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2015 (7) TMI 613 - AT - Income TaxLevy of penalty u/s.158BFA(2) - suppressed capital gain - Held that - We find out of addition of ₹ 63,79,104/- made by the Assessing Officer on account of suppressed capital gain on sale of plot of land situated at 208, Yerawada, Pune, the CIT(A) had granted relief of ₹ 30,71,741/- and sustained addition of ₹ 33,07,363/-. We find the Assessing Officer levied the penalty on account of suppressed capital gain of ₹ 36,24,695/- for the purpose of levy of penalty. It is the submission of the Ld. Counsel for the assessee that in the order giving appeal effect after the order of the CIT(A) the Assessing Officer himself has made addition of ₹ 33,07,363/-. Therefore, penalty if any u/s.158BFA (2) has to be restricted to the addition finally sustained at ₹ 33,07,363/- and not on ₹ 36,24,695/-. It is a matter of fact that in view of enhanced claim of section 54F the addition confirmed comes to ₹ 33,07,363/- only as pointed out by the Assessing Officer in the penalty order at page 4 para 8(i). Since the addition sustained is only to the extent of ₹ 33,07,363/-, therefore, we find merit in the argument of Ld. Counsel for the assessee that penalty u/s.158BFA(2) should be levied only on ₹ 33,07,363/- and not on ₹ 36,24,695/-. - Decided in favour of assessee. Unexplained expenditure on education expenses of son of the assessee - submission of the assessee that if telescoping effect is given to the various additions sustained by the CIT(A) the assessee is still left with an amount of ₹ 23,52,702/- which is available to him for meeting the expenditure out of the addition of ₹ 47,04,520/- and penalty can be levied only on the balance amount of ₹ 23,51,818/- (i.e. 47-04,520 23,52,702) - Held that - Since the addition on account of on-money has been confirmed, therefore, the said amount is available to the assessee to meet the unaccounted expenditure apart from meeting the amount paid towards bungalow. Further, cash receipt to the tune of ₹ 14,50,000/- has been accepted by the assessee. Since, telescoping effect has been given only for ₹ 16,81,591/-, therefore, we find some force in the argument of the Ld. Counsel for the assessee that for levying penalty u/s.158BFA(2) penalty can be levied only on the balance amount, i.e. ₹ 23,51,818/- as against ₹ 47,04,520/-. It is the settled proposition of law that penalty proceedings and assessment proceedings are separate and distinct. An assessee can advance fresh argument during penalty proceedings for non-levy of penalty or penalty of a lesser amount. However, the above details furnished by the Ld. Counsel for the assessee requires verification at the level of the AO. We therefore remit this issue to verify as to whether the assessee has taken any benefit out of the on-money received as well as the cash receipt of ₹ 14.50 lakhs and adjustment at ₹ 10.40 lakhs. The AO shall compute the penalty on the balance amount. - Decided partly in favour of assessee for statistical purposes. Unexplained investments - it is the submission of the assessee that there was no investment in shares during the block period and all those shares were bonus shares out of the holding of shares prior to the block period. However, this fact was also stated before the CIT(A) - Held that - The Ld.CIT(A) confirmed the addition on the ground that no evidence was put forth to indicate that the shares acquired during the block period were actually the conversion of debentures held in the pre block period or accrual in the form of bonus shares. We find although a specific ground was taken before the Tribunal however the same remained unadjudicated. The assessee has neither moved any Miscellaneous Application for adjudication of the above ground by the Tribunal nor challenged the same before the higher forum. It is the submission of the Ld. Counsel for the assessee that given an opportunity he can prove that the shares are not purchased during the impugned block period and are on account of bonus shares issued out of the debentures or shares held prior to the block period. However, nothing was produced before us to substantiate that the investments are out of bonus shares on shares or debentures held prior to the block period. The assessee has already expressed his inability before CIT(A) to substantiate the same. No purpose will be served by remitting this issue to the file of the AO at this juncture. The penalty levied by the AO on this amount of ₹ 1,37,500/- is accordingly upheld. Decided against assessee.
Issues Involved:
1. Levy of penalty under Section 158BFA(2) of the Income Tax Act. 2. Addition on account of suppressed capital gain. 3. Addition on account of unexplained educational expenses of the assessee's son. 4. Addition on account of unaccounted investments in shares. Detailed Analysis: 1. Levy of Penalty under Section 158BFA(2): The primary issue in this case revolves around the levy of a penalty amounting to Rs. 59,43,634/- by the Assessing Officer (AO) under Section 158BFA(2) of the Income Tax Act, which was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The penalty was imposed due to additions made during the block assessment period from 01-04-1990 to 14-02-2001. The AO levied the penalty based on three specific additions: suppressed capital gain, unexplained educational expenses of the assessee's son, and unaccounted investments in shares. 2. Addition on Account of Suppressed Capital Gain: The assessee, along with his mother, was the joint owner of a plot of land sold for Rs. 76,00,000/- with additional considerations. During a search, a loose paper indicated cash receipts over and above the recorded consideration, leading the AO to compute suppressed capital gain at Rs. 63,79,104/-. The CIT(A) reduced this addition to Rs. 33,07,363/-, and the assessee did not challenge this before the Tribunal. The Tribunal found merit in the argument that penalty should be levied only on the sustained addition of Rs. 33,07,363/- rather than Rs. 36,24,695/-. Consequently, the additional ground raised by the assessee was allowed, and the penalty was restricted to the sustained amount. 3. Addition on Account of Unexplained Educational Expenses of the Assessee's Son: The search revealed documents related to the educational expenses of the assessee's son studying at Cornell University. The AO added Rs. 54,79,120/- as unexplained expenditure, which was reduced by the CIT(A) to Rs. 47,04,520/-. The Tribunal upheld this addition. The assessee argued for a telescoping effect, suggesting that cash available from other additions should offset the unexplained expenditure. The Tribunal found merit in this argument, noting that the cash receipts taxed as undisclosed income and accepted part of the sale consideration provided sufficient funds to cover part of the educational expenses. The Tribunal remitted the issue to the AO to verify the details and compute the penalty on the balance amount, considering the telescoping effect. 4. Addition on Account of Unaccounted Investments in Shares: During the search, shares valued at Rs. 3,49,540/- were found, with Rs. 1,37,500/- acquired during the block period. The assessee claimed these were bonus shares from holdings prior to the block period, but could not substantiate this claim. The CIT(A) and the Tribunal upheld the addition due to lack of evidence. The Tribunal dismissed the assessee's ground on this issue, affirming the penalty on the unexplained investment. Conclusion: The Tribunal partly allowed the appeal for statistical purposes, directing a reassessment of the penalty concerning the educational expenses after considering the telescoping effect. The penalty related to the suppressed capital gain was adjusted to the sustained addition, while the penalty on unaccounted investments in shares was upheld. The general ground of appeal was dismissed. The judgment was pronounced in the open court on 30-06-2015.
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