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TMI Blog2011 (4) TMI 930X X X X Extracts X X X X X X X X Extracts X X X X ..... tax payable on the additional income assessed at twice the amount of tax as against one time fixed by the Commissioner of Income-tax (Appeals) - Decided partly in favor of Assessee. - 202 of 2010 - - - Dated:- 4-4-2011 - RAMACHANDRAN NAIR C. N., BHABANI PRASAD RAY JJ. JUDGMENT C. N. Ramachandran Nair J.- 1. The respondent-assessee is a private limited company engaged in real estate business, i.e., construction and sale of commercial and residential apartments and buildings. A search was conducted by the Income-tax Department in the business premises and in the residence of directors of the company under section 132 of the Income-tax Act (hereinafter referred to as "the Act" for short). Pursuant to the search, the Assessing Officer proposed to make block assessment under section 158BC of the Act and as the first step, the assessee was called upon to furnish return of undisclosed income in Form No. 2B. Even though assessee filed return disclosing undisclosed income of Rs. 79,10,187 the assessee did not remit the tax thereon, which was Rs. 48,41,034 prior to or along with filing of return. The Assessing Officer proceeded to make assessment by making substantial addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied with the mandatory condition of payment of the admitted tax along with the return filed in Form 2B as required in the first proviso to section 158BFA(2) of the Act. When the appellant was heard by the two-member Bench of the Tribunal, the Judicial Member allowed the Departmental appeal by reversing the order of the Commissioner of Income-tax (Appeals) and by restoring the minimum penalty levied by the officer with reference to the tax payable on the total undisclosed income assessed. However, the Accountant Member disagreed with the order of the Judicial Member and he dismissed the Departmental appeal confirming the order of the Commissioner of Income-tax (Appeals). When the matter was referred to the third Member, the President of the Tribunal, he concurred with the Accountant Member through separate order, as a result of which, by majority, the Tribunal dismissed the appeal filed by the Revenue. It is against the majority decision of the Tribunal, the Revenue has filed this appeal before us. 2. We have heard senior counsel Shri P. K. R. Menon appearing for the Revenue and advocate Shri S. Sreedhar along with advocate Shri B.Kamalahasan, appearing for the respondent-asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proviso are mandatory for getting immunity from payment of penalty on the undisclosed income returned by the assessee. In other words, the Revenue's stand is that filing of return on undisclosed income does not give any immunity to the assessee from penalty under section 158BFA(2) unless the assessee satisfies all the conditions including payment of tax prior to filing of return and production of proof of such payment along with the return so filed. Admittedly, the assessee did not pay tax along with the return filed returning undisclosed income. The assessee did not even pay the admitted tax for maintainability of the appeal filed against assessment before the first appellate authority and consequently the first appeal filed got dismissed on account of non payment of admitted tax. The assessee, however, approached the Commissioner of Income-tax on the administrative side and based on the instalment facility obtained by the assessee, the assessee paid the admitted tax in easy instalments and only on payment of arrears of tax, the quantum appeal filed against the assessment itself was entertained by the Commissioner of Income-tax (Appeals) that too after remand by the Tribunal. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y penalty chooses to levy penalty then the discretion of quantum of penalty ranges from 100 per cent. to 300 per cent. of the tax, which means that the minimum penalty leviable is equal to the amount of tax and maximum is at three times of tax. The discretion in regard to levy of penalty is controlled by two provisos to the said sub-section, which are discussed below. 9. Subject to the second proviso, the first proviso provides complete immunity from penalty on the tax due in respect of the undisclosed income returned by the assessee based on notice issued by the Assessing Officer after search or survey. However, the conditions provided in clauses (i) to (iv) of the first proviso are that the assessee should have filed return pursuant to notice issued by the officer and tax due in respect of the undisclosed income returned has to be paid before filing of return and the evidence of tax payment has to be furnished along with the return filed. However, if cash is seized in the course of search, the requirement of the proviso is satisfied if instead of making payment the assessee allows the Assessing Officer for adjustment of the seized cash towards tax payment based on the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances of each case. From the above, we conclude the scope of the said section as follows : (1) Where the income finally assessed under section 158BC(c) of the Act is the only undisclosed income returned by the assessee based on return filed under clause (a) of section 158BC and the assessee has complied with all the conditions of clauses (i) to (iv) of the first proviso, i.e. payment of tax on the undisclosed income or request to the officer to adjust full tax against cash if any seized and held by the Department sufficient to adjust the tax and if the assessee files statement that no appeal will be filed against the undisclosed income returned and assessed based on return filed, no penalty could be levied. (2) Penalty will be leviable in all cases where undisclosed income finally assessed under clause (c) of section 158BC is in excess of the undisclosed income returned by the assessee in the return filed under clause (a) of section 158BC. In such cases, there is no complete immunity from penalty on the tax payable on the undisclosed income returned by the assessee even though the assessee has complied with all the conditions of clauses (i) to (iv) of the first proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the first proviso to the said section, which requires payment of full tax on the undisclosed income returned either prior to or along with filing of return and production of proof of payment of tax along with the return so filed. The assessee's financial difficulty which found acceptance by the Commissioner in granting instalment facility for payment of tax and the compliance with the said direction of the Commissioner, is no substitute for the mandatory requirements of clauses (ii) and (iii) of the first proviso abovestated. Probably these are matters which the Assessing Officer has to consider, i.e., whether penalty should be levied with reference to the undisclosed income returned by the assessee without payment of tax along with the return filed by it, or the assessee forfeits the right of immunity from penalty, which in any case will not be available to the assessee because of the second proviso by which the benefits of the first proviso will not be available to the assessee as a matter of right, if the undisclosed income assessed is more than the undisclosed income returned by the assessee. 11. We, therefore, hold that in view of the application of the second proviso, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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