Income Tax Appellate Tribunal - Chennai
P.A.Habibulla, Salem vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
CHENNAI BENCH "A "
BEFORE SHRI U.B.S.BEDI, JUDICIAL MEMBER AND SHRI N.S.SAINI, ACCOUNTANT
MEMBER
Date of hearing : Drafted on:
IT(SS) No.26/Mds./09
Block Period: 01.08.09 to 14.07.09
Deputy Commissioner of Vs.Shri P.A.Habibulla,
Income Tax, C/o.Five Star Readymades,
Company Circle,Salem. 162,First Agraharam,
Salem 636 001.
PAN/GIR No. : AALPH 1157 J
(APPELLANT) .. (RESPONDENT)
Appellant by : Shri Shaji P. Jacob
Respondent by: Shri S. Sridhar
ORDER
PER N.S.SAINI , ACCOUNTANT MEMBER :-
This is an appeal filed by the Revenue against the order of the Learned Commissioner of Income Tax(Appeals)- , dated 30.03.09.
2. In this appeal, the assesse has taken six grounds of appeal and the only issue involved in all the grounds of appeal is that the CIT(A) was not justified in confirming the levy of penalty of Rs.8,25,500/- u/s.158BFA(2) of the Act.
3. The brief facts of the case are that a search u/s.132 of the Act was conducted at the residential cum business premises of the assesse group at Pallapatti and 14 other business premises on 14.07.99. A survey was also conducted in the business premises at Theni and Dindugul. In the course of search and survey, incriminating documents and books of account in addition to cash of Rs.10.2 lakhs were seized. In pursuance to the notice u/s.158BC of the Act, the assesse filed a block return for the period ending 14.07.99 on 07.03.00 disclosing undisclosed income of Rs.6,01,520/-. The assessment was completed on 30.0701 determining undisclosed income at Rs.22,85,161, which was reduced in appeal to Rs.19,77,362/-. The additional income assessed was on account of addition made for investment in kitchen of Rs.4 lakhs, on-money transaction of Rs.1 lakh and circulating capital and cash seized Rs.9,77,362/-. Since the assesse had disclosed -2- undisclosed income of Rs.6,01,520/-, the AO levied penalty u/s.158BFA(2) on the difference amount of Rs.13,75,842/-, which worked out to Rs.8,25,500/-
4. In appeal before the CIT(A), the assesse submitted that levy of penalty was not justified, since there is a discretion that the Assessing Officer to levy the penalty or not. It was also submitted that the Mumbai Bench of the Tribunal in the case of DCIT Vs. Koatex infrastructure ltd. [2006] 100 ITD 510 has held that levy of penalty u/s.158BFA(2) was discretionary and there is a necessity for the Learned Assessing Officer to bring independent material for making the addition. It was further submitted that the assesse filed the return on net-worth basis and though the net-worth statement filed with the return in form No.2B had undergone change during the course of assessment proceedings, the undisclosed income in the returned income remains same. It was also submitted that the Assessing Officer did not discover any independent material for making the addition and therefore no penalty was leviable u/s.158BFA(2). The assesse filed return u/s.158BC and paid all the taxes due on the undisclosed income determined by the Assessing Officer. The interest u/s.158BFA(1) was also waived by the CIT. The assesse further relied on the decision of Hon'ble Delhi High Court in the case of CIT Vs. Hrkarandas Vedpal [2009] 222 CTR 438 where it was held that if there is a bonafide surrender and undisclosed income was computed merely on the basis of such surrender, no penalty would be imposable u/s.158BFA(2).
5. The CIT(A) after considering the above submissions held that undisclosed income had not undergone any change and the finding of the Assessing Officer in the assessment order confirms the fact. The Assessing Officer has brought no independent material for making addition as well as the levy of penalty . The Assessing Officer has not made out a case of the concealment of income or the furnishing of inaccurate particulars while arriving at the additional income. He relied on the decision of Hon'ble Madras High Court in the case of CIT vs. Dodsal [2008] in 218 CTR 430 where it was held that the levy of penalty was discretionary and penalty was not imposable merely because the assessed income was more than the income declared by the assesse. He also noted that in the assessment order the AO has given a finding in page-2 that though the net worth statement filed along with the return in form 2B had undergone change during the course of assessment proceedings, the undisclosed income returned remained the same. Therefore, the CIT(A) held that the difference arose mainly on account of the difference in net-worth computed by the AO. Accordingly, the CIT(A) deleted the penalty observing that there is no justification for levy of penalty u/s.158BFA(2).
-3-6. The Departmental Representative submitted that the observation of the CIT(A) that the undisclosed income shown in the block return had not undergone any change was not correct as the assesse showed the undisclosed income of Rs.6,01,520/- in block return against which undisclosed income assessed was Rs.19,77,362/- Thus, there was a difference of Rs.13,75,842/- between the returned income and the assessed income and therefore, the penalty was rightly levied by the AO and the CIT(A) was not justified in deleting the same. The Departmental representative also relied on the decision of Delhi bench of the Tribunal in the case of Kay Cee electricals Vs. DCIT [2003] 87 ITD 35 (Del.) where it was held that in view of provisions of Sec.158BFA recourse to the provisions of Explantion-5 to Sec.271(1)(c) cannot be taken to determine the scope of undisclosed income and therefore, the definition of undisclosed income given in Sec.158B(b) would apply. He also relied on the decision of the Mumbai Bench of the Tribunal in the case of spark electric communication systems [2006] 98 ITD 237 (Mum.) where it was held that where the AO made certain additions in block assessment on account of various incomes which were not offered by the assessee in block return, but were subsequently declared during assessment proceedings, penalty/s.158BFA(2) was leviable.
7. The Authroised representative of the assesse on the other hand submitted that the addition of Rs.4 lakhs made on account of investment in kitchen was based on the Valuer's report. He submitted that this was already disclosed in the regular return of income by the assesse. No material was found in the search and therefore, addition made on the basis of valuer's report cannot be a ground for imposing penalty u/s.158BFA. He submitted that addition of Rs.9,77,362/- on account of circulating capital and cash seized was arrived at with reference to seized books and as per the figures given by the assesse during the course of assessment proceedings and therefore no penalty u/s.158BFA could be levied.
8. We have heard the rival submissions and perused the orders of the lower authorities and the materials available on record. In the instant case, penalty of Rs.8,25,500/- was imposed by the Learned Assessing Officer u/s.158BFA(2) of the Act on difference between returned income for the block period of Rs.6,01,520/- and assessed income of `19,77,362/- On appeal the Learned Commissioner of Income Tax (Appeals) deleted the above penalty by observing as under:-
-4-"6. After considering the submissions of the appellant and the contentions of the Learned Assessing Officer, I am of the view that this is a case where the undisclosed income has not undergone any change and the finding of the Learned Assessing Officer in the assessment order also confirm the fact. I also find that the Learned Assessing Officer has not brought out any independent material for making the addition as well as levy of penalty. The Learned Assessing Officer also has not made out a case of concealment of income or furnishing of inaccurate particulars while arriving at the additional income. The Hon'ble Mumbai High Court in the case of CIT Vs. Dodsal (218 CTR 430)(2008) has given a finding that the levy of penalty is discretionary and penalty is not imposable merely because the assessed income is more than the income declared by the appellant. I also find that the Learned Assessing Officer has given a finding in page No.2 of the assessment order that though the net worth statement filed along with the return in Form 2B has undergone change during the course of assessment proceedings, the undisclosed income returned remains the same. I find that the difference arose mainly on account of the difference in net worth computed by the Learned Assessing Officer. Therefore, I am of the view that there is no justification for levy of penalty u/s.158BFA(2) and penalty is directed to be deleted."
9. Before us the Learned Departmental Representative pointed out that assessed income was Rs.19,77,362/- whereas returned income was Rs.6,01,520/- and therefore, the Learned Commissioner of Income Tax (Appeals) was not justified in deleting the penalty by observing that undisclosed income has not undergone any change and difference has arose only because of net worth computed by the Learned Assessing Officer.
10. We find that copy of net worth computation as filed by the assessee along with return of income was not produced before us by either of the parties. From the order of the Learned Commissioner of Income Tax (Appeals) also it could not be deciphered that how difference in returned income and assessed income arose only because of change in computation of net worth and not because of non-disclosure of any income by the assessee. In our considered view, the order of the Learned Commissioner of Income Tax (Appeals) is non-speaking order as it has not mentioned details of difference between -5- the returned income and assessed income and has not discussed the issue in complete details. In these circumstances, we are not in a position to adjudicate the issue fully. We therefore, in the interest of justice restore the matter back to the file of the Learned Commissioner of Income Tax (Appeals) and direct him to adjudicate the issue afresh by passing a speaking order and bringing all the relevant material on record after allowing reasonable opportunity of hearing to both the parties.
11. Thus, this appeal of the Revenue is allowed for statistical purposes.
Order signed, dated and pronounced in the Court on this 27th day of MAY, 2011.
Sd/- Sd/-
(U.B.S.BEDI) ( N.S. SAINI )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: Chennai, 27th day of MAY, 2011.
Compiled and compared by: KSS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent
3. The CIT Concerned
4. The ld. CIT(Appeals)-
5. The DR, Chennai Bench
6. The Guard File.
BY ORDER,
स×याǒपत ूित //True Copy//
(Dy./Asstt.Registrar), ITAT, CHENNAI
Date Initials
1. Draft dictated on 04.05.11 -------------------
2. Draft Placed before authority 06.5.11 -------------------
3. Draft proposed & placed 10.05.11 ------------------- JM
Before the Second Member
4. Draft discussed/approved --------------- ------------------- JM/AM
By Second Member
5. Approved Draft comes to P.S ---------------- --------------------
6. Kept for pronouncement on ---------------- --------------------
7. File sent to the Bench Clerk ---------------- --------------------
8. Date on which file goes to the ---------------- --------------------
-6-
9. Date of dispatch of Order ---------------- ---------------------