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2016 (1) TMI 712 - AT - Income TaxPenalty imposed u/s 158BFA(2) - delay of 10 days in filing the return - Held that - Levy of penalty under s. 158BFA(2) is not automatic. Before levying penalty, the concerned officer is required to find out that even if there was any failure referred to in the concerned provision the same was without a reasonable cause. The initial burden is on the assessee to show that there existed reasonable cause which was the reason for the failure referred to in the concerned provision. Thereafter, the officer dealing with the matter has to consider whether the explanation offered by the assessee or the person, as the case may be, as regards the reason for failure, was on account of reasonable cause. In our opinion, the delay of 10 days in filing the return is well within the knowledge of the assessee and the assessee is aware of the consequences of late filing of return. Therefore, it is not a case of deliberate attempt to delay the filing of return and avoid payment of taxes. Hence, the AO, is not right in levying penalty on the assessed income including returned income by invoking first proviso to section 158BFA(2). In the present case, the undisclosed income finally assessed at ₹ 42,59,151/- as per the consequential order passed by AO, giving effect to ITAT order. The assessee admitted a undisclosed income of ₹ 35,00,000/- in the block return. Thus, there was difference of ₹ 7,59,151/- in the assessed income in excess of returned income. The CIT(A), after considering the factual position and also considering the third member decision of ITAT Cochin bench in the case of DCIT vs. Heera Constructions Co P. Ltd 2009 (8) TMI 120 - ITAT COCHIN , confirmed the penalty on this portion of undisclosed income. CIT(A) rightly deleted the penalty levied u/s 158BFA(2) by the AO on undisclosed income declared by the assessee in the block return and confirmed the penalty on undisclosed income determined by the AO in excess of undisclosed income shown in the block return. Hence, we inclined to up held the order of CIT(A). - Decided against revenue
Issues Involved:
1. Validity of penalty imposed under Section 158BFA(2) of the Income Tax Act, 1961. 2. Applicability of the first and second provisos to Section 158BFA(2). 3. Consideration of reasonable cause for delay in filing return and payment of taxes. Detailed Analysis: 1. Validity of Penalty Imposed under Section 158BFA(2): The core issue is whether the Commissioner of Income-tax (Appeals) [CIT(A)] was correct in deleting the penalty imposed by the Assessing Officer (AO) under Section 158BFA(2) of the Income Tax Act, 1961. The assessee firm, engaged in the business of film exhibition, was subjected to a search and seizure operation under Section 132 of the Income Tax Act, 1961. Subsequently, a notice under Section 158BC was issued, and the firm filed its return for the block period, declaring undisclosed income of Rs. 35,00,000/-. The AO completed the assessment and determined the undisclosed income at Rs. 42,59,159/-. Penalty proceedings were initiated under Section 158BFA(2) due to the assessee's failure to file the return within the specified date and non-payment of the entire tax due on the returned income. The AO levied a penalty of Rs. 26,83,300/-. The CIT(A) directed the AO to levy penalty only on the undisclosed income assessed in excess of the undisclosed income declared in the block return, leading to the revenue's appeal. 2. Applicability of the First and Second Provisos to Section 158BFA(2): The Departmental representative argued that the first proviso to Section 158BFA(2) was applicable, as the assessee did not fulfill the conditions stipulated by the section, i.e., timely filing of the return and payment of taxes. The assessee contended that penalty could only be levied on the undisclosed income over and above the returned and assessed income, as per the second proviso to Section 158BFA(2). The CIT(A) deleted the penalty on the undisclosed income declared by the assessee and confirmed the penalty on the undisclosed income assessed over and above the returned income. The tribunal upheld the CIT(A)'s decision, stating that the second proviso mandates the AO to levy penalty only on the portion of undisclosed income assessed in excess of the returned income. The tribunal referred to the third member decision of the ITAT Cochin bench in DCIT vs. Heera Constructions Co P. Ltd 125TTJ 589, which supported this interpretation. 3. Consideration of Reasonable Cause for Delay in Filing Return and Payment of Taxes: The assessee argued that the delay in filing the return and paying taxes was unintentional and due to an inability to mobilize funds. The tribunal noted that the delay of 10 days in filing the return was marginal and the return was considered by the AO for completing the assessment. The tribunal emphasized that the levy of penalty under Section 158BFA(2) is not automatic and the AO must consider whether the failure was due to a reasonable cause. The tribunal found that the delay was not a deliberate attempt to avoid filing the return or paying taxes, and thus, the AO was not justified in levying penalty on the assessed income including the returned income by invoking the first proviso to Section 158BFA(2). Conclusion: The tribunal concluded that the CIT(A) rightly deleted the penalty on the undisclosed income declared by the assessee in the block return and confirmed the penalty on the undisclosed income determined by the AO in excess of the undisclosed income shown in the block return. The revenue's appeal was dismissed. Final Order: The revenue's appeal is dismissed. The order was pronounced in the open court on 29th October 2015.
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