2011 (11) TMI 460 - HC - Income Tax

Penalty levied u/s 158BFA - search - block assessment - assessee filed return declaring undisclosed income - Held That - Penalty u/s 158BFA(2) is provided where the A.O. computes income in excess of what is declared by the assessee for the block period. In the present case, addition of Rs. 3 lakhs was confirmed by the Tribunal over and above the income declared by the assessee for the block period in question. The AO, therefore, imposed penalty which was confined to such addition. Penalty justified - Decided against the assessee.

Summary

Issues:
1. Challenge to the penalty imposed under section 158BFA(2) of the Income-tax Act, 1961.
2. Validity of the order passed under section 158BFA(2) in the absence of a substantive provision to levy penalty in respect of undisclosed income under Chapter XIV-B.
3. Whether the conclusion reached by the Income-tax Appellate Tribunal to uphold the penalty was based on the material on record or was perverse.

Analysis:
The judgment involved a challenge to a penalty imposed under section 158BFA(2) of the Income-tax Act, 1961. The appellant contested the penalty of Rs. 1,83,600 confirmed by the Tribunal. The block assessment proceedings for the appellant were conducted for the period from April 1, 1995, to January 8, 2002. The Assessing Officer made additions over the declared income, leading to the initiation of penalty proceedings under section 158BFA(2) of the Act. The Tribunal upheld an additional income of Rs. 3 lakhs, resulting in the imposition of the penalty by the Commissioner of Income-tax (Appeals) at 100% of the undisclosed income.

The appellant argued that the penalty was erroneously imposed, especially as the additions were based on concessions made during the proceedings. However, the Tribunal's decision was based on the undisclosed income determined during the search operation. The penalty provisions under section 158BFA(2) differ from those under section 271(1)(c) of the Act, as they are triggered when the assessed income exceeds the declared income for the block period.

The court clarified that the penalty under section 158BFA(2) is discretionary but found no error in its imposition in this case. The Assessing Officer had exercised his discretion correctly by imposing the minimum penalty leviable. The court dismissed the appeal, stating that the penalty was justified based on the additional undisclosed income upheld by the Tribunal. The judgment emphasized that the penalty provisions under section 158BFA(2) are distinct from those under section 271(1)(c) and are triggered by discrepancies between assessed and declared incomes for the block period.