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2012 (10) TMI 860 - AT - Income TaxPenalty u/s 158BFA(2) - CIT(A) deleted the levy - Held that - The facts are not in dispute that there is a difference of Rs. 18,25,849/- between the undisclosed income returned by the assessee and finally assessed. Thus merely because the part of the addition has been confirmed by the Tribunal and the assessee has not filed appeal before the Hon ble High Court does not mean that the assessee is liable to penalty u/s 158 BFA(2). As decided in CIT vs. Satyendra Kumar Doshi And Another 2009 (1) TMI 240 - RAJASTHAN HIGH COURT proviso to section 158BFA(2) enumerates the circumstances wherein no penalty is leviable but from that also it cannot be inferred that the absence of the circumstances enumerated will attract the provision of penalty automatically. Of course, as per the provision of section 273B no penalty shall be imposable on the person or the assessee, as the case may be, on their failure referred to in the said provisions if he proves that there was reasonable cause for the said failure. But then the said provision in no manner leads to the presumption that in respect of the cases other than covered by section 273B for any failure or violation imposition of the penalty is automatic. Each provision of penalty has to be construed independently keeping in view the language employed therein - thus as the assessee s explanation was not found to be false or untrue and keeping in view that the A.O. while imposing the penalty at minimum i.e. 100% has accepted the reasonable cause though for limited purpose, that on the facts and circumstances of the case, the penalty u/s 158BFA(2) is not leviable - in favour of assessee.
Issues Involved:
1. Legality of the penalty levied under section 158BFA(2) of the Income Tax Act, 1961. 2. Whether the penalty under section 158BFA(2) is discretionary or mandatory. Detailed Analysis: 1. Legality of the penalty levied under section 158BFA(2) of the Income Tax Act, 1961: The case involves an individual engaged in the business as a builder and landlord. A search and seizure operation under section 132 of the Income Tax Act, 1961, led to a notice under section 158BC, and the assessee filed a return disclosing undisclosed income of Rs. 16,00,000/-. However, the assessment was completed at an undisclosed income of Rs. 2,86,87,806/-. On appeal, the CIT(A) partly allowed the appeal, and the Tribunal further reduced the undisclosed income to Rs. 34,25,849/-, resulting in an addition of Rs. 18,25,849/- to the returned undisclosed income. The Assessing Officer (A.O.) initiated penalty proceedings under section 158BFA(2), which the assessee contested, arguing that the additions were based on unexplained expenditure without corroborative evidence and that the penalty was discretionary. The A.O., however, imposed a penalty of Rs. 12,05,060/-, stating that the additions had been confirmed by the Tribunal and the assessee had not appealed to the High Court, making the additions final. On appeal, the CIT(A) deleted the penalty, relying on decisions that held the levy of penalty under section 158BFA(2) is not mandatory and considering that the A.O. acknowledged a reasonable cause for the non-inclusion of items in the returned undisclosed income. 2. Whether the penalty under section 158BFA(2) is discretionary or mandatory: The Revenue appealed against the CIT(A)'s decision, arguing that the penalty should be imposed since the Tribunal confirmed the additions. However, the Tribunal noted that the A.O. himself had acknowledged a reasonable cause for the non-inclusion of the items and had imposed the minimum penalty. The Tribunal referred to various judgments, including CIT vs. Satyendra Kumar Doshi, which clarified that section 158BFA(2) is discretionary, not mandatory. The provision uses the word "may," indicating discretion. The Tribunal emphasized that the absence of circumstances enumerated in the proviso to section 158BFA(2) does not automatically attract penalty. The Tribunal also referred to CIT vs. Dodsal Ltd., where it was held that the authorities below had recorded reasons for exercising their discretion, and the decision that section 158BFA(2) was directory and not mandatory was upheld. The Tribunal concluded that since the A.O. imposed the minimum penalty acknowledging a reasonable cause, and the assessee's explanation was not found to be false or untrue, the penalty under section 158BFA(2) was not leviable. The order of the CIT(A) in deleting the penalty was upheld, and the Revenue's appeal was dismissed. Conclusion: The Tribunal upheld the CIT(A)'s decision, emphasizing that the penalty under section 158BFA(2) is discretionary and not mandatory. The Tribunal found that the A.O. acknowledged a reasonable cause for the non-inclusion of items in the returned undisclosed income and imposed the minimum penalty. Therefore, the deletion of the penalty by the CIT(A) was justified, and the Revenue's appeal was dismissed.
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