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2016 (4) TMI 523 - AT - Income TaxSatisfaction for initiating proceeding under Section 158BD - Held that - Penalty proceeding is different than the assessment proceeding. The authorities under Income-tax Act are expected to re-appreciate the material available on record and find out whether penalty can be imposed for concealment of income. This Tribunal is of the considered opinion that when the satisfaction was not recorded by the Assessing Officer for initiating proceeding under Section 158BD of the Act, it cannot be said that there is any concealment of income by the assessee. In those circumstances, this Tribunal is of the considered opinion that initiating proceeding under Section 158BFA(2) may not be justified. Even otherwise, there are two views possible in this case. One view is that the partner and partnership-firm are one and the same person, therefore, recording of satisfaction may not be necessary. This view is somewhat similar to that of same officer assessing the income of searched person and the person other than the searched person. The CBDT clarified that even though the Assessing Officer is one and the same for the searched person and the person other than searched person, satisfaction need to be recorded. Similarly, even though the partner and partnership-firm are one and same under common law, they are being assessed separately under Income-tax Act, therefore, recording of satisfaction is mandatory as held by the Apex Court in Manish Maheshwari (2007 (2) TMI 148 - SUPREME COURT OF INDIA ). The CBDT, in fact, instructed to withdraw all the appeals where no satisfaction was recorded. This Tribunal is of the considered opinion that this is not a fit case for levy of penalty under Section 158BFA(2) of the Act - Decided in favour of assessee.
Issues:
1. Addition of undisclosed income for the block period based on search operation. 2. Levy of penalty under Section 158BFA(2) of the Income-tax Act. 3. Requirement of recording satisfaction under Section 158BD for initiating proceedings. 4. Discrepancies in sales bills and Daily Summary Transaction Report leading to alleged concealment of income. Analysis: Issue 1: Addition of Undisclosed Income The appeal pertains to the assessment of undisclosed income for the block period based on a search operation conducted under Section 132 of the Income-tax Act. The Assessing Officer computed the undisclosed income at ?66,40,000, which was later reduced by the CIT(Appeals) to ?23,45,873. The representative for the assessee argued that the addition was solely based on a statement from a partner of the assessee-firm and not on seized material, thus questioning the justification of the addition. The Tribunal upheld the CIT(Appeals) decision, emphasizing the necessity of material found during the search operation for such additions. Issue 2: Levy of Penalty The Assessing Officer levied a penalty under Section 158BFA(2) of the Act, which was confirmed by the CIT(Appeals. The representative for the assessee contended that without evidence of income concealment, the penalty was unwarranted. Citing a precedent, the representative argued against the imposition of penalty solely on the basis of a partner's statement. The Tribunal concurred, stating that without recorded satisfaction under Section 158BD, the penalty could not be justified. Issue 3: Recording Satisfaction for Initiating Proceedings The Tribunal referenced a Supreme Court judgment emphasizing the mandatory nature of recording satisfaction under Section 158BD before initiating proceedings. Despite the search involving a partner of the firm, the Tribunal held that the partner and the partnership-firm are distinct assessable entities under the Income-tax Act, necessitating the recording of satisfaction, which was absent in this case. Issue 4: Alleged Concealment of Income The Revenue authorities argued that unaccounted sales were evident from sales bills obtained during the search operation, indicating income concealment. The Daily Summary Transaction Report highlighted discrepancies not reflected in the books of account. The Tribunal noted the Revenue's contentions but emphasized the need for concrete evidence of concealment, especially in the absence of recorded satisfaction for initiating proceedings. Ultimately, the Tribunal ruled in favor of the assessee, concluding that the penalty under Section 158BFA(2) was unwarranted given the lack of justification for income concealment. In conclusion, the Tribunal allowed the appeal of the assessee, deleting the penalty under Section 158BFA(2) of the Act, based on the absence of recorded satisfaction and insufficient evidence to support the alleged income concealment during the block period.
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