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TMI Blog2005 (11) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... to the same, the legal heir vide letter dated 15-12-2000 reiterated the earlier stand. However, it was further submitted that in order to meet the requirement of notice the return was being filed. No income was offered in this return. Subsequently, in the course of assessment proceedings, the legal heir revised the return disclosing undisclosed income of Rs. 5,82,439 along with covering letter dated 19-1-2001 stating as under:- "However, on 22-1-2001 the legal heir of Shri Pratap C. Shah i.e., his wife Smt. Pramila P. Shah filed the revised return of income in form No. 2B for the block period declaring the undisclosed income at Rs. 5,82,439 with a covering letter dated 19-1-2001 submitted that subsequent to the filing of return it has been noticed on perusal of various papers and relevant statements on records that the figures of income shown for the assessment year 1997-98 needs revision. The figure of interest allowed on the capital balance lying to the credit of my deceased husband has not been properly shown in the original return." On the perusal of the Bank Account, it is noticed that my husband had during his life time shown certain shares of Infar (India) Ltd. The capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the proceedings initiated by your good self. Subsequently, the records of the deceased were examined carefully in consultation with us when it was noticed that certain items had remained to be shown. Therefore, a revised return was filed purely voluntarily without any notice being issued by you to rectify the errors committed in the original return. In the light of the fact that the revised return has been submitted the assessee voluntarily disclosing correct figures of untaxed income, we request you to kindly take a lenient view of the matter and dropped the penalty proceedings, for the kind action of which, the assessee shall be most grateful to your goodself." Not satisfied with the above explanation, the Assessing Officer levied the penalty of Rs. 3,49,460 by observing as under:- "In this case the search operation was carried out on 9-2-1999 and the last panchanama was drawn on 12-2-1999. The assessee was expired on 30-1-1997. It is, therefore, obvious that the legal heir had having ample time to verify the record of the deceased which was neglected even after notices under section 158BC were issued i.e., on 9-5-2000 and on 1-12-2000. Notice under section 143(2) dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome irrespective of the circumstances. 6. On the other hand, the Learned Counsel for the Assessee has submitted that levy of penalty can never be automatic. He drew our attention to the provisions of section 158BFA(3) to point out that reasonable opportunity has to be given to assessee before levying penalty. Further, sub-clause (2) provides that Assessing Officer may direct for levy of penalty. These two provisions clearly suggest that levy of penalty is discretionary. In other words, circumstances of the case must be taken into consideration before levy of penalty. She then drew our attention to the circumstances of the case which were taken into consideration for deleting the penalty by the Learned CIT (Appeals). Accordingly, it is prayed that order of the Learned CIT (Appeals) should be upheld. 7. However, it is mentioned that neither the Learned Departmental Representative nor Learned Counsel for the Assessee brought to our notice any decision in support of their pleas. 8. Rival submissions have been considered carefully. The basic question to be considered is whether levy of penalty is automatic irrespective of the facts and circumstances of the cast. In our humble op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retion is vested in the tax authorities and the same must be exercised judiciously after considering the facts and circumstances of the case. The technicalities should not come in the way of justice. The benefit of doubt must be given to the assessee. Accordingly, it has to be held that discretion must be exercised in favour of assessee, if facts and circumstances of the case, prima facie, shows the innocence of the person against whom penal action is sought. 10. Keeping in view the above legal position, let us now analyze the relevant provisions of section 158BFA which are being reproduced as under:- "(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 personal if- (i) such person has furnished a return under clause (a) of section 158BC; (ii) the tax payable o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se his discretion in judicious manner. 11. If the facts and circumstances of the case show the bona fide of the assessee in not disclosing the income in the return then, in our opinion, penalty should not be imposed and the technicalities, if any, should not come in the way of justice. The Hon'ble Supreme Court in the case of Hindustan Steels Ltd has clearly held that authority competent to impose the penalty would be justified in refusing to impose penalty when there is technical or venial breach of the provisions of the Act. This judgment further provides in clear terms that all relevant circumstances should be taken into consideration before exercising the discretion vested in the authority. The relevant observations have already been reproduced by us in earlier para and, therefore, need not be produced again. 12. Let us now examine whether facts and circumstances of the case justifies the levy of penalty. We have already noted the relevant facts namely - (i) that search operation was carried out after the death of the assessee, (ii) no incriminating material was found either at the premises of deceased assessee or from the lockers operated by him or from the possession of h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Further, sale proceeds of shares were duly recorded in the books of firm where deceased assessee was partner. Hence, income by way of capital gain was not assessable as "undisclosed income" under section 158BB/158BC. Thus, question of levying penalty did not arise. Assessee cannot be penalised merely because, by mistake, income which is not "undisclosed income', was offered to tax as "undisclosed income." 14. Before parting with this order, we would like to mention that the learned CIT (Appeals) had taken into consideration the factor of mens rea in deleting the penalty. We agree with the contention of the Learned Departmental Representative that concept of mens rea cannot be imported in the provisions of section 158BFA(2) in view of Hon'ble Supreme Court judgment in the case of Gujarat Travencore Agency v. CIT [1989] 177 ITR 455. The effect of such legal position is that onus is not on the Revenue either to prove the guilty mind or the sufficient cause on the part of assessee. The onus is entirely on the assessee to prove his bona fides on the basis of facts and circumstances of the case. If the assessee can discharge such onus, then levy of penalty would not be justified. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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