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2015 (10) TMI 2010 - AT - Income TaxPenalty u/s 158BFA(2) - sale consideration received in cash, over and above the consideration stated in the sale deed - Held that - Where the addition was made on the basis of estimation of investment in property, the Tribunal held that in the absence of any evidence found in the course of search that the assessee had incurred any unaccounted expenditure on construction of the said property, there was no merit in levy of penalty under section 158BFA(2) of the Act. As pointed out evidence of sale consideration received in cash, over and above the consideration stated in the sale deed in respect of property sold by the assessee, was found during the course of search of the person who had purchased the property of the assessee. In view of direct evidence of a transaction entered into by the assessee with the purchaser, though not found from the premises of the assessee, but from the premises of the purchaser, during the search operations and also in view of the admission of the partners of searched person and their cross-examination by the assessee, where complete evidence has been found against the assessee on the basis of which addition of undisclosed income has been made in the hands of assessee, we find no merit in the reliance placed upon by the learned Authorized Representative for the assessee. Accordingly, setting-aside the order of CIT(A), we direct the Assessing Officer to levy penalty under section 158BFA(2) of the Act on differential income of ₹ 17,22,500/-. The grounds of appeal raised by the Revenue are thus, allowed. - Decided against assessee.
Issues Involved:
1. Deletion of penalty under section 158BFA(2) of the Income-tax Act, 1961. 2. Validity of the presumption under section 132(4A) of the Act against a third party. 3. Applicability of penalty provisions under section 158BFA(2) when additional income is declared to avoid litigation. Issue-Wise Detailed Analysis: 1. Deletion of Penalty Under Section 158BFA(2): The Revenue's appeal contested the deletion of the penalty of Rs. 10,85,180/- levied under section 158BFA(2) of the Income-tax Act, 1961. The CIT(A) had deleted the penalty on the grounds that the addition itself was debatable and not conclusively proved. The Tribunal, however, reversed the CIT(A)'s decision, stating that the penalty was justified as the assessee had failed to declare the additional income in its return, which was determined based on documents found during the search on another person. The Tribunal emphasized that the incriminating documents found from the possession of the searched person were relatable to the assessee, and the assessed income was higher than the returned income, making the assessee liable for the penalty under section 158BFA(2). 2. Validity of Presumption Under Section 132(4A) Against a Third Party: The assessee argued that the presumption under section 132(4A) of the Act, which assumes the contents of seized documents to be true, could only be drawn against the person from whom the documents were seized and not against a third party. The Tribunal rejected this contention, stating that the documents found during the search on M/s. Rushiraj Builders and Developers, which indicated cash payments to the assessee, were sufficient evidence to initiate proceedings under section 158BD of the Act. The Tribunal noted that the assessee was given an opportunity to cross-examine the partner of M/s. Rushiraj Builders and Developers, who confirmed the cash payments, and the assessee failed to disprove the receipt of cash consideration. 3. Applicability of Penalty Provisions Under Section 158BFA(2) When Additional Income is Declared to Avoid Litigation: The assessee claimed that the additional income of Rs. 18,22,500/- was offered to buy peace of mind and avoid litigation, subject to the condition that no penalty would be levied. The Tribunal held that the penalty under section 158BFA(2) was still applicable as the additional income was determined based on seized documents and the assessee's offer to declare the income did not exempt it from penalty. The Tribunal referred to the Hon'ble Gujarat High Court's decision in Kandoi Bhogilal Mulchand Vs. DCIT, which stated that penalty under section 158BFA(2) is attracted when the Assessing Officer computes income in excess of what is declared by the assessee for the block period. The Tribunal concluded that the penalty was justified as the assessee had not voluntarily admitted the income and the issue was not debatable. Conclusion: The Tribunal allowed the Revenue's appeal, reversing the CIT(A)'s order and upholding the penalty of Rs. 10,85,180/- under section 158BFA(2) of the Act. The Tribunal emphasized that the incriminating documents found during the search on M/s. Rushiraj Builders and Developers were sufficient evidence to levy the penalty, and the assessee's offer to declare additional income did not exempt it from penalty. The Tribunal's decision was based on the provisions of section 158BFA(2) and relevant case law, including the Hon'ble Gujarat High Court's decision in Kandoi Bhogilal Mulchand Vs. DCIT.
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