2015 (4) TMI 617 - AT - Income Tax

Penalty u/s 158BFA - Search conducted u/s 132 - unexplained cash receipts - Held that - mere fact that an addition has been confirmed in the Tribunal per se cannot be a ground for imposing or sustaining penalty u/s 158BFA. Since the assessment and penalty proceedings are different and independent of each other, it is open to the assessee to make out a case that even if addition has been confirmed in quantum proceedings, but it cannot be a good reason to impose penalty. - Admittedly Awin Exim Co. offered ₹ 15 lakh, which did not co-relate to any incriminating material and that assessee owed page no.2 of Annexure-A4 by claiming to be pertaiing to it. It is a strong reason to conclude that no penalty should be imposed in the hands of the assessee because the amount has already been offered and assessed in the hands of the sister concern. - CIT(A) was fully justified in ordering the deletion of penalty u/s 158BFA(2). - Decided against Revenue.

Summary

Issues:
- Appeal against deletion of penalty under section 158BFA(2) of the Income Tax Act.
- Determination of undisclosed income during a search action.
- Discrepancy in books of account and addition of unexplained cash receipts.
- Contention regarding ownership of incriminating material.
- Imposition of penalty and subsequent deletion by the Commissioner of Income-tax (Appeals).
- Legal implications of confirming additions in quantum proceedings on penalty imposition.
- Relevance of admission of substantial question of law by the High Court on penalty imposition.

Analysis:

The case involves an appeal against the deletion of a penalty under section 158BFA(2) of the Income Tax Act, arising from a search action conducted in a group of cases. The Assessing Officer imposed a penalty of Rs. 8,82,884 related to the block period from 01.04.1990 to 14.11.2000, which was subsequently deleted by the Commissioner of Income-tax (Appeals).

During the search action, certain documents and computer CD were seized, leading to the assessment of undisclosed income. The appellant firm declared Rs. 10 lakh as undisclosed income, while an addition of Rs. 13,13,816 as unexplained cash receipts was made. The appellant contended that the incriminating material belonged to its sister concern, which had also declared undisclosed income. The Tribunal upheld the addition, but the High Court admitted a substantial question of law regarding the same.

The Tribunal observed that the mere confirmation of additions in quantum proceedings does not automatically warrant penalty imposition. The Tribunal noted discrepancies in the ownership and correlation of incriminating material, emphasizing that penalty should not be imposed if the income has already been offered and assessed in the hands of another entity.

Additionally, the Tribunal referred to a case law stating that when a substantial question of law is admitted by the High Court against additions confirmed by the Tribunal, no penalty should be imposed. This principle was supported by precedents highlighting the importance of High Court's consideration in determining the bona fides of the assessee.

Ultimately, the Tribunal upheld the Commissioner's decision to delete the penalty under section 158BFA(2), emphasizing the lack of justification for penalty imposition given the circumstances and legal precedents cited.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the deletion of the penalty under section 158BFA(2) in light of the legal analysis and considerations presented in the judgment.