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Issues Involved:
1. Justification of the deletion of the penalty levied under section 158BFA of the Income-tax Act, 1961. Detailed Analysis: 1. Justification of the deletion of the penalty levied under section 158BFA of the Income-tax Act, 1961: Facts of the Case: The premises and lockers of the deceased assessee were searched under section 132 of the Income-tax Act on 9-2-1999. The legal heir was issued notices under section 158BC, and initially, no income was declared in the return. However, a revised return was later filed disclosing undisclosed income of Rs. 5,82,439. The Assessing Officer treated the revised return as non est but completed the assessment on the disclosed income. Penalty Proceedings: The Assessing Officer initiated penalty proceedings under section 158BFA and levied a penalty of Rs. 3,49,460. The legal heir contended that the revised return was filed voluntarily upon discovering errors in the original return and requested leniency. The Assessing Officer, however, was not satisfied with this explanation and imposed the penalty. Appeal to CIT (Appeals): The CIT (Appeals) deleted the penalty, observing that: - The legal heir, a housewife, was unaware of the deceased's financial transactions. - No incriminating material was found during the search. - The revised return was filed immediately upon discovering the omitted income. - The Assessing Officer did not independently find any unaccounted income. - There was no mens rea (guilty mind) on the part of the legal heir. Revenue's Appeal to the Tribunal: The Revenue argued that mens rea was not required under section 158BFA(2) and that the penalty was automatic if the assessed income exceeded the returned income. The Department contended that the revised return was non est and the penalty was justified. Tribunal's Analysis: The Tribunal considered several principles regarding the levy of penalty: - Penalty proceedings are quasi-criminal and distinct from assessment proceedings. - The principle of natural justice mandates a reasonable opportunity of being heard. - The levy of penalty is discretionary and should be exercised judiciously based on the facts and circumstances. - The Tribunal referred to the Supreme Court's judgment in Hindustan Steels Ltd. v. State of Orissa, which emphasized that penalty should not be imposed for technical or venial breaches and should consider all relevant circumstances. Section 158BFA Provisions: The Tribunal noted that section 158BFA(2) uses "may" for the levy of penalty, indicating discretion, and "shall" for the quantum of penalty, indicating obligation. Section 158BFA(3) requires providing a reasonable opportunity to the assessee before imposing a penalty. Conclusion: The Tribunal concluded that the levy of penalty is not automatic and must consider the bona fides of the assessee. In this case, the legal heir acted in good faith, and no incriminating material was found during the search. The revised return was filed voluntarily upon discovering the omitted income. The Tribunal held that the Assessing Officer should have exercised discretion in favor of the assessee and that technicalities should not hinder justice. The Tribunal also noted that the capital gain was not assessable as "undisclosed income" under section 158BB/158BC since no incriminating material was found. Final Decision: The Tribunal upheld the CIT (Appeals) order deleting the penalty, emphasizing the bona fides of the legal heir and the absence of incriminating material. The appeal of the Revenue was dismissed.
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