2010 (2) TMI 256 - HC - Income Tax

Search and seizure- a search and seizure action was conducted on August 27, 2002. A block return was filed declaring undisclosed income of Rs. 12.01 lakhs and tax payable was mentioned as Rs. 7.56 lakhs. No payment of tax was made. Tribunal cancel the penalty. Held that- the Tribunal was not justified in canceling the penalty thus the matter is remanded.

Summary

Issues involved:
Appeal against the decision of the Income-tax Appellate Tribunal regarding the penalty imposed under section 158BFA(2) of the Income-tax Act, 1961.

Analysis:

1. Issue: Validity of setting aside the penalty imposed by the Assessing Officer under section 158BFA(2).

The appeal raised the question of whether the Tribunal had valid and justifiable reasons to set aside the penalty imposed by the Assessing Officer under section 158BFA(2) of the Income-tax Act, 1961. The facts revealed that a search and seizure action led to the filing of a block return declaring undisclosed income, which was later modified on appeal. The provision under sub-section (2) of section 158BFA allows for the imposition of a penalty not less than the tax leviable but not exceeding three times the tax leviable on the undisclosed income. The Tribunal, in setting aside the penalty, considered the discretionary nature of imposing a penalty, citing legal commentary and case law. However, the Court found merit in the Revenue's argument that the Tribunal did not adequately assess whether the penalty was judiciously imposed by the Assessing Officer, especially regarding the non-payment of tax as required by the proviso. Consequently, the Court set aside the Tribunal's order and remanded the proceedings for fresh consideration, keeping all rights and contentions open.

2. Conclusion:
The High Court, after a detailed analysis of the facts and legal provisions, found that the Tribunal did not adequately consider the judicious exercise of discretion by the Assessing Officer in imposing the penalty under section 158BFA(2). The Court, therefore, set aside the Tribunal's decision and remanded the case for fresh consideration, emphasizing the need for a more thorough assessment of the circumstances.