2014 (1) TMI 810 - HC - Income Tax

Penalty u/s 158BFA - Held that - Held that - Following Commissioner of Income Tax v. Becharbhai P. Parmar 2012 (4) TMI 418 - GUJARAT HIGH COURT - It is true that Section 273B of the Act which provides that penalty shall not be imposed in certain cases on the assessee proving that there was reasonable cause for failure to pay tax refers to several provisions such as Section 271, 271A, etc., makes no mention of Section 158BFA(2) - This still does not mean that penalty under Section 158BFA(2) is mandatory - Penalty under Section 158BFA (2) is not mandatory. The Tribunal has not looked into the aspect of quantum of penalty - The issue has been restored for fresh adjudication.

Summary

Issues:
1. Appeal against the penalty imposed under section 158BFA(2) of the Income Tax Act, 1961.
2. Consideration of the legality of canceling the penalty by the Appellate Tribunal.

Analysis:
1. The case involved an appeal by the Revenue against the penalty imposed under section 158BFA(2) of the Income Tax Act, 1961, for the block period ending on 31.03.1999. The impugned judgment by the Income Tax Appellate Tribunal (ITAT) canceled the penalty of Rs.7,12,000/- imposed by the Assessing Officer. The main issue was whether the ITAT was correct in canceling the penalty.

2. The search operation under section 132(1) of the Act in the Mahendra S. Vyas Group led to the discovery of incriminating documents showing undisclosed income. Subsequently, a notice under section 158BD read with section 158BC was issued to the assessee to file a block return of income. The block assessment order was passed, computing the undisclosed income at Rs.11,85,337/-. Penalty proceedings under section 158BFA(2) were initiated, and a penalty of Rs.7,12,000/- was levied on the assessee. The assessee's appeals before the CIT(A) and ITAT resulted in the confirmation and cancellation of the penalty, respectively.

3. The CIT(A) dismissed the assessee's appeal against the penalty, leading to further appeal before the ITAT. The ITAT, relying on a decision of the Coordinate Bench, allowed the appeal and directed the deletion of the penalty. This decision was challenged by the Revenue in the present Tax Appeal, questioning the cancellation of the penalty under section 158BFA(2) by the ITAT.

4. During the hearing, both parties agreed that the matter should be remanded to the ITAT for fresh consideration, particularly regarding the quantum of penalty, in light of a decision by the Division Bench of the High Court. The Court, considering the lack of detailed examination by the ITAT on the quantum of penalty and the recent relevant legal precedent, quashed the impugned judgment and restored the matter to the ITAT for a fresh assessment of the penalty issue.

5. In conclusion, the Court allowed the appeal to the extent of setting aside the ITAT's decision to cancel the penalty and remanded the matter back to the ITAT for reconsideration in accordance with the legal principles laid down by the Division Bench of the High Court. No costs were awarded in this decision.