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2004 (12) TMI 309 - AT - Income TaxBlock Assessment in search case - difference in undisclosed income - income disclosed in the returns filed after the search - Whether penalty u/s 158BFA(2) is mandatory or discretionary - FDR interest - HELD THAT - Since the provision of section 271(1)(c) are similar to the provision of section 158BFA(2) therefore we are of the view that the same will apply mutatis mutandis and the ratio as laid down by the various courts while dealing with the penalty relating to concealment of income will also apply. Therefore respectfully following the decision of ITAT Bangalore Bench C in the case of Smt. Mala Dayanithi we do not find any merit in the plea of the Ld. D.R. that the penalty under section 158BFA(2) is mandatory and not discretionary and accordingly the same is rejected. No particular item of income was brought on record by the revenue to show that the same was not considered by the assessee while disclosing the undisclosed income at Rs. 50 lakhs and the undisclosed income was computed by the Assessing Officer by applying certain formula appearing at page 6 of the assessment order and likewise income from Tokai seeds commission was also assessed on estimate on the basis of the same bunch of seized papers therefore we are of the view that the income determined by the Assessing Officer on account of undisclosed cash and Tokai seeds is based on estimate and in the absence of any other contrary material brought on record by the Ld. D.R. we are of the view that no penalty under section 158BFA(2) is leviable on this account and therefore we uphold the order of the Ld. CIT(A) in this regard. Imposition of penalty on income disclosed in the returns filed after the search for the assessment years 1996-97 and 1997-98 - HELD THAT - No material was brought on record by the revenue to show that the particulars of income as shown by the assessee in the said returns have not been disclosed to the revenue prior to the date of search. We further find that the assessee has also paid advance tax and TDS prior to the date of search on the income disclosed in the returns filed after the date of search therefore income disclosed in the returns filed after the date of search is not an undisclosed income in view of the provisions of section 158B(b) of the Income-tax Act. In this view of the matter the income disclosed in the returns filed after the date of search is not liable for penalty under section 158BFA(2) of the Income-tax Act and accordingly we are inclined to uphold the order of the Ld. CIT(A) in deleting the penalty on this account also. FDR interest - Since the Ld. Counsel for the assessee has failed to brought on record any reconciliation statement showing the difference of the FDR interest and keeping in view the plea of the Ld. D.R. that for this purpose the issue may be restored back to the file of the Ld. CIT(A) and also in the interest of justice we consider it fair and reasonable to set aside the order of the Ld. CIT(A) and accordingly we set aside the order of the Ld. CIT(A) to this extent and restore the matter to his file who shall work out the net amount of FDR interest which has not been disclosed by the assessee either in the block return or in the regular returns for the assessment years 1995-96 1996-97 and 1997-98 and worked out the net undisclosed amount of interest for the purpose of imposition of penalty u/s 158BFA(2) and to impose a minimum penalty according to law after providing reasonable opportunity of being heard to the assessee. Accordingly the grounds taken by the revenue are rejected and that of the assessee is partly allowed for statistical purposes. In the result revenue s appeal stands dismissed and that of the assessee is partly allowed for statistical purposes.
Issues Involved:
1. Legality of penalty u/s 158BFA(2) for undisclosed income. 2. Quantum of penalty imposed by Assessing Officer and reduced by CIT(A). 3. Merits of the penalty imposed on various components of undisclosed income. Summary: 1. Legality of Penalty u/s 158BFA(2) for Undisclosed Income: The Tribunal examined whether the penalty u/s 158BFA(2) is mandatory or discretionary. The revenue argued that the penalty is mandatory due to the use of the word "shall" in the section, while the assessee contended that the word "may" indicates discretion. The Tribunal concluded that the word "may" grants discretion to the authority, and the penalty is not automatic but should be imposed judicially considering all relevant circumstances. The Tribunal cited the case of Hindustan Steel Ltd v. State of Orissa and other precedents to support its view. 2. Quantum of Penalty Imposed by Assessing Officer and Reduced by CIT(A): The Assessing Officer imposed a penalty of Rs. 15,37,980 based on the difference between the assessed undisclosed income (Rs. 75,63,300) and the declared undisclosed income (Rs. 50 lakhs). CIT(A) reduced the penalty to Rs. 1,60,268, considering only Rs. 2,67,114 as undisclosed income. The revenue challenged the reduction, arguing that the penalty should be on the entire difference. The Tribunal upheld the CIT(A)'s view that the penalty should be discretionary and not mandatory. 3. Merits of the Penalty Imposed on Various Components of Undisclosed Income: - Undisclosed Cash and Tokai Seeds Income: The Tribunal found that the undisclosed cash and Tokai seeds income were based on estimates and not on specific items of income not considered by the assessee. Therefore, no penalty u/s 158BFA(2) was leviable on these components. - Income Disclosed in Returns Filed After Search: The Tribunal noted that no material was brought on record to show that the income disclosed in the returns for AY 1996-97 and 1997-98 was not disclosed to the revenue before the search. Since the assessee paid advance tax and TDS on this income before the search, it was not considered undisclosed income, and no penalty was leviable. - FDR Interest: The Tribunal found discrepancies in the FDR interest disclosed and assessed. The matter was remanded to CIT(A) to determine the net undisclosed FDR interest and impose the minimum penalty according to law after providing an opportunity to the assessee. Conclusion: The Tribunal dismissed the revenue's appeal and partly allowed the assessee's appeal for statistical purposes, directing CIT(A) to reassess the penalty on FDR interest. Result: Revenue's appeal dismissed; assessee's appeal partly allowed for statistical purposes.
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