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TMI Blog2012 (4) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... n interfering with the penalties imposed by the Assessing Officer and confirmed by the CIT [A] on the grounds mentioned in the order. - Decided in favor of the revenue - Tax Appeal No. 2538 of 2009 - - - Dated:- 10-1-2012 - Akil Kureshi and Sonia Gokani, JJ. For Appellant: Mrs Manish R Bhatt with Mr Malak Bhatt For Respondent: Mr S N Soparkar, Sr Adv with Mrs Swati Soparkar JUDGEMENT Per: Akil Kureshi: Revenue is in appeal against the judgment of the Tribunal dated 25 th February 2009, by which the Tribunal was pleased to substantially allow the assessee's appeal and delete substantial portion of the penalty imposed by the Assessing Officer and confirmed by the CIT [A] on different additions made during the block assessment proceedings. On 11 th April 2011, we had issued notice for final disposal, pursuant to which, learned sr. advocate Shri Soparkar appeared and argued on behalf of the respondent-assessee. For the purpose of this appeal, following substantial questions of law arise : [A] Whether or not penalty under sub-section (2) of Section 158BFA of the Income-tax Act, 1961 is of mandatory nature, or whether despite additions made in the Block Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmed the order of Assessing Officer, upon which the assessee approached the Tribunal. 2.5 The Tribunal, by the impugned order, retained a small portion of the penalty imposed. The Tribunal, however, deleted penalty totalling Rs. 10.04 lacs. Thereupon, the Revenue has approached this Court by filing the present Tax Appeal. 3. From the questions framed by us, it can be seen that there are two aspects of the matter. First issue is whether the penalty under Section 158BFA (2) of the Act is mandatory or discretionary in character; and secondly, if it is held to be discretionary, did the Tribunal exercise its discretion on legally sound principles so as to delete the penalty. 3.1 Though, we would be discussing both these questions separately after taking note of submissions made by the counsel for the parties and authorities cited before us, to complete the narration, it would be appropriate to take note of the reasons given by the Tribunal to delete the penalties. 4. From the impugned order of the Tribunal, it can be seen that the Tribunal has discussed different heads of additions, on the basis of which the penalties were imposed. With respect to the additions which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as against appellant's contention of 1 to 2 months, we are of the opinion in view of the presence of large number of unavoidable factors which are co-related by logical imagination, no penalty could be levied. Hence, the penalty levied on this sum of Rs. 17,22,820/= is directed to be deleted . 6.1 On the basis of the above facts, counsel for the Revenue vehemently contended that the penalty under Section 158BFA (2) of the Act is mandatory in nature. Once it is held that during the block assessment income is determined, which is higher than the declared income of the assessee, automatically penalty would follow. The only discretion of the Assessing Officer would be at the rate at which such penalty should be imposed. In other words, the Assessing Officer would have discretion only to impose penalty ranging between 100% to 300% on the income sought to be evaded. Inviting our attention to the different statutory provisions, counsel would contend that Section 158BFA finds place in Chapter XIVB which makes special provisions for undisclosed income. He, therefore, submitted that the word, " may" used in sub-section (2) of the said section should be constructed as, " shall" . In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income-Tax v. Smt. Anju R. Innan i, reported in [(2010) 323 ITR 626 (Bom) ) ]; [b] Commissioner of Income-Tax v. Satyendra Kumar Dosi Anr. , reported in [(2009) 315 ITR 172 (Raj)]; [c] Commissioner of Income-Tax v. Harkaran Das Ved Pal , reported in [(2011) 336 ITR 8 (Delhi) ) ]. 8. Having thus heard learned counsel for the parties, we may take note of the relevant statutory provisions. Section 158BFA of the Act is part of Chapter XIVB, which lays down special procedure for assessment of search cases. Section 158BFA pertains to levy of interest and penalty in certain cases. Sub-section (2) of Section 158BFA, which is relevant for our purpose, reads as under:- "158BFA. Levy of interest and penalty in certain cases - (1) xx xx xx xx (2) The Assessing Officer or the Commissioner (Appeals), in the course of any proceedings under this Chapter, may direct that a person shall pay by way of penalty a sum which shall not be less than the amount of tax leviable but which shall not exceed three times the amount of tax so leviable in respect of the undisclosed income determined by the Assessing Officer under clause (c) of Section 158BC : Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch cases, penalty shall be imposed on that portion of the undisclosed income determined, which is in excess of the amount of undisclosed income shown in the return. 8.3 Closely seen, sub-section (2) of Section 158BFA makes it clear that it is well within the discretion of the Assessing Officer, while framing the assessment for the block period, whether or not to impose any penalty or not. The words, "may direct has to be given its normal meaning, leaving discretion to the officer. In absence of any special reason the word, " may" cannot be read as "shall". 8.4 In case of Hindustan Steel Limited v. State of Orissa, reported in 83 ITR 26 ) , the Apex Court in connection with penalty prescribed in Orissa Sales Tax Act observed : ".. ..An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, 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 imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position of a penalty is not mandatory merely because it is lawful. The imposition of a penalty is a matter which lies in the exercise of discretion which has to be determined judiciously. 10.1 Same is also the view of the Rajasthan High Court in case of Commissioner of Income-Tax v. Satyendra Kumar Dosi Anr. [Supra] , wherein it was observed as under :- "A bare perusal of section 158BFA (2) goes to show that by virtue of the said provisions, the Assessing Officer or the Commissioner (Appeals) is vested with the power to direct the assessee to pay the penalty as specified in respect of the undisclosed income determined by the Assessing Officer under clause (c) of Section 158BC, however, the Assessing Officer or the Commissioner of Income Tax (Appeals) is not empowered to impose the penalty in respect of the person who fulfills the conditions enumerated in the first proviso to section 158BFA. It is to be noticed that in the main provision providing for imposition of penalty, the word "may has been used. It is settled law that the penal provision in the taxing statutes shall be construed strictly. From the plain reading of section 158BFA (2), it does not appear that in al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion that the Legislature did not intend that imposition of penalty by itself to be mandatory. The Legislature intended the same to be left to the discretion, which of course has to be exercised upon judicial considerations, of the Assessing Officer. 11. Coming to the facts of the case, we have already noted the reasons recorded by the Tribunal for deleting the penalties under different heads. Principally, the Tribunal deleted the penalties on three grounds : firstly , that the addition was made only on estimation; secondly, there was no concealment proved by the Revenue, and thirdly, that according to the Tribunal, certain additions would not give rise to penalty proceedings. 12. We are afraid, none of the grounds were sufficient in facts of this case to permit the Tribunal to delete the penalties. Firstly, we are of the clear opinion that the concept of proving concealment of income can nowhere be traced in Section 158BFA (2). The penalty envisaged and imposable under Section 271 [1](c) of the Act is different from the one that can be imposed under Section 158BFA. Section 271 [1](c) of the Act provides for penalty in case an assessee has concealed the particulars of his i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn. By a further proviso, however, it is clarified that such exclusion will not be available where the undisclosed income determined by the Assessing Officer is in excess of the income shown in the return and in such a case, penalty shall be imposed on that portion of the undisclosed income determined, which is in excess of the amount of undisclosed income shown in the return. In essence, therefore, penalty under sub-section (2) of Section 158BFA of the Act is provided where the Assessing Officer computes income in excess of what is declared by the assessee for the block period. This proviso thus is vitally different from the penalty provisions contained in Section 271 [1](c) of the Act, which provides for penalty where the assessee has concealed the particulars of his income, or furnished inaccurate particulars of such income. It is, therefore, often stated by different Courts that mere disallowances of a claim or additions made by the Assessing Officer would not ipso facto give rise to penalty proceedings under Section 271 [1](c) of the Act. What is further required to be established is that the assessee had either concealed the particulars of his income or furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ground which was not permissible. Additions made on the basis of estimation may be one of the grounds on which discretion not to impose penalty may be exercised. However, in absence of any requirement to prove concealment or furnishing of inaccurate particulars found in Section 271 [1](c) of the Act cannot form the sole basis to delete penalty imposed by the Assessing Officer and confirmed by Commissioner [ Appeals ]. 14. We are, therefore, of the opinion that the Tribunal committed a grave error in interfering with the penalties imposed by the Assessing Officer and confirmed by the CIT [A] on the grounds mentioned in the order. In other words, exercise of discretion by the Tribunal cannot be sustained. We are,therefore, inclined to set-aside the Tribunal's order and restore it to the Tribunal for fresh consideration and disposal in accordance with law. 15. In the result, we answer Question {A} in favour of the assessee and against the Revenue and hold that the penalty under Section 158BFA (2) is not mandatory. We answer Question {B} in negative ie ., in favour of the Revenue and against the assessee and remand the proceedings to the Tribunal for fresh consideration, after ..... X X X X Extracts X X X X X X X X Extracts X X X X
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