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TMI Blog2005 (4) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment in the present case is void ab initio since there was no warrant of authorization u/s 132 in the name of the assessee. Therefore, the penalty levied cannot be sustained. In our opinion, the securities, which have matured, could have been encashed after obtaining the assessee's endorsement since those were equivalent to money. So far as the other conditions in the first proviso are concerned, the assessee no doubt filed an appeal against the block assessment, but that was only with regard to the other additions made by the Assessing Officer and not with reference to the undisclosed income declared in the block return. At any rate, the above discussion shows the bona fide of the assessee and the co-operative attitude with which she conducted herself in the course of the block assessment proceedings and the absence of any defiance or contumacious conduct. In the case of CIT v. Ramdas Pharmacy [ 1969 (12) TMI 19 - MADRAS HIGH COURT] held that all the facts and circumstances commencing with the filing of the original return and ending with the assessment may be taken as relevant for considering the assessee's liability for penalty for concealment of income. The assessee&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal by the assessee against certain additions other than the surrendered amount of Rs. 7.5 lakhs as a result of which the total undisclosed income was reduced to Rs. 10,86,637. There was no further appeal by either side. After completing the block assessment, the Assessing Officer initiated penalty proceedings under section 158BFA(2) of the Act. The assessee submitted by way of explanation that she had filed the return of income on the basis of incomplete records and in the block return, she had declared undisclosed income of Rs. 7.5 lakhs with the remark that she may be permitted to revise the same and that the disclosed amount would not be taken as a guiding factor for levying the penalty. She also explained that return was filed under a disadvantage, in that, she did not have all the copies of the seized material with her. It was, therefore, submitted that penalty proceedings may not be pursued. The Assessing Officer, however, rejected the assessee's explanation. He was of the view that the assessee had been given all the copies of the seized materials sufficiently in advance, but still the assessee filed the return late. She had also not paid the tax. Further, he noted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that the disclosure did not specify the details of the undisclosed income of Rs. 7.5 lakhs or the related asset pertaining to the income. As regards payment of the tax on the declared income, the CIT(A) took the view that the adjustment can be made from the seized assets only if they consisted of money whereas in the assessee's case, the assets consisted of fixed deposit receipts, which cannot be said to be money . Thus, the CIT(A) noticed that all the conditions of the first proviso to the sub-section were not satisfied and, therefore, penalty was attracted under the second proviso to the sub-section. The contention that the assessment itself was without jurisdiction was rejected for the same reasons given by the CIT(A) in his order passed in the appeal against the block assessment. Thus, the penalty was confirmed. 5. The assessee is further in appeal before us. An additional ground has been taken to the effect that the block assessment itself was invalid since there was no search warrant in the name of the assessee. In the additional ground, it is further claimed that the notice issued under an invalid authorisation was also invalid and, therefore, the entire assessment and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the block assessment. Thus, the point has already been taken before the income-tax authorities and there is no element of surprise. In fact, even without the help of the additional ground, the assessee could have, in our opinion, canvassed the validity of the block assessment within the scope of the first and third grounds of the original grounds of appeal. Further, the additional ground does not involve an investigation into the facts. The Panchnama and the search warrant are a matter of record. That apart this goes to the very root of the matter. In the case of P.V. Doshi v. CIT [1978] 113 ITR 22 (AP), it was held that a jurisdictional provision which is mandatory and enacted in the public interest could never be waived. It was further held that there was no question of any finality of the orders of the income-tax authorities or the Tribunal because jurisdiction cannot be conferred by consent. The question of jurisdiction is thus of vital importance and it would be open to the assessee to raise the question of validity of assessment on account of lack of jurisdiction, at any time and at any stage of the proceedings. With particular reference to penalty provision, it has been held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stify the block assessment. In Microland Ltd. v. Asstt. CIT [1998] 67 ITD 446, the Bangalore Bench of the Tribunal held that if the search warrant is not in the name of the assessee-company, but is in the case of the CMD of the company at the address of the company, the block assessment was void. In Mahabir Prasad Rungata (HUF) v. Asstt. CIT [2002] 75 TTJ (All.) 309, the Allahabad Bench of the Tribunal held that where there is a search in the case of the firm, but not the partner, a block assessment in the hands of the partner was invalid. A similar view was taken by the Indore Bench of the Tribunal in Indore Construction (P.) Ltd. v. Asstt. CIT [1999] 71 ITD 128. It is thus clear that the regular assessment order is not the final word upon the pleas taken therein or which might have been taken at that stage. The assessee is entitled to show cause in penalty proceedings and to establish by the material and relevant facts which may go to affect his liability or the quantum of penalty. He cannot be held to be debarred from taking appropriate pleas simply on the ground that such a plea was not taken in the regular assessment proceedings. In view of the importance of the question of va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Therefore, the penalty levied cannot be sustained. 10. With regard to the other grounds against the levy of penalty, we are satisfied that there is no justification for the levy. It is, no doubt, true that section 158BFA(2) provides for the levy of penalty- (a) where the undisclosed income returned is accepted by the Assessing Officer; and (b) where the undisclosed income declared in the return is increased by the Assessing Officer. In the case of (a), certain conditions have to be satisfied in order that no penalty is imposed. These are: (1) That the assessee has furnished a block return in response to the notice; (2) The assessee has paid the tax payable on the basis of the block return or if the assets seized consists of money, the assessee has offered the money was seized to be adjusted against the tax payable; (3) Evidence of the tax payment is filed along with the return; and (4) No appeal is filed against the assessment of that part of the income which is shown in the block return as undisclosed income. If all these conditions are satisfied then no penalty would be imposed. However, in the case of (b) there is no such benefit given to the assessee and where the un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the AO in which she stated that she had paid only Rs. 2000 against the demand of tax, but requested the AO to appropriate the balance amount of Rs. 4,75,000 from the 2000 units of State Bank of India's Magnum units of the face value of Rs. 1000 each and having a maturity value of Rs. 6 lacs and lying in the custody of the AO. She further requested that the balance amount of Rs. l,25,000 may be adjusted against the tax dues of J.M.L. Suri for which she had furnished a separate authority letter. It was further pointed out that the securities have already become due for payment and no income would accrue after the maturity. It was also pointed out that the securities would be sufficient to cover the tax dues. The income-tax authorities, in our opinion, could have accepted the assessee's request and obtained the endorsement of the assessee on the Magnum securities and could have collected the money and appropriated the same towards the tax and thus enabled the assessee to comply with condition No. 2 of the first proviso. In K.T. Kunjumon v. CIT and Ors.: 239ITR 782, the Kerala High Court has held that what is required is that the assessee should have made a request and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the penalty levied for concealment of income. The observations are in line with the judgment of the Supreme Court in the case of Hindustan Steel cited supra Recently, in K.C. Builders v. ACIT: 265 ITR 562, the Supreme Court explained that the word concealment inherently carries with it the element of mens rea the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa: 83 ITR 26 with reference to the basic principles that govern the levy of penalty. It will be appropriate to reproduce the relevant observations of the Supreme Court which have now become, with respect, the locus classicus on the nature of the penalty:- An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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