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2015 (5) TMI 2 - HC - Income TaxPenalty u/s.158BFA(2) - Assessee has failed to pay the tax in its entirety on the undisclosed income - ITAT deleted penalty levy - Held that - From the record, it is clear that in the present case, the assessee had paid ₹ 7,36,000/- earlier, which was nearly 60 per cent of the total demand, i.e. ₹ 12,83,293/-, made by the Revenue, whereas, later on the assessee paid ₹ 8,86,033/-in installments, which included the balance demand amount as well as the interest accrued, thereon. We are, therefore, of the opinion that Mr. Soparkar rightly submitted that the Tribunal was justified in allowing the appeal of the assessee, since, even if the provisions of Section 158BFA of the Act are seen in the light of the decision of the CIT v. Smt. P.K. Noorjahan (1997 (1) TMI 6 - SUPREME Court ), the provisions of law uses the word 'May' and not the word 'Shall', which is the interpretation put forward by the Tribunal and the same does not call for any interference at the hands of this Court. Thus the ITAT was right in law and on facts in deleting the penalty imposed u/s.158BFA(2) of the IT Act, 1961. Decided in favour of the respondent-assessee.
Issues Involved:
1. Legality of the penalty imposed under Section 158BFA(2) of the Income Tax Act, 1961. 2. Interpretation of the provisions of Section 158BFA(2) vis-`a-vis Section 271(1)(c) of the Act. 3. Whether the Tribunal correctly deleted the penalty imposed by the Assessing Officer (AO). Detailed Analysis: Issue 1: Legality of the penalty imposed under Section 158BFA(2) of the Income Tax Act, 1961 The appellant-Revenue challenged the order of the ITAT, Ahmedabad Bench 'A', which deleted the penalty of Rs. 12,83,290/- imposed under Section 158BFA(2) of the Act. The Revenue argued that the assessee failed to pay the tax in its entirety on the undisclosed income disclosed during the search and seizure proceedings. The AO had levied the penalty because the assessee paid only Rs. 7,36,000/- out of the total tax payable of Rs. 12,83,293/- on undisclosed income of Rs. 20,36,971/-. Issue 2: Interpretation of the provisions of Section 158BFA(2) vis-`a-vis Section 271(1)(c) of the Act The Tribunal's interpretation that the penalty under Section 158BFA(2) is akin to Section 271(1)(c) was contested by the Revenue. The Tribunal held that the penalty under Section 158BFA(2) is not mandatory but discretionary, and the department must prove the factum of concealment. The Tribunal, in its analysis, referred to the case of "Gandhi Service Station," which held that the provisions of Section 158BFA(2) are discretionary. The Tribunal noted that the assessee paid the balance tax along with interest voluntarily without further proceedings, indicating no concealment. Issue 3: Whether the Tribunal correctly deleted the penalty imposed by the AO The Tribunal's decision to delete the penalty was supported by the factual scenario where the assessee paid the balance tax and interest in installments after the block assessment. The Tribunal observed that the penalty under Section 158BFA(2) is not mandatory and should be considered in light of the assessee's explanation. The Tribunal cited the case of "CIT v. Harkaran Das Ved Pal" and "CIT v. Becharbhai P. Parmar" to support its decision. The Tribunal concluded that the department did not prove the factum of concealment, and the penalty could not be levied under the given facts. Conclusion: The High Court, after hearing both parties and reviewing the material on record, upheld the Tribunal's decision. The Court agreed that the provisions of Section 158BFA(2) use the word 'May' and not 'Shall', indicating discretion. The Tribunal's interpretation that the penalty under Section 158BFA(2) is discretionary and akin to Section 271(1)(c) was found to be correct. The Court dismissed the appeals, holding that the ITAT was right in law and on facts in deleting the penalty of Rs. 12,83,290/- imposed under Section 158BFA(2) of the Income Tax Act, 1961. The question framed in the appeal was answered in favor of the respondent-assessee and against the appellant-revenue.
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