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TMI Blog2018 (2) TMI 1595X X X X Extracts X X X X X X X X Extracts X X X X ..... such returns and paid a part of the tax on the admitted undisclosed income. The view was, therefore, taken by both the appellate fora that on the facts of the case, the Assessing Officer ought not to have exercised his discretion for imposition of penalty. - Decided against revenue - I.T.T.A. No. 740 of 2017 - - - Dated:- 13-12-2017 - MR. C. V. NAGARJUNA REDDY AND MR. T. AMARNATH GOUD, JJ. For The Appellant : Mr.K.Raji Reddy, senior standing counsel for Income Tax Department For The Respondent : Mr. G. V. N. Hari JUDGMENT: ( Per the Hon ble Sri Justice C.V.Nagarjuna Reddy) The Revenue has filed this appeal on the following substantial questions of law. 1. Whether on the facts and circumstances of the case and in law, the ITAT was justified and correct in deciding that the penalty u/S.158BFA(2) of the Income Tax Act, 1961 is leviable only on the amount of additions made over and above the undisclosed income declared by the assessee in its return filed u/S.158BC(a) by relying upon the decision of LD.ITAT, Cochin Bench, in the case of DCIT vs. Heera Construction co.(pvt) Ltd. 125 TTJ 589, without appreciating the fact that the LD.ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Appellate Tribunal, which partly allowed the appeal, consequent to which, the Assessing Officer determined the undisclosed income at ₹ 42,59,159/- and levied penalty thereon on the ground that the block return was due by 01.08.2003, but it was filed on 11.08.2003 and that the total tax of ₹ 22,09,000/- payable as per the block return was not paid. The Assessing Officer held that the assessee did not fulfill the conditions laid down under Section 158BFA of the Act and therefore, it is not entitled to the benefit of the second proviso to the said provision. Feeling aggrieved, the assessee carried the matter in appeal to the Commissioner of Income Tax (Appeals)-II, Mumbai CAMP at Visakhapatnam. On consideration of the extant provisions and the relevant case law, the Commissioner (Appeals) partly allowed the appeal by restricting the levy of penalty only to the undisclosed income assessed in excess of the undisclosed income declared in the block return. This order was challenged in an appeal by the Revenue before the Income Tax Appellate Tribunal, Visakhapatnam Bench, Visakhapatnam (for short the Tribunal), which by its order, dated 29.10.2015, dismissed the appeal. Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be liable to pay simple interest at the rate of one per cent of the tax on undisclosed income, determined under Clause (c) Section 158BC, for every month or part of a month comprised in the period commencing on the day immediately following the expiry of the time specified in the notice, and ( a) where the return is furnished after the expiry of the time aforesaid, ending on the date of furnishing the return; or ( b) where no return has been furnished, on the date of completion of assessment under Clause (c) of Section 158 BC. ( 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 158 BC: 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 158 BC; ( ii) the tax payable on the basis of such return has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the liability for penalty is automatic. Of course, the proviso to Section 158BFA(2) enumerates the circumstances wherein no penalty is leviable but from that also it cannot be inferred that the absence of the circumstances enumerated will attract the provision of penalty automatically. A Division Bench of the Bombay High Court also in Dodsal Ltd. (1 supra) interpreted Sub-Section (2) of Section 158BFA of the Act as under. The terminology of the said Section makes it clear that there is a discretion in the Assessing Officer to direct payment of penalty. The proviso supports this interpretation. Only if the authority decides to impose penalty then, it will not be less than the tax leviable but shall not exceed three times the tax so leviable. It is, therefore, not possible to accept the submission on behalf of the Revenue that once the Assessing Officer comes to the conclusion that there is a breach of the mandate of Section 158BFA(1), then the penalty should be imposed. Merely because the expression used is shall not be less than the amount of tax leviable or not exceeding three times the tax, does not result in reading the first part of the Section as mandator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection (2) thereof are intended to be directory. In other words, while payment of interest is mandatory, levy of penalty is discretionary. Sub-Section (2) of Section 158BFA of the Act, accordingly, vests discretion in the Commissioner (Appeals) whether to levy or not to levy penalty. It is trite position of law that any discretion vested in an authority has to be exercised in a reasonable and rational manner depending upon the facts and circumstances of each case. 8. In the light of the true purport of Sub-Section (2) of Section 158BFA of the Act as explained above, we are of the opinion that the order of the Tribunal confirming the order of the Commissioner (Appeals) does not suffer from any illegality. Both the appellate fora have taken into consideration the fact that on receipt of the notice following the search and seizure, the assessee has filed his returns within ten days of the expiry of the time stipulated for filing such returns and paid a part of the tax on the admitted undisclosed income. The view was, therefore, taken by both the appellate fora that on the facts of the case, the Assessing Officer ought not to have exercised his discretion for imposition of penal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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