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TMI Blog2015 (7) TMI 613X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer completed the assessment on a total income of Rs. 1,54,28,744/- which was reduced by the CIT(A) to Rs. 83,00,323/-. On further appeal by the Revenue as well as the assessee the Tribunal dismissed both the appeals. The Assessing Officer thereafter initiated penalty proceedings u/s.158BFA(2) on account of following 3 additions : (a) addition on account of suppressed Capital gain Rs.36,24,695/- (b) unexplained educational expenses of son Rs.47,07,520/- (c) unaccounted investments in shares Rs. 1,37,500/- 4. So far as the penalty levied on addition on account of suppressed capital gain of Rs. 36,24,695/- is concerned, the facts are that the assessee along with his mother Smt Jainabai H. Chotani was the joint owner of the plot of land situated at 208, Yerwada, Pune. The said plot of land was sold to Shri Shirish C Karia vide agreement dated 14-04-1992 and 18-10-1991 for a consideration of Rs. 76,00,000/- and additional consideration of Rs. 20/- per sq. ft on free sale area i.e. about 2000 sq. mtrs and Rs. 10/- per sq. ft on buildable area under section 21 of the Urban Land (Ceiling & Regulation) Act. The consideration of Rs. 76,00,000/- was inclusive o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son Mr. Mishaal Chotani. The confirmation of Mr. Siddique to the effect that he had incurred educational expenses of Mr. Mishaal Chotani was filed during the course of assessment proceedings. The AO proposed to make addition of US $ 1,39,978 on the basis of the seized documents on account of unexplained expenditure of the education of son of the assessee. It was brought to the notice of the AO that the actual payment as revealed from this documents is US $ 27,325. The proposed addition of US $ 1,36,978 is nothing but the cumulative total of bills raised by Cornell University. The AO did not agree with the contention of the assessee on the ground that the entire amount of fees are paid before the date of search. Similarly, the AO drew inference that the money belonged to the assessee and it is for this reason that his son has brought all these documents to India and has been giving accounts of his expenditure incurred in USA to his parents. In respect of the claim of the assessee that the expenditure on education of his son was borne by Mr. Usham Ibrahim Siddique, the AO rejected the claim of the assessee on the ground that assessee has not furnished any evidence in support of his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were owned by the assessee's wife and his son Mishaal were found. Out of these shares found, the shares valued at Rs. 1,37,500/- were acquired in the block period. During the course of assessment proceedings, the assessee contended that the shares stood in the maiden name of his wife who was filing returns even before the marriage. Similarly, the assessee also contended that the shares were not purchased but were accrual to the original shares in the form of bonus shares. The AO as well as the Ld. CIT(A) did not accept the contention of the assessee on the ground that the assessee's wife had not filed returns of income after assessment year 1987-88 and hence the sources of income to justify the acquisition of such shares remained unexplained. Therefore, the AO made the said addition and the Ld. CIT(A) confirmed the same. ITAT has also dismissed the appeal of the assessee and the order of ITAT has not been challenged by the assessee. 9. In this background, the Assessing Officer levied penalty of Rs. 59,43,634/- being 100% of the tax sought to be evaded which was upheld by the CIT(A) by observing as under : "4.3 I have carefully considered the facts of the case and the law as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn. There also have been instances in which AOs, considering the language of the main provision as well as the proviso, have been found to be holding the view that this penalty is mandatory in all cases where the returned undisclosed income is more than the assessed undisclosed income. It is a fact that the Courts have held that this penalty is not mandatory as the main provision itself says "The Assessing Officer or the Commissioner(Appeals), may direct that a person shall pay by way of penalty ..............". It has been held that the word "shall" appearing before the rates to be applied only leads to the interpretation that once the penalty is held to be leviable, it cannot be less than the amount of tax determined and which may extend upto three times of the tax so determined. There cannot be any dispute to this interpretation also. Though the appellant has tried to argue that the AO has levied the penalty treating the provision as mandatory, but the same does not appear to be so. After careful consideration of the penalty order, I am of the considered opinion that the AO has not treated levying of penalty u/s.158BFA(2) as mandatory in the facts and circumstances of this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant that the AO has not considered the decision of the jurisdictional High Court given in the case of CIT vs Dodsal Ltd. 312 ITR 112 (Bom), has also been found to be incorrect. As already discussed, the AO has not levied the penalty because he was of the opinion that the penalty is mandatory in all cases of additions. He has considered the nature of the additions and thereafter concluded the penalty as leviable. It is a fact that the Courts in certain cases have allowed relief only where it were found that the additions have been made on estimate basis. In DCIT vs Spark Electro Communication Systems (2006) 281 ITR (AT) 13 (Mum), it has been held that the block assessment is an assessment of the block period and therefore where the assessee has no cogent explanation for omitting an income in the block return, penalty is exigible. In the case of CIT vs Becharbhai P. Parmar (2012) 341 ITR 499 (Guj), it has been held that where an addition on merit has become final, the claim of the assessee that penalty cannot be levied because the addition itself was not justified could not be entertained, and therefore penalty in such cases have to be upheld. The case of the appellant is exact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 in respect of unexplained educational expenses of his son of Rs. 47,04,520/- without appreciating the fact that the expenditure was made by his son who was major at the relevant point of time and the addition, if any, should have been made in his hands and not in the hands of the appellant. The appellant prays that the penalty may please be deleted. 4) On the facts and circumstances of the case and in law the honourable CIT (A) erred in confirming the penalty levied by the learned ACIT Central Circle 1(1) Pune under section 158BFA(2) of the Income Tax Act, 1961 in respect unaccounted investment in shares of Rs. 1,37,500/- without appreciating the fact that the said shares stood in the name of the wife of the appellant. The appellant prays that the penalty may please be deleted. 5) The appellant hereby reserve the right to add, amend, delete, withdraw, any ground/s of appeal." 11. The assessee has also raised the two additional grounds which are as under : "1. On the facts and the circumstances of the case and in law the Hon'ble CIT(A) erred in confirming penalty levied by AO in respect of suppressed capital gain Rs. 36,24,695/- even though addition confirmed on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition on account of unexplained expenditure on education expenses of son of the assessee amounting to Rs. 47,04,520/- is concerned, we find the Tribunal has already given a clear cut finding that the assessee could not prove the source of this expenditure being incurred towards education expenses of his son. It is the submission of the Ld. Counsel for the assessee that if telescoping effect is given to the various additions sustained by the CIT(A) the assessee is still left with an amount of Rs. 23,52,702/- which is available to him for meeting the expenditure out of the addition of Rs. 47,04,520/- and penalty can be levied only on the balance amount of Rs. 23,51,818/- (i.e. 47-04,520 - 23,52,702). We find some force in the above argument of the by the Ld. Counsel for the assessee. We find from the various details filed in the paper book that the son of the assessee went to USA during the period 1997 to 2000. The addition is based on the documents found during the search action. It is the submission of the Ld. Counsel for the assessee that during 1993 to 1998 cash receipts of Rs. 36,24,695/- was taxed as undisclosed income in addition to Rs. 14,50,000/- cash receipt as part of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of shares prior to the block period. However, this fact was also stated before the CIT(A). However, the assesses had expressed his inability to reconcile original and bonus shares as the same were old for more than 20 years at the time of assessment. The Ld.CIT(A) confirmed the addition on the ground that no evidence was put forth to indicate that the shares acquired during the block period were actually the conversion of debentures held in the pre block period or accrual in the form of bonus shares. We find although a specific ground was taken before the Tribunal however the same remained unadjudicated. The assessee has neither moved any Miscellaneous Application for adjudication of the above ground by the Tribunal nor challenged the same before the higher forum. It is the submission of the Ld. Counsel for the assessee that given an opportunity he can prove that the shares are not purchased during the impugned block period and are on account of bonus shares issued out of the debentures or shares held prior to the block period. However, nothing was produced before us to substantiate that the investments are out of bonus shares on shares or debentures held prior to the block period. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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