2004 (3) TMI 395 - AT - Income Tax

Summary

Issues Involved:
1. Legitimacy of treating the income declared by the assessee as undisclosed income under Section 158BB(1)(c) of the IT Act, 1961.
2. Justification for imposing penalty under Section 158BFA(2) of the IT Act, 1961.
3. Validity of the CIT(A)'s direction to charge interest under Section 158BFA(1) of the IT Act, 1961.

Detailed Analysis:

1. Legitimacy of Treating the Income Declared by the Assessee as Undisclosed Income:

The main contention revolves around whether the income declared by the assessee for the assessment year 1999-2000, filed on 23rd June 2000, should be considered as undisclosed income under Section 158BB(1)(c) of the IT Act, 1961. The assessee argued that the income was declared in a regular return filed under Section 139(4) of the Act, which was within the permissible time limit, and thus should not be treated as undisclosed income. The Tribunal noted that the assessee had been regularly assessed to tax, and the sources of income were well-documented and known to the Department. The Tribunal emphasized that the income declared by the assessee for the relevant assessment year had been accepted by the AO without any additions, and there was no material evidence to suggest that the income was concealed. Consequently, the Tribunal concluded that the income of Rs. 3,57,214 could not be considered as undisclosed income, as the assessee would have disclosed such income in the regular course of assessment.

2. Justification for Imposing Penalty under Section 158BFA(2):

The Tribunal evaluated whether the penalty under Section 158BFA(2) was justified. It was highlighted that the penalty provisions apply when there is undisclosed income. Given that the Tribunal concluded the income declared by the assessee was not undisclosed, the imposition of penalty under Section 158BFA(2) was deemed unjustified. The Tribunal referenced multiple case laws, including Vidya Madanlal Malani vs. Asstt. CIT, Amarnath Aggarwal vs. Dy. CIT, and G. Kangaraj vs. Dy. CIT, which supported the view that income declared in a return filed after the due date but within the permissible extended period under Section 139(4) should not be treated as undisclosed income. Hence, the penalty levied by the AO and confirmed by the CIT(A) was cancelled.

3. Validity of the CIT(A)'s Direction to Charge Interest under Section 158BFA(1):

The Tribunal scrutinized the CIT(A)'s direction to the AO to charge interest under Section 158BFA(1). It was observed that the CIT(A) did not provide detailed reasoning for this direction. The Tribunal held that the CIT(A) exceeded its jurisdiction by directing the AO to charge interest in the context of penalty proceedings, which are quasi-criminal and separate from assessment proceedings. The Tribunal emphasized that such directions are only appropriate in quantum appeals and must be supported by proper findings and an opportunity for the assessee to be heard. Consequently, the Tribunal quashed the direction given by the CIT(A) as it was deemed contrary to well-settled legal principles.

Conclusion:

The Tribunal allowed the appeal, determining that the income declared by the assessee for the assessment year 1999-2000 should not be treated as undisclosed income under Section 158BB(1)(c). Consequently, the penalty under Section 158BFA(2) was unjustified and cancelled. Additionally, the direction by the CIT(A) to charge interest under Section 158BFA(1) was quashed as it was beyond jurisdiction and not tenable in law.