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2018 (2) TMI 94 - AT - Income TaxValidity of penalty order passed u/s 158BFA(2) as barred by limitation - Held that - The quantum of undisclosed income gets crystallized only when the Assessing Officer has carried out directions of the ITAT whereby the matters were restored to the file of the Assessing Officer. This means that all earlier assessment orders and subsequent appeals in pursuance to the original assessment order were no more relevant. The Assessing Officer recomputed the income pursuant to the order of the Tribunal dated 30/12/2008 which attained finality in appeal decided by the ld. CIT(A) on 29/11/2013. In this view of the matter, we are of the considered view that the material date, in reference to which limitation has to be considered, is 29/11/2013 and, therefore, the order passed by the Assessing Officer in levying the penalty is within the period of limitation prescribed under the law. Imposition of penalty u/s 158BFA(2) - Held that - Assessing Officer has not brought out any appropriate reason for levy of penalty. There is a clinching evidence to demonstrate that source of KVPs is explained through Will executed by the grandfather. The assessee could not foresee that investment disclosed in the Will of his grandfather and investment made according to the wishes expressed by his grandfather under the Will could become a reason for imposition of penalty under section 158BFA(2) of the Act. The Will was also accepted by the Coordinate Bench of ITAT Lucknow and its genuineness was never challenged anywhere. There is no malafide element for imposition of penalty in this case of the assessee. We set aside the order of the ld. CIT(A) and delete the penalty levied under section 158BFA(2) of the Act. The assessee, therefore, succeeds in the grounds on merit.
Issues involved:
1. Legal issue of whether the penalty order passed under section 158BFA(2) of the Act is barred by limitation. 2. Merits of the imposition of penalty under section 158BFA(2) of the Act. Detailed Analysis: 1. Legal Issue: The appeal in ITA No.694/LKW/2016 raised a legal issue regarding the limitation of the penalty order under section 158BFA(2) of the Act. The Assessing Officer passed the penalty order on 28/2/2014, and the contention was whether this was within the limitation period. The Assessing Officer argued that the penalty was within the six-month limitation from the date of the CIT(A)'s order in the second inning. However, the assessee claimed that the limitation should be calculated from the date of the ITAT order, which was 6/7/2007. The ITAT found that the relevant date for calculating the limitation was 29/11/2013, the date of the final appeal decision by the CIT(A). As the penalty order was passed on 28/2/2014, within this limitation period, the legal ground raised by the assessee was dismissed. 2. Merits of Imposition of Penalty: The appeal challenged the imposition of penalty under section 158BFA(2) of the Act based on the search and seizure operations in the Sub-post Office, Kidwai Nagar, Kanpur. The Tribunal found that the Assessing Officer did not provide appropriate reasons for imposing the penalty. The KVPs found were accepted to be in the name of the assessee's grandfather as per a Will, which explained the source of the investments. The Tribunal noted that the genuineness of the Will was never challenged, and there was no malafide intent on the part of the assessee. Citing judicial pronouncements, including cases like Palakkaran Bankers & Chit Funds vs. DCIT and CIT vs. Satyendra Kumar Dosi, the Tribunal held that the penalty under section 158BFA(2) is not automatic and discretion lies with the Assessing Officer. As the source of KVPs was explained through the grandfather's Will, the penalty was deleted based on the facts and legal precedents presented. The assessee succeeded on the merits, and the penalty was deleted. In conclusion, the legal issue regarding the limitation of the penalty order was dismissed, while the merits of the penalty imposition were in favor of the assessee, leading to the deletion of the penalty in all appeals.
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