies to the Department either for recovery or uplifting of restrained orders and the Department did not take any action then it would be considered that assessee was prohibited by reasonable cause for making the payment of taxes on the returned income. Therefore, assessee does not deserve to be visited with penalty under the situation as contemplated under first proviso to section 158BFA(2) of the Act. As far as the penalty contemplated under the second proviso is concerned, the scheme of Chapter-14B provides that income of an assessee for the purpose of block assessment is to be determined on the basis of seized material found during the course of search. Assessing Officer would supply that material to the assessee and in response to notice u/s 158BC assessee has to compute true and disclose income out of the seized material for the purpose of block assessment. Now the question is, assessee has to compute ₹ 20,00,000/- as true undisclosed income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - for the block period. Block assessment u/s 158BC of the Act was finalized on 30/7/2004 and income was assessed at ₹ 6,56,39,749/-. Matter was carried before ld. CIT(A) and subsequently to the Tribunal and major relief was granted to assessee and after sustaining total addition of ₹ 8,03,600/-, total income remained at ₹ 28,03,600/- on which ld. Assessing Officer levied penalty u/s 158BFA(2) of the Act at ₹ 17,15,803/- by applying the proviso (1) of sec.158BFA (2) of the Act. The basic reason observed by ld. Assessing Officer while framing penalty order u/s 158BFA(2) of the Act on 30.10.2009 was that assessee has offered income of ₹ 20,00,000/- in his return and out of total tax liability of ₹ 12 lacs, paid only ₹ 5 lacs and was, therefore, out of the immunity granted in the proviso (1) of sub-sec.(2) of sec.158BFA of the Act and accordingly calculated penalty on the total income assessed after the appeal effect order of the Tribunal wherein income was determined at ₹ 28,03,600/-. 3. Aggrieved, assessee went in appeal before ld. CIT(A) and got part relief as ld. CIT(A) was of the view that proviso (1) of sub-sec. (2) of section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the compliance of the first assessee is a little better. The situation cannot be envisaged and therefore any such meaning has to be rejected. It is held that to get the benefit of non-levy of penalty on the undisclosed income represented by the block assessment return, the conditions of first proviso are to be met. The exemption from penalty provided by the first proviso is not to be taken lightly and conditions are to be strictly followed. The Hon ble Bombay High Court in the case of Smt. Anju R. Inani 323 ITR 626. In this case the assessee had disclosed the income but had disputed tax rates in appeal. This was taken as non-fulfillment of conditions of first proviso and the benefit was therefore denied. The assessee is claiming assessee's amounts with the debtors were lying attached, and in this sense their money was lying seized. Debt is not money nor can it be seized. In fact it was lying attached and not seized. Therefore the conditions of first proviso are not met. Now, it has to be seen that whether there were reasonable cause with the assessee. It is seen that notice u/s 158BC was issued on 10/02/2003. At that time the loans were lying attached by the Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P Ltd as well as Chase Buildcon Project Ltd are pertaining to the year 1999 only. They are in fact-dated 9.4,99 when the agreement was entered into ₹ 5 lakhs on 24.9.99. The whole amount of ₹ 15 lakhs was given by the appellant apparently on 11.1.99 which included ₹ 6 lakhs by cheques disclosed in the books of account an ₹ 9 lakhs by cash which is offered as undisclosed income by the appellant in the block return. The promissory note of ₹ 6.5 lakhs dated 1.2.2000 in the name of Shri Narendra .Keshkani, therefore/ prima facie does not link with the financing transactions of the appellant with Keshkani group. There is also no mention of requirement of Shri Narendra Keshkani giving personal guarantee in the joint venture MOU. Further, to above, it also does not match with the total figure of ₹ 15 lakhs as at one point of time, the appellant is claiming advance of ₹ 6.00 lakhs recorded in the books and balance of ₹ 9 lakhs as part of disclosure in the block return. I, therefore, find that this was totally a separate transaction between the appellant and Shri Kheshkani and on the basis of material available on record, the AO was justified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee in its block assessment return, and is confirmed at the minimum level (hundred percent) of tax leviable on such part of undisclosed income finally determined. 4. Aggrieved, Revenue and the assessee both are in appeal before the Tribunal. 5. We take both the appeal of Revenue in IT(SS)A No.95/Ahd/2011 and assessee s appeal in IT(SS)A No.170/Ahd/2011 together. 5.1 Revenue has raised the following grounds in its appeal in IT(SS)A No.95/Ahd/2011:- 1. The Ld CIT(A) erred in law and on facts in holding that the penalty U/s 158BFA(2) is leviable on total undisclosed income determined by the A.O.in excess of that declared by the A.O.in its block assessment return though he did not fulfill the conditions as per provisions of section 158BFA(2). 2. The appellant prays that the order of CIT (A) on the above grounds be set aside and that of the Assessing Officer be restored . The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. A copy of CIT(A)'s order was received by me on 21/12/2010. 5.2 In assessee s appeal in IT(SS)A No.170/Ahd/2011 following grounds have been raised:- 1. On the facts and in the circumstances o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst begs to invite your honour's sympathetic consideration to the notes forming part of the return which read as under: 1. Pursuant to the above disclosure, the assessee has already made payment of ₹ 5 lacs as tax. Challans evidencing payment of the said tax is being enclosed with this return. The assessee, after the payment of ₹ 5 lacs, had been in the process of trying to collect monies to pay off the necessary tax on the above income offered to tax in the block return. However, it has been made known to him that certain monies which are recoverable by him from certain parties, being Bhagwati Group and Chase Build Cone cannot be recovered by him as restraint orders have been passed by the Income-tax Department and served on such parties restraining them from making any payment to the assessee and his members. Only on account of this, there has been further delay in filing of the return after the payment of ₹ 5 lacs of tax which the assessee has been able to make from the funds available or gathered by him. Under the circumstances, as the assessee is now unable to gather any further monies, the assessee is filing this return with specific request to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those debtors directly to the credit of department through challan. Under these circumstances, it is stated that non adjustment of tax liability of appellant out of his dues receivable from such parties by Id. Assessing Officer, cannot be made a justifiable ground to hold that since the appellant had not paid entire amount of tax along with return of income resulting into non compliance of first proviso to section 158BFA(2) of the Act. With utmost respect, it is submitted that the Id. Assessing Officer ought to have appreciated the genuine inability to make payment of taxes before filing return of income and ought not to have saddled the appellant with penal consequences for the circumstances beyond his control and in complete disregard of elementary principles of natural justice. 8. Ld. AR further submitted that as the assessee intended to pay total tax liability payable on the disclosed income in the return for the block period but was unable to do so due to restraining order by the Department on the debtors of the assessee and even subsequent thereto the assessee has paid the balance tax liability. Thereafter ld. CIT(A) has held that proviso (1) of sec.158BFA(2) of the Act i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides that if an assessee fails to pay the taxes on the returned income for the block periods while filing the return the assessee would be liable to pay penalty equivalent to the tax leviable on the returned income. The second proviso contemplates a different situation. It provides that in case an assessee files a block return and paid taxes as per law on that return income but the Assessing Officer has made certain addition in the assessment order and ultimately the assessed income is a different income than the one disclosed by the assessee on this difference a penalty equivalent to the tax sought to be evaded would be paid by the assessee on this difference. 11. As far as the facts for the first situation are concerned, the assessee was caused to pay tax of ₹ 12 lacs on the disclosed income of ₹ 20,00,000/- the assessee could pay ₹ 5 lacs and there was a shortage of ₹ 7 lacs. The assessee contended that it has unrealized loans and advances whose recovery has been restrained by the Department. In other words they were attached. Therefore, assessee could not recover these amounts. Along with the return filed in a letter prayed for recovery of these a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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