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TMI Blog2013 (8) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... sistant Commissioner of Income Tax, Circle - 9(1), New Delhi u/s 158 BFA(2) of the Income Tax Act, on account of alleged furnishing of inaccurate particulars of income to the extent of Rs. 8,76,784/-, pertaining to difference in stock in : - (i) Unit C - 85, Sector - IV, NOIDA Rs. 4,75,125/- . (ii) I Unit C - 90 Sector - IV, Rs. 12,765/-. (iii) Unit F - 70 Sector - XI, NOIDA Rs. 51,486/-, and also pertaining to (iv) Undisclosed Expenditure in Unit B - 16 Rs. 3,37,408/- ." 3. Briefly stated, the facts giving rise to this appeal are that a search operation was carried out in the premises of the assessee. During the search operation, certain valuables were found and seized. Subsequently, a notice u/s 158 BC of the Act was issued and served on the assessee on 7.12.1999 for filing of return for block period. The assessee filed return for block period on 19.01.2000 declaring undisclosed income at nil. The Assessing Officer passed order u/s 158BC on 28.02.2001 determining total undisclosed income at Rs.35,38,74,600 and, consequently, penalty proceedings u/s 158BFA(2) of the Act were also initiated. 4. Being aggrieved by the above assessment order, the assessee filed an appeal before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m. He called for a remand report on such information and worked out unreconciled shortage of stock having value of Rs. 4,75,125/-. Learned DR was unable to point out any error in this working of the CIT(AppeaIs). The alternative contention raised by the assessee is that only profit element on sale of such stock out of books has to be treated in the income of the assessee. We do not find any force in this contention of the assessee because as far as for the purchase of raw material assessee has already debited the expenses and claimed the deduction in the regular return. Thus, the stock alleged to have been sold out of the books is required to be considered as undisclosed income of the assessee. In view of the above discussion, both the grounds of appeal are rejected. " ii) Difference of stock in Unit C-90 Rs. 12765/- In this head, ITAT has held:- "We have heard the rival contention and perused the material available on record The assessee reiterated its arguments as were raised with regard to ground No. 1 of revenue's appeal and ground No. 2 of its appeal discussed above. The main thrust of assessee's argument is that variation in the stock is very minor and that too is due to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is rejected." In view of the facts stated above, the penalty imposed by Assessing Officer of Rs. 5,26,070/-is confirmed and hence the appeal is dismissed." 8. Apropos ground no. 1 and 2, the assessee's representative submitted that the penalty u/s 158BFA(2) is not mandatory. The AR pointed out that the Assessing Officer assessed undisclosed income at Rs.35,38,74,600 which was reduced to Rs.8,76,783 by the first appellate authority. The AR pointed out that as per page no. 11 and 12 of the Paper Book filed by the assessee as per physical verification, maximum items have been shown in the first column as zero and the Assessing Officer has ignored this physical position and considered the stock register for the determination of the so- called excess value of finished goods amounting to Rs.4,75,125. He further pointed out page no. 13 of the Paper Book and submitted that according to Panchnama reference G-32 pertaining to fans and appliances division of the assessee with the stock of Rs.12,534 was either not considered or was taken on approximation basis. Therefore, these additions were not sustainable. The AR vehemently submitted that the penalty u/s 158BFA(2) is not mandatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice the statutory provisions. Section 158 BFA (2) reads as under:- 158BFA. Levy of interest and penalty in certain cases. (1) xxxx xxxx xxxx xxxx (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: Provided that no 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 As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be made under Section 158 BFA (2). The intention of the legislature is clear. Where, after a person receives a notice under Section 158 BC and he furnishes a return indicating undisclosed income and tax is paid or the money seized is offered to be adjusted against the tax payable and if the assessee does not appeal against the assessment completed on that basis, then no penalty can be imposed on such an assessee. The intention of the legislature is that where a person, who has been granted an opportunity of making a clean breast of things, comes forth and declares his undisclosed income and also pays the tax thereon, then no penalty ought to be imposed on him for his earlier transgressions. 19. The second proviso to Section 158 BFA (2), however, stipulates that the provisions of the first proviso would not apply where the undisclosed income determined by the Assessing Officer is in excess of the income shown in the return. It further stipulates that in such cases, the penalty shall be imposed on that portion of undisclosed income determined which is in excess of the amount of undisclosed income shown in the return. The indication of the legislature, which can be discerned upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of such assessment; Thus, determination of the undisclosed income has to be done in the manner laid down in Section 158 BB and the provisions of Section 142, subsection (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply. Section 158 BB deals with computation of undisclosed income of the block period. Section 158 BB (1), so much as is relevant for our purposes, reads as under:- "158BB. (1) The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, in accordance with the provisions of this Act, on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence, as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined,.." This provision clearly stipulates that the undisclosed income of the block period has to be determined or computed on the basis of evidence found as a result of search or requisition of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed representatives, we have gone through the record carefully. In the scheme of block assessments, it is settled position of law that the income for the block period has to be determined on the basis of the seized material found during the course of search. The seized material is to be supplied to the assessee and it is supposed to compute true undisclosed income from the seized material. The assessee has disclosed nil income in its return. This nil income was computed on the basis of seized material supplied to the assessee and found during the course of search. Learned Assessing Officer on the other hand, computed an income of Rs.4,35,22,099. This income has also been computed by him on the basis of same seized material. The view of the Assessing Officer was not upheld by the Learned CIT(Appeals) as well as by the ITAT. The ultimate income which is to be assessed as an income for the block period is only Rs.2,09,650. These facts suggest that there was no attempt of concealment or furnishing inaccurate particulars, it is difference of the opinion about the income assessable from the material. When the Assessing Officer can assume such a huge income of more than Rs. 4 crores from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislature to impose penalty under the said provision on every finally sustained addition in undisclosed income and the condition precedent for imposing penalty u/s 158BFA(2) of the Act is that there must be concealment or suppression of income on the part of assessee to avoid payment of tax thereon. The Tribunal has held that in the absence of a positive finding in this regard, the Assessing Officer was not justified in imposing the penalty. 15. The assessee also placed reliance on the judgment of ITAT Bangalroe Bench 'C' in the case of Smt. Mala Dayanithi vs DCIT(2004) 91 ITD 46(BANG) wherein it has been held that the penalty u/s 158BFA(2) of the Act is not mandatory. 16. The assessee has also relied on the judgment of ITAT Chennai Bench 'A' in the case of Dr. Hakeem S.A. Syed Sathar vs ACIT(2009) 120 ITD 1(Chennai) wherein it has been held that the process of imposition of penalty is not automatic in the eventuality of estimated income. The Tribunal held that all the attendant circumstances of the case must be carefully scrutinized and the question of penalty must be considered and decided on the basis of judicial determination and it must be proved beyond the shadow of doubt t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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