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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 ..... ate attempt at the end of assessee in computing wrong income from the seized material. Penalty imposed in the present case is not sustainable because the enhancement of undisclosed income by the Assessing Officer has been made on estimated basis and we are unable to see any reason or material which proves beyond the shadow of doubt that there was actual income in the hands of assessee and further that the income was not disclosed in the return filed u/s 158BC of the Act. - Decision in ACIT vs Shanti Kumar Chhabra [2007 (10) TMI 334 - ITAT JAIPUR-A] followed - No penalty - decided in favor of assessee. - I.T.(SS)A.No.11/Del/2012 - - - Dated:- 11-7-2013 - Shri B. C. Meena And Shri Chandramohan Garg,JJ. For the Appellant : Shri Hiren Mehta For the Respondent : Shri Ramesh Chandra, C.I.T. DR JUDGMENT Per Chandramohan Garg, Judicial Member This appeal has been preferred by the assessee against the order of Commissioner of Income Tax(A)-XII, New Delhi dated 31.12.2011 in Appeal No. 19/10-11 for the block period 01/04/1988 to 10/12/1998 by which the Commissioner of Income Tax(A) confirmed the penalty levied by the Assessing Officer u/s 158BFA(2) of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings u/s 158BFA(2) in view of the limitation prescribed u/s 158 BFA(3)(c) of the Act and the reply of the assessee filed on 08.04.2010 was also considered. The Assessing Officer observed that since the undisclosed income determined by the Assessing Officer was in excess of the income shown in the return, hence, as per second proviso attached to sub-section (2) of section 158BFA, the penalty u/s 158BFA(2) of the Act shall be imposed on that portion of undisclosed income determined in excess of the amount of undisclosed income shown in the return. The Assessing Officer held that penalty u/s 158BFA(2) of the Act was imposable and imposed a penalty of Rs.5,26,070/- on the assessee. 7. The aggrieved assessee filed an appeal before the Commissioner of Income Tax(A) which was also dismissed with following observations and findings:- "Ground No. l, 2 4 are general in nature and needs no adjudication. Ground No.3 I have gone through facts stated in the assessment order and the facts submitted above by the assessee. It is evident that entire addition towards difference of stock is based on estimation only but assessee for his own stock also could not provide any reconsiderable sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration the findings of the learned CIT(Appeals), both these grounds of appeal are rejected." iii) Difference of stock in Unit F-70 Rs. 51486/- In this head, ITAT has held:- "The learned representatives have reiterated their contentions as were raised in the foregoing grounds of appeal. We have specifically gone through the details placed by the assessee on page No. 214 of the paper book. In the light of the details submitted by the assessee alongwith findings of the CIT(Appeals) coupled with the explanation of the assessee submitted before the Assessing Officer vide letter dated 11.12.2000 available (It page NO.220 of the paper book, we do not find any error in the order of the CIT(Appeals). The addition has been partly deleted by the CIT(Appeals) after verifying the details and that led in CIT(Appeals) to arrive at the conclusion that the assessee is able to reconcile the discrepancy. Accordingly, both these grounds of appeals are rejected ." iii) Undisclosed Expenditure at B-16 Rs.3,37,408/- In this head ITAT has held that:- "The learned counsel for the assessee reiterated his contentions as were raised before the Revenue Authorities Below. He took us through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er submitted that in this situation, the provision u/s 158BFA(2) lays down that it is mandatory to impose a penalty where any undisclosed income is returned (unless covered by the first proviso to this section) or has been enhanced. The DR further submitted that the discretion of the Assessing Officer is limited to determining the quantum of the penalty between the minimum 100% of tax and maximum 300% thereof. The DR further submitted that the main limb of section 158BFA(2) stipulates that penalty shall be imposed in respect of the undisclosed income determined by the Assessing Officer under clause (c)of Section 158BC of the Act. The DR also submitted that section 158BFA(2) is not included in the list of provisions mentioned in section 273B of the Act and the implication of this exclusion is to be considered while deciding the issue of penalty u/s 158BFA(2) of the Act. 10. On careful consideration of the above submissions, contentions and legal propositions of both the parties, we observe that this case is related to the imposition of penalty which was confirmed by the Commissioner of Income Tax u/s 158BFA(2) of the Act. The appellant assessee has placed reliance on the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n imposing a penalty. This is apparent from the use of the expression may direct that a person shall pay by way of penalty. Once the Assessing Officer, exercising his discretion, comes to the conclusion that penalty is imposable, the statute requires that such sum of penalty shall not be less than the amount of tax leviable but shall not also exceed three times the amount of tax so leviable in respect of the undisclosed income determined by the Assessing Officer as indicated above. While it is discretionary for the Assessing Officer to direct that a person shall pay penalty, it is mandatory that, in case the Assessing Officer is of the opinion that such penalty is leviable, the penalty amount shall not be less than the amount of tax leviable in respect of the undisclosed income and not more than three times of such tax. A plain reading of Section 158 BFA (2) gives us the indication that the legislature did not intend the 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. 18. The first proviso clearly stipulates the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce to the basis on which the penalty is to be imposed. To be clear, the word shall used in the said expression does not have reference to the imposition of penalty in the sense that penalty would be mandatory but has reference to the mode of quantification of the penalty. All that the second proviso means is that where there is a difference between the undisclosed income shown in the return filed under Section 158 BC (a) and the undisclosed income determined by the Assessing Officer under Section 158 BC (c), notwithstanding the fact that the circumstances stipulated in the first proviso are satisfied, penalty would still be imposable by the Assessing Officer and the same shall be imposed on the portion of the undisclosed income determined by the Assessing Officer which is in excess of the amount of undisclosed income shown in the return. 20. The expression undisclosed income determined has to be understood in the context used in Section 158 BFA (2). It refers to the undisclosed income determined by the Assessing Officer under clause (c) of Section 158 BC. Section 158 BC prescribes the procedure for block assessment. Clause (b) thereof stipulates as under:- (b) the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done on the basis of evidence found as a result of search or requisition of books of accounts or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence. It is, therefore, clear that the undisclosed income, which is to be determined under Chapter XIV-B, has to be determined on the basis of evidence discovered during the search. It is obvious that where the computation of undisclosed income is based on material other than what was found in the course of the search, the same could not be treated as undisclosed income determined under clause (c) of Section 158 BC. 21. Going back to Section 158 BFA (2), the Assessing Officer has been empowered to impose penalty on a person when the undisclosed income determined under clause (c) of Section 158 BC, is in excess of the undisclosed income returned by such person in pursuance to a notice under Section 158 BD/ 158 BC. In other words, a pre-condition for the imposition of penalty under Section 158 BFA (2) is that there must be a determination of the undisclosed income by the Assessing Officer under clause (c) of Section 158 BC of the said Act. If this is not satisfie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eading of observations and findings in the impugned order as reproduced hereinabove in para 7 of this order, we observe that the first appellate authority i.e. Commissioner of Income Tax(A) took note of rejection of assessee's appeal by ITAT and she decided the issue in only two lines by holding that in view of the facts i.e. the appeal of the assessee has been rejected by the ITAT, the penalty imposed by the Assessing Officer was confirmed and appeal of the assessee was dismissed. The First appellate authority is expected to decide the issue after due consideration of contentions and submissions of both the parties and there must be some reasonable and justified conclusion for deciding the issue. It is pertinent to note that the penalty imposed on M/s Tony Electronics Ltd. (subsequently merged with the assessee company) related to the same search and seizure operation u/s 132 of the Act and has been deleted by the ITAT 'H' Bench in ITA No. 12/Del/2012 dated 28.02.2013 and the present case also emerged from the same search and seizure operation. 13. The AR has vehemently contended that the present case of the assessee is also squarely covered by the above order of the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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