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2005 (4) TMI 261 - AT - Income TaxBlock Assessment in search case - Undisclosed income - Imposition of Penalty u/s 158BFA(2) - additional ground - warrant of authorization u/s 132 - HELD THAT - We have seen that the initial warrant and the Panchnama were in the name of the assessee's husband and not in the name of the assessee. The same is the case relating to the search of the locker in Canara Bank on 7-8-1997. Thus, it is seen that there is no search warrant in the name of the assessee. The observations show that a search u/s 132 of the Act is person specific and not premises specific. It follows that if the name of the assessee against whom the block assessment has been made, does not figure in the warrant of authorization issued u/s 132, the block assessment would be unauthorized, void ab initio. If the block assessment itself is without jurisdiction then there is no question of levy of any penalty u/s 158BFA(2). It, therefore, appears to us be a correct position that the block assessment in the present case is void ab initio since there was no warrant of authorization u/s 132 in the name of the assessee. Therefore, the penalty levied cannot be sustained. In our opinion, the securities, which have matured, could have been encashed after obtaining the assessee's endorsement since those were equivalent to money. So far as the other conditions in the first proviso are concerned, the assessee no doubt filed an appeal against the block assessment, but that was only with regard to the other additions made by the Assessing Officer and not with reference to the undisclosed income declared in the block return. At any rate, the above discussion shows the bona fide of the assessee and the co-operative attitude with which she conducted herself in the course of the block assessment proceedings and the absence of any defiance or contumacious conduct. In the case of CIT v. Ramdas Pharmacy 1969 (12) TMI 19 - MADRAS HIGH COURT held that all the facts and circumstances commencing with the filing of the original return and ending with the assessment may be taken as relevant for considering the assessee's liability for penalty for concealment of income. The assessee's conduct subsequent to the filing of the return is very relevant. Though, these observations were made in the case of the filing of a revised return in the course of the assessment proceedings, they also explain the fundamental nature of the penalty levied for concealment of income. The observations are in line with the judgment of the Supreme Court in the case of Hindustan Steel Ltd. 1969 (8) TMI 31 - SUPREME COURT . Recently, in K.C. Builders v. Asstt. CIT 2004 (1) TMI 7 - SUPREME COURT , the Supreme Court explained that the word concealment inherently carries with it the element of mens rea and a mere omission from the return of an item of receipt does not amount to concealment not to deliberate furnishing of inaccurate particulars of income, unless and until there is some evidence to show or some circumstances are found from which it can be gathered that the amount was attributable to an intention or desire on the part of the assessee to hide or conceal an income so as to avoid the imposition of tax thereon . In order to that, a penalty u/s 271(1)(ii) may be imposed, it has to be proved that the assessee has still made the concealment or furnished inaccurate particulars of his income. The assessee's conduct has not been contumacious or deliberate. In fact, the Assessing Officer has himself admitted that the assessee had co-operated in the completion of the block assessment proceedings. Thus, we are satisfied that this is not a case which justifies the levy of penalty u/s 158BFA(2). We, accordingly, cancel the penalty and allow the appeal.
Issues Involved:
1. Jurisdiction of the block assessment. 2. Validity of penalty under section 158BFA(2) of the Income-tax Act. 3. Assessee's explanation for the delay and incomplete return. 4. Adjustment of seized assets against tax payable. Issue-wise Detailed Analysis: 1. Jurisdiction of the Block Assessment: The assessee contended that the block assessment was without jurisdiction as there was no search warrant issued in her name. The Tribunal admitted this additional ground, noting that the search warrant and panchnama were in the name of the assessee's husband, not the assessee. The Tribunal held that a search under section 132 is person-specific and not premises-specific. Therefore, the block assessment was void ab initio since there was no warrant of authorization under section 132 in the name of the assessee. 2. Validity of Penalty Under Section 158BFA(2): The Assessing Officer imposed a penalty of Rs. 6,51,982 under section 158BFA(2), which was confirmed by the CIT(A). The Tribunal noted that section 158BFA(2) provides for the levy of penalty where the undisclosed income declared in the return is increased by the Assessing Officer. However, the Tribunal emphasized the discretionary nature of the penalty provision, highlighting that penalties are quasi-criminal in nature and should not be imposed unless there is contumacious conduct or deliberate defiance of law. 3. Assessee's Explanation for the Delay and Incomplete Return: The assessee explained that the return was filed based on incomplete records and that she was not provided with all copies of the seized material in time. The Tribunal acknowledged that the assessee did not have sufficient time to prepare the return accurately due to the late provision of documents by the Assessing Officer. The Tribunal also noted the cooperative attitude of the assessee and the absence of any defiance or contumacious conduct. 4. Adjustment of Seized Assets Against Tax Payable: The assessee requested the Assessing Officer to adjust the tax payable from the fixed deposit receipts and Magnum investment bonds seized during the search. The Assessing Officer rejected this request, stating that only "money" could be adjusted against the tax payable. The Tribunal found this argument hyper-technical and noted that the securities, which had matured, could have been encashed and appropriated towards the tax due. The Tribunal cited various judgments supporting the view that the Assessing Officer is bound to carry out the request for adjustment of seized assets against tax payable. Conclusion: The Tribunal concluded that the block assessment was void ab initio due to the lack of a search warrant in the name of the assessee. Consequently, the penalty levied under section 158BFA(2) could not be sustained. Additionally, the Tribunal found no justification for the levy of penalty, considering the bona fide conduct of the assessee, the cooperative attitude shown during the assessment proceedings, and the technical nature of the breach. The appeal was allowed, and the penalty was canceled.
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