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2008 DIGILAW 750 (PNJ)

Commissioner Of Income Tax v. Jai Parkash

2008-03-25

RAKESH KUMAR GARG, SATISH KUMAR MITTAL

body2008
Judgment Rakesh Kumar Garg, J. 1. The Revenue has filed the present appeal under Section 260A of the IT Act, 1961 (for short the Act), against the order of the Income-tax Appellate Tribunal, Chandigarh, Bench A, Chandigarh (for short Tribunal), dt. 25th April, 2007 (Annex. A-5) passed in IT(SS)A No. 130/Chandi/2005 in the case of Jai Parkash v. Asstt. CIT , for the block period 1st April, 1986 to 2nd April, 1997, raising the following proposed substantial questions of law: (i) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the penalty imposed under Section 158BFA(2) of the Act by ignoring its own finding that the income of Rs. 3,76,640 constituted undisclosed income within the meaning of Section 158BB(1)(ca) r/w Section 158BC(c) of the Act and that such undisclosed income attracted penal provisions under Section 158BFA(2). (ii) Whether on the facts and in the circumstances of the case, the Tribunal was justified in deleting the penalty on the ground that the assessee still had time to file the return income under Section 139(4) and that it had paid entire advance tax ignoring the mandate of second proviso to Sub-section (2) of Section 158BFA of the Act. 2. A search and seizure under Section 132(1) of the Act had been carried out at the premises owned by the assessee/respondent on 2nd April, 1997 and upto the date of search, the assessee had not filed his return of income for the assessment year (for short A. Y.) 1996-97, which was otherwise due to be filed on or before 31st Oct., 1996. The return was filed on 17th Jan., 1997, therein declaring an income of Rs. 3,76,640. During the course of search, three savings bank accounts bearing Numbers 1499, 1760 and 1453 with Oriental Bank of Commerce, Anaj Mandi, Patiala, belonging to the assessee were detected, which were in the fictitious names of M/s Goyal Traders, M/s Shiv Traders and M/s National Engineering having deposits of Rs. 69,33,866, Rs. 57,15,604 and Rs. 54,72,439, respectively. The AO while completing block assessment under Section 158BC r/w Section 143(3) of the Act treated the income of Rs. 69,33,866, Rs. 57,15,604 and Rs. 54,72,439, respectively. The AO while completing block assessment under Section 158BC r/w Section 143(3) of the Act treated the income of Rs. 3,76,640 as an income from undisclosed sources in view of the specific provisions under Section 158BB(1)(ca) of the Act, though the same was declared by the assessee under Part III of his return of income filed under Section 158BC(a)(i) of the Act. 3. Simultaneously, penalty proceedings under Section 158BFA(2) r/w Section 158BC(c) of the Act were initiated vide order dt. 31st Dec, 1998. The appeal filed by the assessee against the order of the assessment was partly allowed vide order dt. 12th Nov., 1999. However, the findings of the AO pertaining to the addition of Rs. 3,76,640 shown as income by the appellant in his return filed on 17th. Jan., 1997 for the asst. yr. 1996-97 were upheld by the CIT(A). 4. Aggrieved against the order of the CIT(A), the assessee filed further appeal before the Tribunal challenging the order of the AO, which was confirmed by the CIT(A) adding the income of Rs. 3,76,640 as an undisclosed income within the meaning of Section 158BB(1)(ca) on the ground that the assessee had not disclosed the same before the search operation carried out on 2nd Jan., 1997. The Tribunal vide its order dt. 15th Oct., 2004 dismissed the said appeal filed by the assessee. 5. The AO initiated penalty proceedings against the assessee and an opportunity was given to the assessee. The assessee vide letter dt. 19th Dec, 2004 furnished his reply as under: By way of reply, it is submitted that no penalty survives as in appeal, the entire addition made in terms of p. 6(iii) of the assessment order was deleted in terms of order dt. 12th Nov., 1999 passed by the learned CIT(A), Patiala, while giving appeal effect to the appellate order dt. 12th Nov., 1999, leaving the balance income at Rs. 3,76,637 which was assessed under Section 158BC. Thus, no income survives to which provisions under Section 158BFA(2) may be applicable. The only income which survived out of assessment order dt. 31st Dec, 1998 was Rs. 3, 76,637 which was income declared under Section 158BC. Had the normal return been filed in time before search, even this income of Rs. 3,76,637 would not have survived. 6. Thus, no income survives to which provisions under Section 158BFA(2) may be applicable. The only income which survived out of assessment order dt. 31st Dec, 1998 was Rs. 3, 76,637 which was income declared under Section 158BC. Had the normal return been filed in time before search, even this income of Rs. 3,76,637 would not have survived. 6. On the basis of this reply, it was submitted by the assessee that there was no such income on which any penalty under Section 158BFA(2) of the Act was leviable and therefore, the penalty proceedings under Section 158BFA(2) of the Act initiated on the basis of assessment may kindly be dropped. However, the AO vide his order dt. 19th May, 2005 held as under: I have carefully gone through the above reply put forth by the assessee which is not correct because return of income for the asst. yr. 1996-97 was due on 30th Nov., 1996 and the same was filed on 17th Jan., 1997 declaring income of Rs. 3,76,640 after the search and seizure operation conducted by the Department on 2nd Jan., 1997 i.e., precisely a fortnight after the search under Section 132(1) of the IT Act, 1961. It was an afterthought on the part of the assessee which clearly shows that the assessee had concealed particulars of his income and declared his income only after the search operation conducted on 2nd Jan., 1997. Accordingly, the declaration under Part III of the block assessment by the assessee of income of Rs. 3,76,640 is the undisputed income and not what it has claimed. Moreover, the CIT(A) as well as the Honble Tribunal in their respective orders (supra) rejected the assessees contention that income of Rs. 3,76,640 relate to asst. yr. 1996-97 but upheld the action of the AO that this income relates to undisclosed sources because the assessee not disclosed this income before search operation conducted on 2nd Jan., 1997. In view of the facts elaborated above, it is crystal clear that the assessee deliberately did not disclose the income of Rs. 3,76,640 which tantamounts to concealment of income. I therefore, treat the assessee in default under the provisions of Section 158BFA(2) r/w Section 158BC(c) of the IT Act, 1961 and impose a penalty of Rs. 2,26,020. 7. In view of the facts elaborated above, it is crystal clear that the assessee deliberately did not disclose the income of Rs. 3,76,640 which tantamounts to concealment of income. I therefore, treat the assessee in default under the provisions of Section 158BFA(2) r/w Section 158BC(c) of the IT Act, 1961 and impose a penalty of Rs. 2,26,020. 7. Aggrieved against the said order, the assessee filed an appeal before the CIT(A), Patiala, on the ground that the penalty has been imposed only in respect of the income of Rs. 3,76,640 which was a regular income of the asst. yr. 1996-97 for which the return could not be filed by the due date and was only filed on 17th Jan., 1997, i.e., after the search action under Section 132 of the Act conducted on 1st Jan., 1997. The penalty has been levied without appreciating that there was no contumacious conduct on the part of the assessee to conceal the income and therefore, there was no question of levy of any penalty. It was also argued by the assessee that penalty under Section 158BFA(2) of the Act is not mandatory and is discretionary and such discretion has to be exercised by the AO considering the facts and circumstances of the case. 8. The CIT(A) dismissed the appeal vide order dt. 19th Sept., 2005. The relevant part of the order is reproduced as under: The assertion made by the learned Counsel of the appellant that imposition of penalty under Section 158BFA(2) of the Act is discretionary and not mandatory is not disputed. Nevertheless, it is noted that second proviso to Sub-section (2) of Section 158BFA stipulates that penalty shall be imposed on such portion of undisclosed income determined which is in excess of amount of undisclosed income shown in the return. In the case under consideration, there is no dispute that the sum of Rs. 3,76,640 was not shown in the return of income filed for block period inasmuch as the appellant had claimed deduction of an equivalent amount whereas as per Clause (c) of Sub-section (1) of Section 158BB of the Act, no such deduction was admissible to the appellant as due date for filing of return had expired and no return of income had been filed. Therefore, there is no dispute that the undisclosed income assessed was in excess of the undisclosed income returned by Rs. 3,76,640. Therefore, there is no dispute that the undisclosed income assessed was in excess of the undisclosed income returned by Rs. 3,76,640. The case of the appellant also is not covered under the 1st proviso of Section 158BFA(2) of the Act. No material has been placed on record, which can establish that the appellant was prevented by any reasonable cause in not filing the return for the asst. yr. 1996-97 by the due date and why the same was filed only after the search action. The failure to file the return of income by the due date being attributed to inadvertence is not acceptable. Even if it were so, it is noted that for the imposition of penalty under Section 158BFA(2) of the Act, there is no requirement that the Department should establish that the income assessed in excess of the income returned was on account of any deliberate action of an assessee. There is also no condition that in case an assessee has reasonable cause for not reflecting its undisclosed income in the return for the block period correctly, penalty cannot be levied. The only requirement for the imposition of penalty under Section 158BFA(2) of the Act is that the assessed income should be in excess of the returned income and such excess income is in the nature of undisclosed income. 9. Not satisfied with the order of the CIT(A), the assessee filed further appeal before the Tribunal challenging the said order. The Tribunal allowed the appeal vide order dt. 25th April, 2007 filed by the assessee and reversed the order of the CIT(A) by holding that it is not the case of the Revenue that the assessee either concealed the income or furnished inaccurate particulars of such income. It can be said rather the assessee is on more sound wicket due to the fact that the assessee filed the advance tax before the search and secondly, there was still time available with the assessee to file the return under Section 139(4) of the Act Hence, this appeal by the appellant Revenue. 10. We have heard Shri Yogesh Putney, advocate, learned Counsel for the Revenue. 10. We have heard Shri Yogesh Putney, advocate, learned Counsel for the Revenue. He has argued that while allowing the appeal the Tribunal has erred while holding that the respondent assessees case was covered under second proviso to Sub-clause (2) of Section 158BFA of the Act, as the second proviso to Section 158BFA(2) overrules the first proviso where the undisclosed income determined by the AO was in excess of the income shown in the return as in the present case. Learned Counsel has further argued that the assessee had not disclosed the income of Rs. 3,76,640 within the time allowed under Section 139(1), which implies that the same related to the undisclosed income because the income in question was not disclosed before the date of search and therefore, as per the provisions, Section 158BFA(2) r/w Section 158BC(c) of the Act, penalty is leviable on the amount of undisclosed income. 11. After hearing the counsel, we find no force in the arguments raised by the learned Counsel for the Revenue. The only contention raised by the Revenue before the Tribunal was to the effect that the assessee had filed the return only due to search operation, but at the same time, the fact remains that the assessee was still having time to file the return as under Sub-section (4) of Section 139 of the Act upto 31st March, 1997; search took place on 2nd Jan., 1997 and before the expiry of the said period as provided under Section 139(4) of the Act. Undisputedly, the assessee had paid the entire advance tax and was claiming refund. Therefore, in such a situation, the assessee was saved by the proviso (i) to Sub-clause (2) of Section 158BFA of the Act. For imposing penalty under Section 158BFA(4), there is discretion with the AO but at the same time, the said discretion has to be used in a judicious way. As in the present case, there is no concealment of income since the assessee has already paid the advance tax. If the assessee was having any intention not to pay the tax, he would not have paid the advance tax. 12. In the present case, the penalty is not imposable as there was no conscious breach of law by the assessee and still there was a time available to file the return under Section 139(4) of the Act. If the assessee was having any intention not to pay the tax, he would not have paid the advance tax. 12. In the present case, the penalty is not imposable as there was no conscious breach of law by the assessee and still there was a time available to file the return under Section 139(4) of the Act. The Revenue has failed to prove that there was conscious or deliberate concealment of income or furnishing of inaccurate particulars by the assessee. Rather, the Tribunal has given a finding of fact that it is not the case of the Revenue that the assessee either concealed the income or furnished inaccurate particulars of such income. It may also be mentioned here that the argument raised by the counsel for the Revenue regarding the applicability of proviso (ii) to Sub-clause (2) of Section 158BFA in the present case does not arise from the order of the Tribunal. The ground raised by the counsel for the Revenue before us was never raised before the Tribunal. Thus, the questions of law as proposed by the Revenue in the present appeal do not arise from the order of the Tribunal. 13. Hence, we find no merit in the appeal and the same is dismissed.