TMI Blog2013 (8) TMI 1039X X X X Extracts X X X X X X X X Extracts X X X X ..... h and seizure action u/s.132 of the Income Tax Act was carried out at the business and office premises of the assessee on 29-08-2000. In response to notice u/s.158BC the assessee filed his return of income declaring undisclosed loss of ₹ 75,39,357/- pertaining to 3 years, i.e. A.Y. 1999-2000 to 2001-02. While arriving at this loss, the assessee had claimed accrued interest of ₹ 90,77,000/- on advances received from the members of the society. The Assessing Officer completed the assessment on 29-08-2002 determining the total undisclosed income at ₹ 58,67,526/-. In the said order the Assessing Officer disallowed accrued interest of ₹ 90,77,000/- claimed by the assessee in toto, charged to tax the notional income of ₹ 10,21,815/- and disallowed the administration and office expenses. 3.1 In appeal the Ld.CIT(A) allowed interest to the extent of ₹ 9,07,700/-, deleted the notional income of ₹ 10,21,815/- and allowed administrative expenses of ₹ 22,49,790/- and depreciation of ₹ 5,69,170/-. The Revenue filed an appeal before the Tribunal. The Tribunal confirmed the deletion of notional income of ₹ 10,21,815/-, disallowed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part and the consequent addition to the income has to be considered to be a sound basis for penalty. Further, the loss was claimed on the basis of books of accounts prepared after the search. Therefore, the claim of the assessee cannot be considered as a bonafide one. The Assessing Officer further noted that the undisclosed interest income has been utilised by the assessee for investment in his personal assets worth ₹ 59,78,282/-. Rejecting the various decisions cited before him the Assessing Officer levied penalty of ₹ 61,67,600/- u/s.158BFA (2) of the Income Tax Act. 5. In appeal the Ld.CIT(A) upheld the action of the Assessing Officer by holding as under : 5. I have carefully considered the contention of the appellant in the light of the facts of the case and provisions of law. The appellant's contention that his claim of interest of ₹ 90,77,000/- was bonafide and genuine based on the contractual obligation of the plot holders does not appear to be acceptable. As observed by the Assessing Officer in para 6 of his order that there is no evidence found at the time of the search with regard to the liability of the assessee for making any payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirmed. 5.1 Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 6. The Ld. Counsel for the assessee reiterated the same submissions as made before the Assessing Officer and the CIT(A). Challenging the leviability of penalty he submitted that the disallowance of interest was made only on the basis of the return of income filed by the assessee and not based on any document found during the course of search. Referring to the provisions of section 158B(b) he submitted that the words or any expense, deduction or allowance claimed under this act which is found to be false were inserted by the Finance Act, 2002 with retrospective effect from 01-07- 1995. He submitted that the date of search in the instant case is 29-08-2000 and the block period starts from A.Y. 1991-92 to part of 2001-02. Referring to the decision of the Mumbai Bench of the Tribunal (Third Member) in the case of Super Metal Industries Vs. DCIT reported in 119 ITD 153 he submitted that the Tribunal in the said decision has held that the expression or any expense, deduction or allowance claimed under this act which is found to be false not being there in section 158B(b) at the time of fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of search and the loss was claimed on the basis of books of account prepared after the search operations on 29-08-2000. 8.1 It is the submission of the Ld. Counsel for the assessee that the provisions of section 158B(b) were amended to include or any expense deduction or allowance claimed under this act which is found to be false by the Finance Act, 2002 with retrospective effect from 01-07-1995 whereas the assessment years involved in the case of the assessee relates to block period 1991-92 and part of 2001-02 and the date of search is 29-08-2000 and the assessee filed return of income on 23-03-2001. Therefore, in view of the decision of the Mumbai Bench of the Tribunal (Third Member) in the case of Super Metal Industries (Supra) penalty u/s.158BFA(2) cannot be levied under the facts and circumstances of the case. 8.2 We find merit in the above submission of the Ld. Counsel for the assessee. We find the Mumbai Bench of the Tribunal (Third Member) in the case of Super Metal Industries (Supra) has observed as under (Short notes) : First of all, a discretion is given to the AO to levy or not to levy the penalty. The reasoning of the AM that mere failure on the part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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