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TMI Blog2005 (8) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... humanly possible for the assessee to work out the exact figure. The group has already honoured whatever discloser was made at the time of search. The assessee further did not dispute the addition made by the Assessing Officer in the assessment, rather assessee itself filed the letter pointing out as to how it claimed the expenses which are not allowable and can be considered as undisclosed income for the block assessment purpose. In the present case particulars were already in the possession of the department. It is the computation of income which has not been properly disclosed by the assessee and the reasons demonstrated before us for not disclosing the true undisclosed income is that from the seized material it was not humanly possible to compute the income from such voluminous record. We have gone through the assessment order also. From the assessment order it is discernible that additions have been made purely on the basis of assessee's letter dated 24-4-2001 extracted above. The Assessing Officer nowhere discussed independent material for making the addition. No doubt there is a difference in undisclosed income declared by the assessee and ultimately determined by the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has gone through the explanation of the assessee in detail and rejected the same primarily on the ground that expression shall has been used in section 158BFA(2) which indicted the Assessing Officer to impose a penalty under section 158BFA(2) whenever he finds the difference in the undisclosed income declared by an assessee and ultimately determined by the Assessing Officer. Ld. Assessing Officer has dealt with the case law relied upon by the assessee in detail but did not find any merit in the contentions of the assessee. 3. Dissatisfied with the levy of penalty assessee carried the matter before ld. CIT(A). Ld. CIT(A) deleted the penalty on the ground that the assessment and penalty proceedings are two separate processes. According to him penalty is quasi-criminal in nature and must be levied only in case where mens rea exists. He further observed that provisions of section 158BFA(3) provide a reasonable opportunity of hearing before imposing any penalty. Therefore, before imposing penalty under section 158BFA(2) the conduct of the assessee is also required to be looked into. In the opinion of ld. CIT(A) the assessee duly demonstrated the circumstances leading for determination o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A). He placed on record the copies of the Tribunal's order passed in IT(SS)A.No.226/Mum./02 and IT(SS)A.No. 107/Mum./ 02, wherein deletion of similar penalties have been upheld. 6. The ld. D.R while replying the submission of ld. Counsel for the assessee contended that the difference in the undisclosed income involved in the present case is of Rs. 2,87,09,980, which is a substantial amount and such a difference could not occur without any deliberate intention. The cases in which deletion of penalty have been upheld by the Tribunal are involving a minor difference of one or two lakhs which could have been occurred on account of miscalculation, on account of some omissions whether a particular expense is allowable or not. Therefore, on the basis of those decisions the order of the ld. CIT(A) cannot be upheld. He submitted that Tribunal has accepted the reasons for such differences. But in the present case assessee failed to show any reasonable cause for not disclosing the true undisclosed income. 7. We have duly considered the rival contention. Before adverting to the legal position we would like to deal with the peculiar facts of this case as to how the difference has occurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no question of booking any purchases and/or sales. However, somewhere from January 1998, the utilization of L/C facility was started for such paper entries of purchases and sales with other than group parties and although no particular movement of goods or actual purchase or sales was there, the entry of trading purchases and sale were made and income thereof was offered. The assessee-company is also having large volume of contract in business as civil construction contractors and the funds are also borrowed for working capital requirement for such business. The L/C charges, bank charges, interest incurred on the above mentioned paper transactions cannot be claimed as deduction against the genuine income. This aspect came into the consideration at the time of filing return for assessment year 1999-2000. However, the disallowance made while filing the return for assessment year 1999-2000 is on an ad hoc basis. On in-depth scrutiny, it is noticed that even for assessment year 1998-99, such expenses have been debited and inadvertently, remained to be disallowed in the computation of income while filing return of income. In the background, a comprehensive exercise have been d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de: Particulars Assessment year 1998-99 Assessment year 1999-2000 Disallowable finance charges 68,30,970 98,48,354 74,61,000 Transportation charges 6,51,360 32,17,298 Total 74,82,330 2,05,26,652 8. On the strength of above detail assessee has tried to demonstrate that difference in the undisclosed income as returned by the assessee and determined by the Assessing Officer is not the result of any intentional concealment, rather assessee has agreed for this addition on realizing the bona fide mistake committed by it. 9. Section 158BFA has a direct bearing on the controversy in hand. Therefore, it is salutary for us to take note of this section. (1) Where the return of total income including undisclosed income for the block period, in respect of search initiated under section 132 or books of account, other document or any assets requisitioned under section 132A on or after the 1st day of January, 1997, as required by a notice under clause (a) of section 158BC, is furnished after the expiry of the period specified in such notice, or is not furnished, the assessee shall be liable to pay simple interest at the rate of one and one-forth per cent of the tax on undisclosed income, determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later; (d) in a case where the assessment is the subject-matter of revision under section 263, after the expiry of six months from the end of the month in which such order of revision is passed; (e) in any case other than those mentioned in clauses (c) and (d), after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later; (f) in respect of search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, after the 30th day of June, 1995 but before the 1st day of January, 1997. Explanation.- In computing the period of limitation for the purpose of this section,- (i) the time taken in giving an opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that while filing return for assessment year 1999-2000 assessee voluntarily noticed that certain expenses to the tune of Rs. 106.78 lakhs were not co-relatable with the income and hence it disallowed them. This was purely a voluntary disclosure by the assessee. The rest of disallowances emerged out during the course of assessment proceedings and assessee has accepted them. 12. The charge against the assessee is to show the reason why a difference has taken place in the undisclosed income shown in the return and ultimately determined by the Assessing Officer. In order to appreciate this controversy we have to keep in mind that element of concealment of particulars of income or income is not condition precedent for levy of penalty under section 158BFA(2) because income for the block period is to be determined on the basis of seized material which is already in the possession of the department. The assessee has to explain as to why it was not able to compute the true undisclosed income from the seized material and why it failed to return the true undisclosed income. 13. In order to explain its position assessee has submitted that 84 files containing about 10,000 voluminous sheets were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lug the loopholes after detection and it was not intended to bring on record the materials which were discovered subsequent to the filing of the return. The inevitable conclusion was that the penalty was imposable and the Tribunal was not justified in cancelling it. 15. Thus from this decision the ratio of law emerges out that admission in the shape of revised return should be bona fide and not with a view to plug the loopholes after detection for avoiding the penalty etc. If revised return is not filed for the purpose of correcting the bona fide omission then penalty for concealment would be leviable. 16. The next case law relied upon by ld. D.R is C. Anantham Chettiar's case. In this case after the search and seizure the assessee has filed revised return disclosing an additional income which was accepted and assessment was made on the basis of the revised return. In the penalty proceedings the assessee took the stand that there was no concealment and it was only for the purpose of buying peace with the department that additional income was disclosed and the revised return was filed. The Hon'ble High Court has held that assessee had offered no explanation except to plead t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat from the seized material it was not humanly possible to compute the income from such voluminous record. We have gone through the assessment order also. From the assessment order it is discernible that additions have been made purely on the basis of assessee's letter dated 24-4-2001 extracted above. The Assessing Officer nowhere discussed independent material for making the addition. No doubt there is a difference in undisclosed income declared by the assessee and ultimately determined by the Assessing Officer but for that assessee has already demonstrated that it was not humanly possible to compute the alleged true undisclosed income as determined by the Assessing Officer out of the voluminous seized material. This argument of the assessee has been rejected by ld. Assessing Officer without assigning any reason. From the record we nowhere find mala fide intentions attributable to the assessee, rather on going through the letter of the assessee dated 24-4-2001 coupled with the explanation submitted by it during the penalty proceedings we are of the view that ld. CIT(A) has rightly deleted the penalty. Therefore, we do not see any good reason to interfere in the order of ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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