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TMI Blog2010 (4) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case and in law, the Tribunal is correct in law in deleting the penalty of Rs.42,90,000/imposed u/s. 158BFA(2) of the I.T.Act by the A.O. and confirmed by the CIT(A) on the undisclosed income of Rs.65 lakhs; (B) Whether on the facts and in the circumstances of the case, the Tribunal is correct in law in deleting the penalty on the ground of applicability of subclause (iv) of proviso to Section 158BFA(2), even though an appeal was filed by the assessee against the assessment order before the CIT(A) who rejected the appeal in respect of which the Assessee did not file any further appeal before ITAT." 3. The assessee filed a return for the block period from 1st April 1988 to 22nd December 1998 and declared an undisclosed income of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of this, the Assessing Officer held that the assessee was liable to be penalized and proceeded to impose the penalty. 5. The appeal filed by the assessee was dismissed by the CIT (Appeals). The Tribunal, however, held that since the assessee had filed an appeal only on the rate of tax, she was not in breach of clause (iv) to the first proviso to Section 158BFA which requires that an appeal should not be filed against the assessment of that part of income which is shown in the return. Applying a rule of strict interpretation, the Tribunal held that an appeal against the rate of tax could not be equated with an appeal against any part of the income assessed. On this ground, the Tribunal set aside the imposition of the penalty. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order imposing penalty shall be made in respect of a person if (i) such person has furnished a return under clause (a) of section 158BC; (ii) the tax payable on the basis of such return has been paid or, if the assets seized consist of money, the assessee offers the money so seized to be adjusted against the tax payable; (iii) evidence of tax paid is furnished along with the return; and (iv)an appeal is not filed against the assessment of that part of income which is shown in the return: Provided further that the provisions of the preceding proviso shall not apply where the undisclosed income determined by the Assessing Officer is in excess of the income shown in the return and in such cases the penalty shall be imposed on that portio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee must offer the money seized to be adjusted against the tax payable); evidence of the payment of tax must be furnished together with the return and an appeal should not be filed "against the assessment of that part of income which is shown in the return". Clauses (i) to (iv) of the first proviso cannot be read in isolation and form part of a comprehensive intent expressed by Parliament. The intent of Parliament in legislating the first proviso is that the assessee, in order to have the benefit of a protective provision against the imposition of a penalty, must file a return, pay the tax on the basis of the return, furnish evidence of the payment of the tax and should not contest the assessment in appeal. In other words, a certain degree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of capital gains was not 60%, but 20%. As a result of the filing of the appeal, the assessee failed to comply with clause (iv) of the first proviso to Section 158BFA(2). As a result, the assessee was not entitled to the benefit of the prohibitory provision contained in subsection (2) of Section 158 BFA. 11. The Tribunal was, in our view, in error in holding that an appeal against the rate of tax will not fall within the ambit of clause (iv) of the first proviso. 12. Having said this, we must clarify that the consequence of the non fulfillment of the conditions prescribed by the first proviso to Section 158BFA(2) would be that the prohibition against the imposition of the penalty does not come into force. Whether a penalty should o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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