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2009 DIGILAW 154 (RAJ)

Commissioner of Income v. Satyendra Kumar Dosi

2009-01-19

A.M.KAPADIA, SANGEET LODHA

body2009
JUDGMENT 1. - These two appeals under the provisions of section 260A of the Income-tax Act, 1961 (in short "the Act of 1961" hereinafter) filed by the Revenue are directed against the order dated March 13, 2007, passed by the Income-tax Appellate Tribunal, Jodhpur Bench, Jodhpur (in short "ITAT" hereinafter) in ITSSA No. 14/JDPR/2006 and ITSSA No. 15/JDPR/2007 in respect of the block period for the assessment years 1996-97 to 2001-02, whereby the appeals preferred by the Revenue against separate but similar orders dated October 18, 2005, passed by the Commissioner of Income-tax (Appeals) (in short " CIT(A)" hereinafter) in the case of each of the respondent-assessees deleting the penalty imposed under section 158 BFA(2) by the Assessing Officer (in short " AO" hereinafter), stands confirmed. 2. The respondent-assessees and one Shri Virendra Kumar Dosi are brothers, who are engaged in money-lending business jointly at Banswara. A search was conducted at their residential premises on January 3, 2002. The assessees filed their respective returns for the block period in response to the notices issued under section 158BC of the Act of 1961 declaring the total undisclosed income of three brothers at Rs. 56,33,926. The Assessing Officer assessed the total undisclosed income at Rs. 88,67,116. The assessees' undisclosed income being found much more than the income declared in the block period returns, the Assessing Officer initiated the penalty proceedings against the respondents-assessees and their brother, Shri Virendra Kumar Dosi, under section 158BFA(2) of the Act of 1961. After due consideration of the explanations furnished by the assessees, the Assessing Officer levied penalty quantified at Rs. 19,39,913 (Shri Narendra Kumar Dosi Rs. 6,41,839, Satyendra Kumar Dosi Rs. 6,56,235 and Virendra Kumar Dosi Rs. 6,41,839) which comes to 100 per cent. of the tax leviable on the difference of the assessed and the returned income. It is relevant to mention here that the appeals of the assessee in quantum proceedings were decided by the learned Income-tax Appellate Tribunal and the income of the assessees after the appellate orders stands quantified at Rs.67,17,116. 3. The validity of penalty orders dated August 6, 2002, passed by the Assessing Officer as aforesaid was challenged by each of the assessees by way of separate appeals before the Commissioner of Income-tax (Appeals), Udaipur. 3. The validity of penalty orders dated August 6, 2002, passed by the Assessing Officer as aforesaid was challenged by each of the assessees by way of separate appeals before the Commissioner of Income-tax (Appeals), Udaipur. After due consideration of overall facts of the case and the decisions cited on behalf of the assessees, the learned Commissioner of Income-tax (Appeals) arrived at the finding that the difference between the assessed income and the returned income is not because of any concealment of income by the assessees or because of any inaccurate particulars of the income furnished by the assessees. According to the Commissioner of Income-tax (Appeals), the difference in opening capital claimed by the assessees and allowed by the Commissioner of Income-tax (Appeals) (in quantum appeals) was on account of different method and different calculation followed by the assessees. According to the Commissioner of Income-tax (Appeals), the assessees did not disturb the actual concealment of the income and accordingly offered undisclosed income on the basis of Neelgagan Diary seized during the course of search. Accordingly, on consideration of totality of the facts and circumstances, the learned Commissioner of Income-tax (Appeals) arrived at the finding that non-allowance of the opening capital balance by the Assessing Officer and the reduction of the opening capital balance by the Commissioner of Income-tax (Appeals) Central, Jaipur, from 35 lakhs to 15 lakhs following different method and working of the same than that of the appellants cannot be said to be undisclosed income of the assessees for the purpose of levy of penalty under section 158BFA(2). Accordingly, the penalty imposed by the Assessing Officer in the case of each of the assessees was ordered to be deleted by the learned Commissioner of Income-tax (Appeals), vide order dated October 18, 2005. 4. On further appeals, before the learned Income-tax Appellate Tribunal, it was contended on behalf of the Revenue that under section 158BFA(2) a penalty on account of difference in disclosed and assessed undisclosed income has to be imposed automatically as no reasonable cause is admissible there under. The learned Income-tax Appellate Tribunal after due consideration of the provisions of section 158BFA and the rival submissions of the parties so also the earlier decisions of the Income-tax Appellate Tribunal held that the provision of penalty as contained in section 158BFA(2) is not mandatory. The learned Income-tax Appellate Tribunal after due consideration of the provisions of section 158BFA and the rival submissions of the parties so also the earlier decisions of the Income-tax Appellate Tribunal held that the provision of penalty as contained in section 158BFA(2) is not mandatory. That apart, the learned Income-tax Appellate Tribunal opined that in the instant case, the addition is result of estimation of the opening capital involved prior to the block period and in the block assessments while computing the undisclosed income for the block period, capital possessed by the assessees prior to the block period as revealed from the ledger and the material seized during the search could not be treated as undisclosed income of the first assessment year in the block period. Accordingly, the order passed by the Commissioner of Income-tax (Appeals) deleting the penalty in case of each of the assessees has been confirmed by the learned Income-tax Appellate Tribunal by the order impugned in these appeals. 5. In these appeals, the appellants have suggested that the following substantial question of law arise out of the order passed by the learned Income-tax Appellate Tribunal for consideration of this court : "Whether, on the facts and in the circumstances of the case as well as in the law, the learned Tribunal was justified in upholding the order of the learned Commissioner of Income-tax (Appeals) deleting penalty levied under section 158BFA(2) on the basis of wrong facts that the said income in real sense does not relate to the block period as such and by ignoring the vast difference in interpretation of section 158BFA(3) and section 273B of the Income-tax Act" ? 6. However, during the course of arguments, the learned counsel for the appellant submitted that yet another question as to " whether the provisions of section 158BFA(2) providing for penalty on account of difference in disclosed and assessed undisclosed income is mandatory or discretionary" ? also arise for consideration of this court in these appeals. 7. It is contended by the learned counsel for the appellant that the learned Income-tax Appellate Tribunal has erred in holding that the disputed income in real sense does not relate to the block period as such. The learned counsel submitted that what relates to the earlier period is the opening capital which is on estimate basis and not the income on which penalty is levied. The learned counsel submitted that what relates to the earlier period is the opening capital which is on estimate basis and not the income on which penalty is levied. The learned counsel submitted that even if the addition is result of estimated addition, a penalty shall be imposed on that portion of the undisclosed income so determined which is in excess of the amount of undisclosed income shown in the return. The learned counsel submitted that section 158BFA(3) only provides for reasonable opportunity being granted to the assessees before imposition of penalty but, in no manner it can be inferred from the provision that no penalty is leviable if the reasonable cause is shown, as it is in certain cases covered by the provisions of section 273B. Accordingly, it is submitted by the learned counsel that the penalty under section 158BFA in respect of undisclosed income determined by the Assessing Officer is automatic. 8. We have considered the submissions of the learned counsel for the appellant and also perused the record. 9. Accordingly, it is submitted by the learned counsel that the penalty under section 158BFA in respect of undisclosed income determined by the Assessing Officer is automatic. 8. We have considered the submissions of the learned counsel for the appellant and also perused the record. 9. Since the controversy involved in these appeals rolls round the provisions of section 158BFA(2), it will be beneficial to reproduce the same : " 158BFA.(2) The Assessing Officer or the learned Commissioner of Income-tax (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 person if ; (i) such person has furnished a return under clause (a) of section 158BC ; (ii) the tax payable on the basis of such return has been paid or, if the assets seized consist of money, the assessee offers the money so seized to be adjusted against the tax payable ; (iii) evidence of tax paid is furnished along with the return ; and (iv) an appeal is not filed against the assessment of that part of income which is shown in the return : Provided further that the provisions of the preceding proviso shall not apply where the undisclosed income determined by the Assessing Officer is in excess of the incomes shown in the return and in such cases the penalty shall be imposed on that portion of undisclosed income determined which is in excess of the amount of undisclosed income shown in the return." 10. A bare perusal of section 158BFA(2) goes to show that by virtue of the said provision, the Assessing Officer or the Commissioner (Appeals) is vested with the power to direct the assessee to pay the penalty as specified in respect of the undisclosed income determined by the Assessing Officer under clause (c) of section 158BC, however, the Assessing Officer or the Commissioner of Income-tax (Appeals) is not empowered to impose the penalty in respect of the person who fulfils the conditions enumerated in the first proviso to section 158BFA. It is to be noticed that in the main provision providing for imposition of penalty, the word " may" has been used. It is settled law that the penal provision in the taxing statutes shall be construed strictly. From the plain reading of section 158BFA(2), it does not appear that in all the cases where the undisclosed income is determined by the Assessing Officer under clause (c) of section 158BC, the imposition of penalty as specified under section 158BFA shall follow as a natural consequence thereof. In our considered opinion, in terms of section 158BFA, a discretion is vested with the Assessing Officer to levy the penalty in respect of the undisclosed income but it cannot be inferred from the said provision that 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. 11. The contention raised by the learned counsel on the strength of the provisions of sections 273B and 158BFA(3) is also devoid of any merit. Of course, as per the provision of section 273B no penalty shall be imposable on the person or the assessee, as the case may be, on their failure referred to in the said provisions if he proves that there was reasonable cause for the said failure. But then the said provision in no manner leads to the presumption that in respect of the cases other than covered by section 273B for any failure or violation imposition of the penalty is automatic. Each provision of penalty has to be construed independently keeping in view the language employed therein. 12. For the aforementioned reasons, we are of the considered opinion that the learned Income-tax Appellate Tribunal has committed no error in holding that the provisions of section 158BFA(2) providing for imposition of penalty in respect of the undisclosed income determined by the Assessing Officer under clause (c) of section 158BC is discretionary and not mandatory. 13. Moreover, in the instant case, after due examination of the facts and the material on record, the Commissioner of Income-tax (Appeals) and learned Income-tax Appellate Tribunal have concurrently found that the difference of the undisclosed income assessed and the undisclosed income shown in the return does not relate to the block period as such. 13. Moreover, in the instant case, after due examination of the facts and the material on record, the Commissioner of Income-tax (Appeals) and learned Income-tax Appellate Tribunal have concurrently found that the difference of the undisclosed income assessed and the undisclosed income shown in the return does not relate to the block period as such. The Income-tax Appellate Tribunal has arrived at the finding that the assessees had claimed to give reduction of amounts calculated on reasonable basis on account of their opening capital as on April 1, 1995, from the unaccounted money lending business prior to block period out of the undisclosed income determined in their hands. The learned Income-tax Appellate Tribunal has rightly held that the addition is result of estimation of the opening capital involved prior to the block period and in the block assessments while computing the undisclosed income for the block period, capital possessed by the assessees prior to the block period as revealed from the ledger and the material seized during the search could not be treated as undisclosed income of the first assessment year in the block period. Thus, in view of the concurrent finding of facts arrived at by the two appellate authorities, as aforesaid, in our considered opinion, no substantial question of law arises for consideration of this court in these appeals. 14. In the result, the appeals fail, the same are hereby dismissed. No order as to costs. *******