2016 (5) TMI 848 - AT - Income Tax

Levy of penalty u/s. 158BFA(2) - Held that - As additions have been upheld on estimation basis no penalty is leviable in the present case - Decided in favour of assessee

Summary

Issues:
1. Quantum addition in block assessment for undisclosed income.
2. Dismissal of appeal by ITAT for non-prosecution.
3. Imposition of penalty under section 158BF(2) of the Act.

Quantum Addition for Undisclosed Income:
The case involved a partnership firm engaged in money lending and chit fund business, subjected to a search under section 132 of the Act. The Assessing Officer determined undisclosed income based on seized materials, observing unaccounted transactions. The AO made additions for unaccounted business and gold loan business, relying on seized books of account. The CIT(A) confirmed these additions, leading to an appeal before the ITAT, which was dismissed for non-prosecution in 2010.

Imposition of Penalty under Section 158BF(2) of the Act:
Penalty proceedings were initiated against the assessee for suppression of income, resulting in a penalty imposition by the AO. The CIT(A) upheld the penalty, emphasizing the mandatory nature of section 158BFA(2). However, the ITAT highlighted the discretionary aspect of the provision, citing relevant case laws where penalties were deleted due to estimation-based additions and lack of concrete evidence. The ITAT directed the AO to cancel the penalty, reversing the CIT(A)'s decision and allowing all grounds raised by the assessee.

The judgment delves into the quantum addition for undisclosed income, highlighting the basis for additions made by the Assessing Officer and subsequent confirmation by the CIT(A). It also addresses the penalty imposition under section 158BF(2) of the Act, emphasizing the discretionary nature of the provision and citing precedents where penalties were deleted due to estimation-based additions. Ultimately, the ITAT directed the cancellation of the penalty, overturning the CIT(A)'s decision and ruling in favor of the assessee.