ITO, Ward 1(3), Nashik V. Shri Babasaheb Barku Kolhe, Nashik

ITA 1652/PUN/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2778 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-01-2016
• Assessment Year: misc
• Appeal Filed On: 30-08-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT HALDER
• Keywords: Unexplained investment; Unexplained expenditure; Salary income; Document seized; Block assessment; Benefit of exemption; Documents seized
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , AM ITA NO. 1652 /PN/201 3 BLOCK PERIOD 01 - 04 - 1996 TO 25 - 03 - 2003 ITO, WARD - 1(3), NASHIK . APPELLANT VS. SHRI BALASAHEB BARKU KOLHE, CHETAK APARTMENT, SAUBHAGYA NAGAR, GANGAPUR ROAD, NASHIK PAN NO.ALIPK0277A . RESPONDENT / APPELLANT BY : SHRI ABHIJIT HALDER / RESPONDENT BY : SMT. DEEPA KHARE / DATE OF HEARING : 07 . 0 1. 201 6 / DATE OF PRONOUNCEMENT: 29 .01.2016 / ORDER PER SUSHMA CHOWLA, JM : TH I S APPEAL FIL ED BY THE REVENUE IS AGAINST THE ORDER OF CIT (A) - I , NASHIK RELATING TO BLOCK PERIOD 01 - 04 - 1996 TO 25 - 03 - 2003 AGAINST PENALTY LEVIED UNDER SECTION 158BFA(2) OF THE I.T. ACT, 1961. 2. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST DELETION OF PENALTY L EVIED U/S.158BFA(2) OF THE ACT AT RS. 40,39,380 / - . 2 ITA NO . 1652 /PN/201 3 3. BRIEF LY , IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF REAL ESTATE. S EARCH U/S.132 OF THE I.T. ACT WAS CARRIED OUT AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSE E ON 25 - 03 - 2003. DURING THE COURSE OF SEARCH, STATEMENT OF THE ASSESSEE WAS RECORDED U/S.132(4) OF THE ACT AND THE ASSESSEE DECLARED ADDITIONAL UNDISCLOSED INCOME OF RS.65 LAKHS. PURSUANT TO THE NOTICE ISSUED U/S.158BC OF THE ACT FOR THE BLOCK PERIOD, THE ASSESSEE FILED RETURN OF INCOME DECLARING UNDISCLOSED INCOME OF RS.67,50,000/ - . THE ASSESSMENT U/S.158BC R.W.S. 143(3) OF THE ACT WAS COMPLETED BY THE AO ON 29 - 03 - 2005 AT TOTAL UNDISCLOSED INCOME OF RS.96,52,840/ - . THE AO NOTED THAT THE ASSESSEE HAD NOT PAID ANY TAXES ON THE UNDISCLOSED INCOME OF RS.67,50,000/ - , SHOWN BY HIM IN THE RETURN OF INCOME FOR THE BLOCK PERIOD. FURTHER, THE ASSESSEE HAD NOT FURNISHED ANY DETAILS OF ANY WORKING OF THE UNDISCLOSED INCOME OF RS.67,50,000/ - . DESPITE SPECIFIC QUERI ES RAISED BY THE AO NO DETAILS RS.67,50,000/ - . DESPITE SPECIFIC QUERI ES RAISED BY THE AO NO DETAILS OF THE SAID DECLARATION WERE FILED BY THE ASSESSEE AND HE ONLY STATED THAT THE SAME WAS ON ESTIMATE BASIS. AS AGAINST THE DECLARATION OF UNDISCLOSED INCOME OF RS.67,50,000/ - , THE ASSESSMENT WAS COMPLETED AT RS.96,52,840/ - . CONSEQUENTLY PENALTY PROCEEDINGS U/S.158BFA(2) OF THE ACT WAS INITIATED. SEVERAL NOTICES WERE ISSUED TO THE ASSESSEE BUT THERE WAS NO COMPLIANCE BY THE ASSESSEE. 4. THE FIRST ADDITION MADE IN THE HANDS OF THE ASSESSEE WAS ON ACCOUNT OF UNEXPLAINED INV ESTMENTS AND EXPENDITURE REFLECTED IN THE SEIZED DOCUMENTS. AFTER CONSIDERING THE REPLY OF THE ASSESSEE THE ADDITION OF RS.78,96,577/ - WAS MADE IN THE HANDS OF THE ASSESSEE. ANOTHER ADDITION MADE WAS ON ACCOUNT OF ANOTHER SEIZED DOCUMENT RELATING TO THE PROPERTY KNOWN AS POLICE COMMISSIONERS PROPERTY TO 3 ITA NO . 1652 /PN/201 3 THE EXTENT OF RS.13,24,000/ - . FURTHER, THE AO HAD MADE ADDITION OF RS.71,000/ - ON ACCOUNT OF SALARY RECEIVED BY THE ASSESSEE AS DIRECTOR OF M/S. SHREE SAMARTH DEVELOPER PVT. LTD. FURTHER, DOCUMENT NO. A NNEXED AS A22 SEIZED FROM THE OFFICE PREMISES OF THE ASSESSEE , WHICH CONTAINED THE DETAILS OF INVESTMENTS AND EXPENDITURE INCURRED FOR THE CONSTRUCTION OF HOUSE IN THE NAME OF SHRI IMRAN NAZIM PATEL. THE PAGES 109 AND 110 CONTAIN ED NOTINGS OF EXPENSES IN RESPECT OF CONSTRUCTION OF BUILDING AND THE TOTAL EXPENDITURE AGGREGATED TO RS.3,61,260/ - . THE AO NOTED THAT SHRI IMRAN NAZIM PATEL WAS AN EMPLOYEE OF THE ASSESSEE AND HE FILED A LETTER DATED 21 - 03 - 2005 BEFORE THE AO STATING THAT THE SAID EXPENDITURE WAS INCURRED BY HIS EMPLOYER, I.E. BY THE ASSESSEE AND THIS FACT WAS ALSO ADMITTED BY THE ASSESSEE. SINCE A SUM OF RS.3,61,260/ - WAS NEITHER CONSIDERED BY THE ASSESSEE IN THE CASH FLOW STATEMENT NOR WAS CONSIDERED BY THE AO IN THE PEAK STATEMENT PREPARED FOR THE UNDISCLOSED TRANSACTIONS AO IN THE PEAK STATEMENT PREPARED FOR THE UNDISCLOSED TRANSACTIONS OF THE ASSESSEE, THE SUM OF RS.3,61,260/ - WAS ADDED AS UNDISCLOSED INCOME OF THE ASSESSEE IN THE BLOCK RETURN PERIOD. THE AO NOTED THAT EVEN DURING THE COURSE OF PENALTY PROCEEDINGS, THE ASSESSEE FAILED TO PRODUCE ANY DOCUMEN TARY EVIDENCE TO EXPLAIN NATURE OF THE UNDISCLOSED TRANSACTIONS, INVESTMENTS AND EXPENDITURE CONSIDERED FOR THE BLOCK PERIOD. ANOTHER POINTED NOTED BY THE AO WAS THAT THOUGH THE ASSESSEE HAS FILED THE RETURN OF INCOME DECLARING TOTAL UNDISCLOSED INCOME OF RS.67,50,000/ - ON WHICH TAX PAYABLE INCLUDING INTEREST AND SURCHARGE WORKED OUT TO RS.44,55,000/ - . HOWEVER, THE ASSESSEE FAILED TO PAY THE SAID AMOUNT OF RS.44,55,000/ - BEFORE FILING THE RETURN FOR THE BLOCK PERIOD U/S.158BC OF THE ACT. 4 ITA NO . 1652 /PN/201 3 5. ANOTHER ASPEC T NOTED BY THE AO WAS THAT THE ASSESSEE HAD NOT PRODUCED THE CHALLAN ALONG WITH RETURN OF INCOME OR EVEN THEREAFTER TILL THE DATE OF PASSING OF THE PENALTY ORDER U/S.158BFA OF THE ACT. THE AO, THUS, WAS OF THE VIEW THAT THE ASSESSEE HAD NOT FULFILLED THE SECOND AND THE THIRD CONDITION GIVEN IN FIRST PROVISO TO SUB - SECTION (2) OF SECTION 158BFA OF THE ACT, EVEN IN RESPECT OF UNDISCLOSED INCOME OF RS.67,50,000/ - SHOWN IN THE RETURN OF INCOME. THE AO FURTHER NOTED THAT THE ASSESSEE WAS LIABLE FOR PENALTY U/S .158BFA(2) OF THE ACT EVEN IN RESPECT OF THE UNDISCLOSED INCOME OF RS.29,02,087/ - , THE DIFFERENCE BETWEEN RS.96,52,837/ - AND RS.67,50,000/ - . THE AO COMPUTED THE PENALTY @ 100% OF THE TAX ON THE ASSESSED UNDISCLOSED INCOME OF RS.96,52,837/ - AT RS.60,55,687 / - AND PASSED THE ORDER LEVYING PENALTY UNDER SECTION 158BFA(2) OF THE ACT . 6. BEFORE THE CIT(A) THE FIRST CONTENTION OF THE ASSESSEE WAS THAT BECAUSE OF FINANCIAL HARDSHIP OF THE ASSESSEE, THE TAXES DUE ON THE RETURN ED INCOME W ERE NOT PAID IN TIME AND TH E APPEAL WAS ALSO FILED AFTER ALMOST 2 YEARS, I.E. AFTER PAYMENT OF THE TAXES. HE FURTHER CONTENDED THAT THE DELAY IN FILING THE APPEAL BEFORE THE CIT(A) WAS CONDONE D AND THEREAFTER THE APPEAL WAS HEARD AND VARIOUS ADDITIONS WERE DELETED , WITH DIRECTION S TO THE AO TO RESTRICT THE FINALLY ASSESSED INCOME AS UNDISCLOSED IN THE RETURN OF INCOME FOR THE BLOCK PERIOD. WHILE ARGUING THE APPEAL AGAINST THE ORDER LEVYING THE PENALTY U/S.158BFA OF THE ACT THE LD. AR FOR THE ASSESSEE FURTHER REFERRED TO THE REASONS FOR NON - PAYMENT OF TAXES DUE ON THE RETURNED INCOME AND MADE A REQUEST FOR DELETION OF PENALTY LEVIED U/S.158BFA OF ACT. 7. THE CIT(A) VIDE P ARA 4.3 HELD THAT THE PENALTY U/S.158BFA OF THE ACT HAS BEEN LEVIED ON 2 ACCOUNTS, I.E. THE INCOME RETURNED BY 5 ITA NO . 1652 /PN/201 3 TH E ASSESSEE FOR THE BLOCK PERIOD AT RS.67,50,000/ - AND ALSO ADDITION OF RS.29,02,837/ - , I.E. THE AMOUNT WORKED OUT AFTER GIVING BENEFIT OF THE INCOME RETURNED FROM THE TOTAL UNDISCLOSED INCOME ASSESSED IN THE HANDS OF THE ASSESSEE. THE CIT(A) FURTHER NOTED THAT THE ADDITIONS IN THE HANDS OF THE ASSESSEE HAVE BEEN DELETED BY THE CIT(A) AND THE AO HAS BEEN DIRECTED TO ACCEPT THE UNDISCLOSED INCOME RETURNED BY THE ASSESSEE. IN VIEW OF THE DELETION OF THE ADDITIONS MADE BY THE CIT(A) IN QUANTUM APPEAL, IN THE LEVY OF PENALTY APPEAL, THE CIT(A) HELD THAT THERE WAS NO MERIT IN THE PENALTY U/S.158BFA(2) OF THE ACT. HENCE, THE AO WAS DIRECTED TO CANCEL THE PENALTY PROCEEDINGS IN RESPECT OF THE ADDITION OF RS.29,02,837/ - , WHICH WAS DELETED BY THE CIT(A). 8. IN RES PECT OF THE INCOME RETURNED BY THE ASSESSEE AT RS.67,50,000/ - FOR THE BLOCK PERIOD THE CIT(A) OBSERVED THAT THE AO HAD IMPOSED PENALTY AS THE ASSESSEE HAD NOT PAID THE TAX ES PAYABLE ON THE BASIS OF RETURN OF INCOME FILED AND AS EVIDENCE OF TAX PAID W AS NOT FURNISHED ALONG WITH THE RETURN. FURTHER, IT WAS A UNDISPUTED FACT THAT THE ASSESSEE HAD PAID THE TAXES ON THE RETURNED INCOME AFTER A GAP OF ALMOST 2 YEARS, WHEREAS THE RETURN OF INCOME FOR THE BLOCK PERIOD DECLARED INCOME OF RS.67,50,000/ - WAS FILED ON 06 - 08 - 2004. THE CIT(A) REFERRED TO THE PROVISIONS OF SECTION 158BFA(2) OF THE ACT AND THE DECISION OF HONBLE HIGH COURT OF KERALA IN THE CASE OF M/S. HEERA CONSTRUCTION CO. PVT. LTD. REPORTED IN 337 ITR 359 AND OBSERVED THAT THE HONBLE HIGH COURT HAD DIRECTED NOT TO LEVY PENALTY U/S.158BFA(2) OF THE ACT IN THE SAID CASE BECAUSE THE TAXES ON THE RETURNED INCOME WERE NOT PAID BY THE ASSESSEE DUE TO PROVED FINANCIAL DIFFICULTIES. THE CIT(A) WAS OF THE VIEW THAT THE FACTS OF THE 6 ITA NO . 1652 /PN/201 3 PRESENT CASE WERE IDENTIC AL TO THE FACTS BEFORE THE HONBLE HIGH COURT OF KERALA AND APPLYING THE SAID RATIO HELD THAT THERE IS NO MERIT IN THE IMPOSITION OF PENALTY U/S.158BFA(2) OF THE ACT. 9. ANOTHER POINT RAISED BY THE CIT(A) WAS THAT SINCE THE INCOME IN THE CASE OF THE BLOCK ASSESSMENT WAS NOT DETERMINED ON THE BASIS OF EVIDENCE FOUND AS A RESULT OF SEARCH ACTION, NO PENALTY U/S.158BFA(2) WAS LEVIABLE IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HARKARAN DAS VED PAL REPORTED IN 336 ITR 8. 10. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF THE CIT(A). THE LD. DR FOR THE REVENUE POINTED OUT THAT WHERE THE ASSESSEE HAD NOT PAID THE TAXES ON THE RETURNED INCOME OF THE BLOCK PERIOD, THE PENALTY U/S.158BFA(2) OF THE ACT IS LEVIABLE FOR NON - F ULFILMENT OF THE CONDITIONS LAID DOWN IN THE PROVISO TO THE SUB - SECTION. IT WAS FURTHER CONDITIONS LAID DOWN IN THE PROVISO TO THE SUB - SECTION. IT WAS FURTHER CONTENDED B Y THE LD. DR FOR THE REVENUE THAT THE ORDER OF THE CIT(A) IS TO BE REVERSED IN THIS REGARD. 11. THE LD. AR FOR THE ASSESSEE ON THE OTHER HAND POINTED OUT T HAT THOUGH SEVERAL ADDITIONS WERE MADE IN THE HANDS OF THE ASSESSEE, PARTLY ADDITIONS HAVE BEEN DELETED BY THE CIT(A) AND SUSTAINED BY THE TRIBUNAL AND THE ISSUE HAS BEEN SET ASIDE TO THE FILE OF THE AO. IN THIS REGARD, THE LD. AR FOR THE ASSESSEE REQUEST ED THAT THE PENALTY PROCEEDINGS MAY ALSO BE SET ASIDE TO THE FILE OF THE AO. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. PURSUANT TO SEARCH U/S.132 OF THE ACT ON 25 - 03 - 2003 AT THE RESIDENTIAL AND OFFICE PREMISES OF THE ASSESSEE, THE A SSESSEE IN THE 7 ITA NO . 1652 /PN/201 3 STATEMENT RECORDED U/S.132(4) OF THE ACT DECLARED UNDISCLOSED INCOME OF RS.85 LAKHS. HOWEVER, IN THE RETURN OF INCOME FOR THE BLOCK PERIOD, THE ASSESSEE DECLARED ONLY UNDISCLOSED INCOME TO THE EXTENT OF RS.67,50,000/ - . AS AGAINST THIS THE ASSESSMENT IN THE CASE WAS COMPLETED ON TOTAL UNDISCLOSED INCOME OF RS.96,52,840/ - . THE AO HOWEVER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD FAILED TO PAY THE TAXES ON THE UNDISCLOSED INCOME OF RS.67,50,000/ - . HOWEVER, WHILE LEVYING THE PENALTY U/S.158BFA(2) OF THE ACT, THE AO COMPUTED THE PENALTY ON 2 COUNTS, FIRST ON THE UNDISCLOSED INCOME OF RS.67,50,000/ - SHOWN IN THE RETURN OF INCOME, I.E. THE DIFFERENCE BETWEEN THE ASSESSED UNDISCLOSED INCOME OF RS.96,52,837/ - AND DECL ARED UNDISCLOSED INCOME OF RS.67,50,000/ - . PENALTY OF RS.60,50,687/ - WAS LEVIED UPON THE ASSESSEE U/S.158BFA(2) OF THE ACT. WHILE DECIDING THE APPEAL AGAINST THE PENALTY ORDER U/S.158BFA(2) OF THE ACT, THE CIT(A) VIDE AGAINST THE PENALTY ORDER U/S.158BFA(2) OF THE ACT, THE CIT(A) VIDE PARA 4.3 OF THE ORDER NOTED THAT THE ORDER OF THE AO IMPOSING PENALTY ON 2 ASPECTS, I.E. THE INCOME RETURNED IN THE BLOCK PERIOD AT RS.67,50,000/ - AND ALSO ON ADDITION OF RS.29,02,837/ - . THE CIT(A) VIDE PARA 4.3.1 AT PAGE 7 OF THE ORDER NOTED THAT THE CIT(A) HAD DELETED THE ADDITION OF RS.2 9,02,837/ - AND THE AO WAS ACCORDINGLY DIRECTED TO CANCEL THE PENALTY IMPOSED ON THE AFORESAID ADDITION. THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDER OF CIT(A) IN DELETING THE AFORESAID PENALTY LEVIED U/S.158BFA(2) OF THE ACT. 13. WE FIND THE TRIB UNAL WHILE DECIDING THE QUANTUM CROSS APPEALS IN ASSESSEES CASE IN ITA NO. 803/PN/2010 THE APPEAL FILED BY THE REVENUE AND IN ITA NO.784/PN/2010 THE APPEAL FILED BY THE ASSESSEE FOR THE BLOCK PERIOD VIDE ORDER DATED 15.07.2015 HAS RESTORED THE 8 ITA NO . 1652 /PN/201 3 FIRST ISSUE ON ADDITION ON ACCOUNT OF PEAK UNEXPLAINED EXPENDITURE OF RS.78,96,577/ - . THE OTHER TWO ADDITIONS, I.E. UNEXPLAINED PAYMENT ON ACCOUNT OF POLICE COMMISSIONERS LAND AMOUNTING TO RS.13,24,000/ - AND UNDISCLOSED SALARY INCOME OF RS.71,000/ - WAS DELETED BY T HE CIT(A) AND THE SAID ORDER OF THE CIT(A) HAS BEEN UPHELD BY THE TRIBUNAL. CONSEQUENTLY, NO ADDITION HAS BEEN RETAINED AMOUNTING TO RS.13,24,000/ - AND RS.71,000/ - . IN RESPECT OF THE 4 TH ADDITION, I.E. THE INVESTMENT IN RESIDENTIAL PROPERTY, DOCUMENT IN RESPECT OF WHICH WERE FOUND DURING THE COURSE OF SEARCH AMOUNTING TO RS.3,61,260/ - THE ASSESSEE IN THE FACT SHEET FILED BEFORE US DECLARED THAT THE SAID ADDITION WAS NOT PRESSED BEFORE CIT(A) AND HENCE THE SAME STANDS CONFIRMED. 14. NOW COMING TO THE ISSU E OF LEVY OF PENALTY U/S.158BFA(2) OF THE ACT IN RESPECT OF THE INCOME DECLARED BY THE ASSESSEE IN THE BLOCK RETURN AND THE ADDITIONS MADE BY THE AO, WE FIND THAT IN RESPECT OF TWO ADDITIONS, I.E. UNEXPLAINED PAYMENT ON ACCOUNT OF POLICE COMMISSIONERS LAN D AMOUNTING TO RS.13,24,000/ - AND UNDISCLOSED SALARY INCOME ASSESSED IN THE HANDS OF THE ASSESSEE AT RS.71,000/ - , HAVE BEEN DELETED BY THE CIT(A) AND HAVE BEEN CONFIRMED BY THE TRIBUNAL. IN THE ABSENCE OF ANY ADDITION BEING RETAINED IN THE HANDS OF THE AS SESSE E , THERE IS NO MERIT IN THE LEVY OF PENALTY U/S.158BFA(2) OF THE ACT. ACCORDINGLY, WE DIRECT THE AO TO DELETE THE ADDITION. 15. IN RESPECT OF THE 3 RD ADDITION, I.E. UNEXPLAINED INVESTMENTS IN RESIDENTIAL HOUSE OF RS.3,61,260/ - , WHERE THE ASSESSEE HA D NOT PRESSED THE GROUNDS OF APPEAL AND IN VIEW THEREOF THE ADDITION HAS BEEN CONFIRMED IN THE HANDS OF THE ASSESSEE, WE REVERSE THE ORDER OF THE CIT(A) IN THIS REGARD . W HERE THE ASSESSEE HAD NOT DECLARED A 9 ITA NO . 1652 /PN/201 3 PARTICULAR EXPENDITURE NOTED ON THE SEIZED DOCUM ENT FOUND DURING THE COURSE OF SEARCH, AS PART OF ITS ADDITIONAL INCOME ON EITHER OF THE COUNTS, THE EXEMPTION PROVIDED UNDER THE PROVISO TO SECTION 158BFA (2) OF THE ACT IS NOT AVAILABLE TO THE ASSESSEE. IN VIEW THEREOF WE UPHOLD THE LEVY OF PENALTY U/S.1 58BFA(2) OF THE ACT. 16. NOW COMING TO THE AMOUNT OF ADDITION MADE ON ACCOUNT OF PEAK UNEXPLAINED EXPENDITURE AT RS.78,96,577/ - WHICH INTURN HAS BEEN SET ASIDE AGAINST THE INCOME DECLARED BY THE ASSESSEE IN THE BLOCK RETURN AT RS.67,50,000/ - AND PENALTY U /S.158BFA(2) OF THE ACT HAS BEEN LEVIED ON THE DIFFERENTIAL AMOUNT. IN VIEW OF THE ISSUE BEING SET ASIDE BY THE TRIBUNAL TO THE FILE OF THE AO TO RE - DETERMINE THE ADDITION, IF ANY IN THE HANDS OF THE ASSESSEE, WE REVERSE THE ORDER OF CIT(A) IN THIS REGARD AND REMIT THE ISSUE BACK TO THE FILE OF THE AO TO DECIDE THE LEVY OF PENALTY U/S.158BFA(2) OF THE ACT, ON THE ASSESSED UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE. THE AO SHALL PROVIDE REASONABLE OPPORTUNI TY OF HEARING TO THE ASSESSEE BEFORE LEVYING THE AFORESAID PENALTY U/S.158BFA(2) OF THE ACT. 17. THE LAST ASPECT TO BE CONSIDERED IS THE PENALTY ON THE INCOME DECLARED BY THE ASSESSEE IN THE BLOCK PERIOD OF RS.67,50,000/ - , ON WHICH NO TAX HAVE BEEN PAID BY THE ASSESSEE. ADMITTEDLY, THE ASSESSEE FAI LED TO PAY THE TAXES ALONG WITH THE RETURN OF INCOME AND EVEN DURING THE C OUR S E OF ASSESSMENT PROCEEDINGS. NO APPEAL HAS BEEN FILED BY THE ASSESSEE BEFORE THE CIT(A) IN TIME . HOWEVER, THE ASSESSEE PAID THE TAXES AFTER A GAP OF ALMOST 2 YEARS AND BELATED APPEAL WAS FILED BEFORE THE CIT(A), WHO IN TURN CONDONED THE DELAY IN FILING THE APPEAL AND ADJUDICATED THE APPEAL AFTER TAKING THE SAME ON 10 ITA NO . 1652 /PN/201 3 RECORD. THE ASSESSEE HAS FILED THE APPEAL BEFORE THE TRIBUNAL AGAINST THE SAID ORDER OF THE CIT(A) WHICH WE HAVE RE FERRED TO THE PARAS HEREINABOVE. 18. THE ISSUE WHICH ARISE FOR ADJUDICATION BEFORE US IS THAT WHERE THE ASSESSEE HAD NOT FULFILLED THE CONDITIONS LAID DOWN IN THE PROVISO TO SECTION 158BFA(2) OF THE ACT, I.E. HAD NOT PAID THE TAXES ON THE BASIS OF THE RET URN FOR BLOCK PERIOD AND HAD NOT FURNISHED THE EVIDENCE OF PAYMENT OF TAX ALONG WITH THE RETURN, IS THE ASSESSEE ENTITLED TO THE BENEFIT OF DEDUCTION GIVEN IN THE FIRST PROVISO TO SECTION 158BFA(2) OF THE ACT AGAINST THE IMPOSITION OF PENALTY. 19. THE LD. AR FOR THE ASSESSEE DURING THE COURSE OF HEARING HAS FAILED TO ADDRESS THE SAID ISSUE BEFORE US. HOWEVER, THE ORDER OF THE CIT(A) IN DELETING THE PENALTY ON THE SAID INCOME DECLARED IN THE RETURN FOR THE BLOCK PERIOD, IS IN APPEAL BEFORE US BY THE REVEN UE. ON THE EARLIER DATE OF HEARING THE TWO DECISIONS HAVE BEEN REFERRED TO BY THE LD. DR FOR THE REVENUE THAT ARE AVAILABLE ON RECORD, ONE IS THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. S MT. ANJU R. INNANI (2010) 1 91 TAXMAN 350 (BOM) A ND THE SECOND DECISION IN THE CASE OF CIT VS. M/S. HEERA CONSTRUCTION CO. PVT. LTD. ( S UPRA) . 20. THE HONBLE BOMBAY HIGH COURT IN CIT VS. SMT. ANJU R. INNANI (SUPRA) WHILE DECIDING THE ISSUE OF BENEFIT OF PROTECTIVE PROVISION OF FIRST PROVISO TO SECTION 158BFA(2) OF THE ACT AGAINST IMPOSITION OF PENALTY NOTED THAT THE FIRST CONDITION WAS TO (I) MUST FILE THE RETURN OF INCOME; (II) MUST PAY THE TAXES ON THE BASIS OF RETURN; (III) MUST FURNISH EVIDENCE OF PAYMENT OF TAXES; AND (IV) SHOULD NOT CONTEST BLOCK ASSESSMENT IN APPEAL. THE HONBLE HIGH COURT 11 ITA NO . 1652 /PN/201 3 OBSERVED THAT THE FIRST PROVISO TO SUB - SECTION (2) STIPULATES THAT IN CERTAIN CIRCUMSTANCES, NO ORDER IMPOSING PENALTY SHALL BE MADE, IF THE CONDITIONS WHICH ARE PROVIDED THEREUNDER ARE FULFILLED BY THE ASSESS EE. WHILE LOOKING AT THE CONDITION OF PAYMENT OF TAXES UNDER CLAUSE ( II ) OF PROVISO TO SECTION 158BFA(2) OF THE ACT, THE HONBLE HIGH COURT OBSERVED THAT THE TAXES PAYABLE ON THE BASIS OF RETURN OUGHT TO HAVE BEEN PAID OR WHERE MONEY IS SEIZED, THE ASSESS EE MUST OFFER THE MONEY SEIZED TO BE ADJUSTED AGAINST THE TAXES PAYABLE AND FURTHER EVIDENCE OF PAYMENT OF TAXES MUST BE FURNISHED TOGETHER WITH THE RETURN. IT IS FURTHER OBSERVED BY THE HONBLE HIGH COURT THAT CLAUSES (I) TO (IV) OF THE FIRST PROVISO CAN NOT BE READ IN ISOLATION AND FORM PART OF COMPREHENSIVE INTENT EXPRESSED BY THE PARLIAMENT. SO, ALL THE CONDITIONS PROVIDED THEREIN SHOULD BE FULFILLED I.E. THE ASSESSEE (I) MUST FILE THE RETURN OF INCOME; (II) PAY THE TAXES ON THE BASIS OF RETURN; (III) F URNISH EVIDENCE OF PAYMENT OF TAXES; AND (IV) SHOULD NOT RETURN; (III) F URNISH EVIDENCE OF PAYMENT OF TAXES; AND (IV) SHOULD NOT CONTEST THE ASSESSMENT IN APPEAL. IN THE FACTS BEFORE THE HONBLE HIGH COURT, THE FIRST THREE CONDITIONS WERE FULFILLED BY THE ASSESSEE, HOWEVER, AN APPEAL WAS FILED DISPUTING THE RATE AT WHICH TAXE S HAD TO BE COMPUTED. THE HONBLE BOMBAY HIGH COURT HELD THAT WHERE AN APPEAL HAS BEEN FILED BY THE ASSESSEE BEFORE THE CIT(A), THE ASSESSEE FAILED TO COMPLY WITH CLAUSE (IV) OF FIRST PROVISO TO SECTION 158BFA(2) OF THE ACT AND AS A RESULT, SHE WAS NOT EN TITLED TO THE BENEFIT OF PRO TECTIVE PROVISION S CONTAINING IN SUB - SECTION (2) TO SECTION 158BFA OF THE ACT . THE RELEVANT FINDINGS OF THE HONBLE HIGH COURT ARE AS UNDER: - 9. THE SUBSTANTIVE PART OF SUB - SECTION (2) OF SECTION 158BFA IS AN ENABLING PROVISIO N BY WHICH THE ASSESSING OFFICER OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS) IS EMPOWERED TO IMPOSE A PENALTY IN THE COURSE OF ANY PROCEEDINGS UNDER CHAPTER XIV - B. PARLIAMENT HAS 12 ITA NO . 1652 /PN/201 3 INDICATED ITS INTENT BY USING THE EXPRESSION 'MAY DIRECT THAT A PERSON SHALL PAY BY WAY OF PENALTY A SUM. . .'. CONSEQUENTLY, UNDER THE SUBSTANTIVE PART OF SUB - SECTION (2), THE IMPOSITION OF A PENALTY IS NOT MANDATORY, BUT LIES IN THE DISCRETION OF THE ASSESSING OFFICER OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS). IT IS TRITE LAW THAT THE IMPOSITION OF A PENALTY IS NOT MANDATORY MERELY BECAUSE IT IS LAWFUL. THE IMPOSITION OF A PENALTY IS A MATTER WHICH LIES IN THE EXERCISE OF DISCRETION WHICH HAS TO BE DETERMINED JUDICIOUSLY. THE FIRST PROVISO TO SUB - SECTION (2) STIPUL ATES THAT IN CERTAIN CIRCUMSTANCES, NO ORDER IMPOSING A PENALTY SHALL BE MADE. ONCE THE CONDITIONS WHICH ARE PROVIDED IN THE FIRST PROVISO ARE FULFILLED BY THE ASSESSEE, THE EFFECT IS TO PROHIBIT THE ASSESSING OFFICER OR, AS THE CASE MAY BE, THE COMMISSION ER (APPEALS) FROM IMPOSING A PENALTY. THE CONDITIONS WHICH HAVE BEEN SPELT OUT IN THE FIRST PROVISO ARE THAT THE ASSESSEE MUST FURNISH A RETURN UNDER CLAUSE (A) OF SECTION 158 BC; THE TAX PAYABLE ON THE BASIS OF THE RETURN OUGHT TO HAVE BEEN PAID (OR IF MO NEY IS SEIZED, THE ASSESSEE MUST OFFER THE MONEY SEIZED TO BE ADJUSTED AGAINST THE TAX PAYABLE); EVIDENCE OF THE PAYMENT OF TAX MUST BE FURNISHED TOGETHER WITH THE RETURN AND AN APPEAL SHOULD NOT BE FILED 'AGAINST THE ASSESSMENT OF THAT PART OF INCOME WHIC H IS SHOWN IN THE RETURN'. CLAUSES (I) TO (IV) OF THE FIRST PROVISO CANNOT BE READ IN ISOLATION AND FORM PART OF A COMPREHENSIVE INTENT EXPRESSED BY PARLIAMENT. THE INTENT OF PARLIAMENT IN LEGISLATING THE FIRST PROVISO IS THAT THE ASSESSEE, IN ORDER TO HAV E THE BENEFIT OF A PROTECTIVE PROVISION AGAINST THE IMPOSITION OF A PENALTY, MUST FILE A RETURN, PAY THE TAX ON THE BASIS OF THE RETURN, FURNISH EVIDENCE OF THE PAYMENT OF THE TAX AND SHOULD NOT CONTEST THE ASSESSMENT IN APPEAL. IN OTHER WORDS, A CERTAIN D EGREE OF FINALITY IS BROUGHT TO BEAR UPON THE ASSESSMENT DURING THE COURSE OF THE BLOCK PERIOD AND IF THE ASSESSEE ACCEPTS THE ASSESSMENT AS FINAL AND PAYS THE TAX THEREON, THE PROTECTIVE PROVISION IS BROUGHT INTO FORCE. CLAUSE (IV) OF THE FIRST PROVISO ST IPULATES THAT AN APPEAL SHOULD NOT BE FILED AGAINST THE ASSESSMENT OF THAT PART OF THE INCOME WHICH IS SHOWN FILED AGAINST THE ASSESSMENT OF THAT PART OF THE INCOME WHICH IS SHOWN IN THE RETURN. AN APPEAL AGAINST THE ASSESSMENT OF THAT PART OF THE INCOME WHICH IS SHOWN IN THE RETURN ALSO COMPREHENDS AN APPEAL DISPUTING THE RATE AT WHICH THE TAX HAS BEEN COMPUTED. IT WOULD NOT BE PERMISSIBLE FOR THE COURT TO ARTIFICIALLY RESTRICT THE AMBIT OF CLAUSE (IV) BY STIPULATING THAT AN APPEAL AGAINST THE RATE OF TAX WOULD NOT BE HIT BY CLAUSE (IV) TO THE PROVISO. TO ACCEPT SUCH A CONT ENTION WOULD BE TO RENDER THE OBJECT AND PURPOSE OF LEGISLATING THE FIRST PROVISO OTIOSE. AN ASSESSEE WHO FILES AN APPEAL AGAINST THE ASSESSMENT OF THAT PART OF THE INCOME WHICH IS SHOWN IN THE RETURN IS DISABLED FROM SEEKING THE BENEFIT OF THE FIRST PROVI SO. AN APPEAL ON THE RATE OF TAX IS NO EXCEPTION. HAVING CHALLENGED THE ASSESSMENT OF THAT PART OF THE INCOME WHICH IS SHOWN IN THE RETURN, THE ASSESSEE CANNOT INVOKE THE PROTECTION OF THE FIRST PROVISO. THE INITIATION OF PENALTY P ROCEEDINGS WILL NOT BE IN VALID . 2 1 . THE ISSUE BEFORE THE HONBLE HIGH COURT OF KERALA IN CIT VS. M/S. HEERA CONSTRUCTION CO. PVT. LTD. (SUPRA) WAS AGAINST THE ORDER OF TRIBUNAL HOLDING THAT PENALTY UNDER SECTION 158BFA OF THE ACT COULD NOT BE LEVIED WITH REFERENCE TO TAXES ON UN DISCLOSED INCOME RETURNED BY THE ASSESSEE, EVEN IF THE ASSESSEE HAD NOT COMPLIED WITH THE REQUIREMENT OF CLAUSES (II) AND (III) OF THE FIRST PROVISO, WHICH 13 ITA NO . 1652 /PN/201 3 REQUIRES THE ASSESSEE TO REMIT TAXES BEFORE FILING THE RETURN AND SHOW PROOF THEREOF ALONG WITH RETU RN. THE CIT(A) WHILE DECIDING THE APPEAL IN FAVOUR OF THE PRESENT ASSESSEE BEFORE US HAD PLACED RELIANCE ON THE RATIO LAID DOWN BY THE C OCHIN BENCH OF TRIBUNAL IN DCIT VS. HEERA CONSTRUCTIONS (P) LTD. (2009) 125 TTJ (COCH.) (T.M.) 589, AS REFERRED IN PARA 4.3.1 OF THE APPELLATE ORDER . HOWEVER, IN PARA 4.3.3 OF THE APPELLATE ORDER THERE IS AN ERROR IN REFERRING TO THE SAID DECISION BY HON BLE MADRAS HIGH COURT. THE CIT(A) HELD THAT WHILE DECIDING THE QUANTUM APPEAL, THE CIT(A) HAD CONDONED THE DELAY IN FI LING THE APPEAL LATE FOR THE REASONS OF FINANCIAL DIFFICULTIES FACED BY THE ASSESSEE, HENCE , THE IMPOSITION OF PENALTY UNDER SECTION 158BFA(2) OF THE ACT WAS NOT JUSTIFIED. FIRST OF ALL, THE DECISION IS NOT BY HONBLE MADRAS HIGH COURT BUT THE REFERRED DE CISION IS OF COCHIN BENCH OF TRIBUNAL, AGAINST WHICH THE REVENUE WENT ON APPEAL BEFORE THE HONBLE HIGH COURT OF KERALA AND THE HONBLE HIGH COURT VIDE ORDER HONBLE HIGH COURT OF KERALA AND THE HONBLE HIGH COURT VIDE ORDER DATED 04.04.2011 HELD AS UNDER: - 8. ON AN ANALYSIS OF SECTION 158BFA(2) EXTRACTED ABOVE, WHAT WE FIND IS THAT PENALTY ON UNDISCLOSED INCOME ASSESSED UNDER SECTION 158BC IS DISCRETIONARY AND IT CAN BE LEVIED BY THE ASSESSING OFFICER AS WELL AS BY THE COMMISSIONER OF INCOME - TAX (APPEALS). THE POWER IS GIVEN TO THE COMMISSIONER (APPEALS) BECAUSE IF THE A SSESSING OFFICER DOES NOT LEVY PENALTY AFTER COMPLETION OF ASSESSMENT, THE COMMISSIONER OF INCOME - TAX (APPEALS) WHILE CONSIDERING THE ASSESSMENT APPEAL IS ALWAYS FREE TO CONSIDER WHETHER PENALTY IS TO BE LEVIED, NO MATTER THE ASSESSING OFFICER HAS NOT LEVI ED PENALTY, THE COMMISSIONER (APPEALS) CAN ORDER LEVY OF PENALTY UNDER THE SAID CLAUSE. WHILE THERE IS DISCRETION IN REGARD TO LEVY OF PENALTY, DEPENDING ON THE FACTS AND CIRCUMSTANCES OF EACH CASE ONCE THE AUTHORITY COMPETENT TO LEVY PENALTY CHOOSES TO LE VY PENALTY THEN THE DISCRETION OF QUANTUM OF PENALTY RANGES FROM 100 PER CENT. TO 300 PER CENT. OF THE TAX, WHICH MEANS THAT THE MINIMUM PENALTY LEVIABLE IS EQUAL TO THE AMOUNT OF TAX AND MAXIMUM IS AT THREE TIMES OF TAX. THE DISCRETION IN REGARD TO LEVY O F PENALTY IS CONTROLLED BY TWO PROVISOS TO THE SAID SUB - SECTION, WHICH ARE DISCUSSED BELOW. 9. SUBJECT TO THE SECOND PROVISO, THE FIRST PROVISO PROVIDES COMPLETE IMMUNITY FROM PENALTY ON THE TAX DUE IN RESPECT OF THE UNDISCLOSED INCOME RETURNED BY THE ASSE SSEE BASED ON NOTICE ISSUED BY THE ASSESSING OFFICER AFTER SEARCH OR SURVEY. HOWEVER, THE CONDITIONS PROVIDED IN CLAUSES (I) TO (IV) OF THE FIRST PROVISO ARE THAT THE ASSESSEE 14 ITA NO . 1652 /PN/201 3 SHOULD HAVE FILED RETURN PURSUANT TO NOTICE ISSUED BY THE OFFICER AND TAX DUE IN RESPECT OF THE UNDISCLOSED INCOME RETURNED HAS TO BE PAID BEFORE FILING OF RETURN AND THE EVIDENCE OF TAX PAYMENT HAS TO BE FURNISHED ALONG WITH THE RETURN FILED. HOWEVER, IF CASH IS SEIZED IN THE COURSE OF SEARCH, THE REQUIREMENT OF THE PROVISO IS SATISF IED IF INSTEAD OF MAKING PAYMENT THE ASSESSEE ALLOWS THE ASSESSING OFFICER FOR ADJUSTMENT OF THE SEIZED CASH TOWARDS TAX PAYMENT BASED ON THE RETURN OF UNDISCLOSED INCOME FILED. APART FROM THE REQUIREMENT OF PAYMENT OF TAX PRIOR TO OR ALONG WITH FILING THE RETURN THE ASSESSEE SHOULD ALSO CONFIRM TO THE ASSESSING OFFICER THAT NO APPEAL WILL BE FILED CHALLENGING THE ASSESSMENT ON THE INCOME VOLUNTARILY DISCLOSED BY THE ASSESSEE IN THE RETURN FILED. IN OTHER WORDS, IF THE ASSESSEE FILES APPEAL CHALLENGING THE ASSESSMENT OF UNDISCLOSED INCOME RETURNED BY THE ASSESSEE, THE BENEFIT OF EXEMPTION FROM PENALTY WILL NOT BE AVAILABLE UNDER THE FIRST PROVISO TO THE SAID SECTION. THE SECOND PROVISO IS A FURTHER CONDITION QUALIFYING THE FIRST PROVISO WHICH SAYS THAT IF TH E ASSESSMENT UNDER SECTION 158BC(C) OF THE ACT INCLUDES INCOME OTHER THAN THE UNDISCLOSED INCOME RETURNED BY THE ASSESSEE THEN THE IMMUNITY FROM THE PENALTY IN RESPECT OF THE UNDISCLOSED INCOME RETURNED BY THE ASSESSEE WILL BE LOST TO THE ASSESSEE. IN OTHE R WORDS, THE ABSOLUTE IMMUNITY FROM PENALTY ON THE TAX PAYABLE IN RESPECT OF THE UNDISCLOSED INCOME IS AVAILABLE ONLY IF THE ASSESSING OFFICER ACCEPTS THE RETURN FILED BY THE ASSESSEE DECLARING THE UNDISCLOSED INCOME, WHICH IS THE UNDISCLOSED INCOME ASSESS ED UNDER SECTION 158BC(C) OF THE ACT. IN OTHER WORDS, IF THE UNDISCLOSED INCOME RETURNED IS NOT ACCEPTED BY THE OFFICER AND ANY ADDITION IS MADE TO THE INCOME SO RETURNED, THEN THE ASSESSEE WILL NOT BE ENTITLED TO IMMUNITY FROM PENALTY ON THE TAX PAYABLE O N THE UNDISCLOSED INCOME RETURNED AS A MATTER OF RIGHT. HOWEVER, THE FACT THAT IMMUNITY FROM PENALTY IS NOT AVAILABLE AS A MATTER OF RIGHT DOES NOT MEAN THAT PENALTY IN RESPECT OF UNDISCLOSED INCOME RETURNED BY THE ASSESSEE IS AUTOMATIC. IT IS STILL WITHIN THE DISCRETION OF THE ASSESSING OFFICER TO CONSIDER IT IS STILL WITHIN THE DISCRETION OF THE ASSESSING OFFICER TO CONSIDER PENALTY WITH REFERENCE TO INCOME RETURNED BY THE ASSESSEE ALSO. THE SECOND PROVISO TO THE MAIN SECTION STATES THAT PENALTY IS MANDATORY IN RESPECT OF UNDISCLOSED INCOME ASSESSED OVER THE UNDISCLOSED INCO ME RETURNED BY THE ASSESSEE PURSUANT TO NOTICE ISSUED BY THE OFFICER AS STATED ABOVE. IN OTHER WORDS, WHAT THE SECTION MEANS IS THAT WHATEVER IS THE INCOME ASSESSED BY WAY OF ADDITION TO UNDISCLOSED INCOME, THE SAME SHALL BE TREATED AS INCOME CONCEALED BY THE ASSESSEE AND THE ASSESSEE HAS NO ESCAPE FROM PENALTY. OF COURSE, THE SAID SECTION PROVIDES THAT THE ASSESSING OFFICER HAS DISCRETION TO LEVY PENALTY FROM MINIMUM TO MAXIMUM AS PROVIDED UNDER THE MAIN SECTION DEPENDING ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. FROM THE ABOVE, WE CONCLUDE THE SCOPE OF THE SAID SECTION AS FOLLOWS : (1) WHERE THE INCOME FINALLY ASSESSED UNDER SECTION 158BC(C) OF THE ACT IS THE ONLY UNDISCLOSED INCOME RETURNED BY THE ASSESSEE BASED ON RETURN FILED UNDER CLAUSE (A) OF SECT ION 158BC AND THE ASSESSEE HAS COM PLIED WITH ALL THE CONDITIONS OF CLAUSES (I) TO (IV) OF THE FIRST PROVISO, I.E. PAYMENT OF TAX ON THE UNDISCLOSED INCOME OR REQUEST TO THE OFFICER TO ADJUST FULL TAX AGAINST CASH IF ANY SEIZED AND HELD BY THE DEPARTMENT S UFFICIENT TO ADJUST THE TAX AND IF THE ASSESSEE FILES STATEMENT THAT NO APPEAL WILL BE FILED AGAINST THE UNDISCLOSED INCOME RETURNED AND ASSESSED BASED ON RETURN FILED, NO PENALTY COULD BE LEVIED. (2) PENALTY WILL BE LEVIABLE IN ALL CASES WHERE UNDISCLOSED INCOME FINALLY ASSESSED UNDER CLAUSE (C) OF SECTION 158BC IS IN EXCESS OF THE UNDISCLOSED INCOME RETURNED BY THE ASSESSEE IN THE RETURN FILED UNDER CLAUSE (A) OF SECTION 158BC. IN SUCH CASES, THERE IS NO 15 ITA NO . 1652 /PN/201 3 COMPLETE IMMUNITY FROM PENALTY ON THE TAX PAYABLE O N THE UNDISCLOSED INCOME RETURNED BY THE ASSESSEE EVEN THOUGH THE ASSESSEE HAS COMPLIED WITH ALL THE CONDITIONS OF CLAUSES (I) TO (IV) OF THE FIRST PROVISO AS STATED ABOVE. THIS IS BECAUSE THE ASSESSEE IN SUCH A CASE WILL BE TREATED AS PARTLY DISHONEST AND PARTLY HONEST AND, THEREFORE, THE PENALTY WILL CERTAINLY IN THE DISCRETION OF THE ASSESSING OFFICER. OF COURSE, IF THE ADDITION MADE WHEN COMPARED TO THE UNDISCLOSED INCOME RETURNED BY THE ASSESSEE IS RELATIVELY SMALL AND IF THE ASSESSEE HAD COMPLIED WITH THE CONDITIONS OF THE PROVISO ON THE UNDISCLOSED INCOME RETURNED BY THE ASSESSEE THEN CERTAINLY THE OFFICER WILL NOT BE JUSTIFIED IN LEVYING PENALTY WITH REFERENCE TO THE TAX PAYABLE ON THE TOTAL INCOME ASSESSED UNDER CLAUSE (C), WHICH INCLUDES TAX ON UND ISCLOSED INCOME RETURNED BY THE ASSESSEE. ON THE OTHER HAND, IF ON FINAL ASSESSMENT UNDER CLAUSE (C) OF SECTION 158BC IT IS FOUND THAT THE ADDITION MADE TO THE UNDISCLOSED INCOME RETURNED BY THE ASSESSEE IS VERY HIGH, I.E., SUBSTANTIAL EITHER IN ABSOLUTE T ERMS OR IN RELATION TO THE INCOME RETURNED BY THE ASSESSEE, THEN THE OFFICER SHOULD CONSIDER PENALTY ON THE TOTAL INCOME ASSESSED INCLUDING UNDISCLOSED INCOME RETURNED BY THE ASSESSEE, NO MATTER THE ASSESSEE HAS COMPLIED WITH THE CONDITIONS OF THE FIRST PR OVISO ABOVE REFERRED TO IN RESPECT OF THE UNDISCLOSED INCOME RETURNED BY THE ASSESSEE. IN OTHER WORDS, THE ASSESSEE'S DISHONESTY OUTWEIGHS THE LITTLE HONESTY SHOWN BY HIM AND SO MUCH SO, PENALTY SHOULD BE LEVIED WITH REFERENCE TO THE TAX PAYABLE ON THE ENT IRE INCOME ASSESSED. SO FAR AS RANGE OF PENALTY BETWEEN 100 PER CENT. TO 300 PER CENT. OF TAX IS CONCERNED IT WILL DEPEND UPON THE NATURE OF CONCEALMENT, CONDUCT OF THE ASSESSEE, ETC., WHICH WILL HAVE TO BE CONSIDERED WHILE FIXING THE QUANTUM OF PENALTY. 1 0. APPLYING THE ABOVE PRINCIPLE TO THE FACTS OF THIS CASE, WE NOTICE THAT THE ADDITION MADE TO THE RETURNED UNDISCLOSED INCOME IS AROUND THAT THE ADDITION MADE TO THE RETURNED UNDISCLOSED INCOME IS AROUND TO 25 PER CENT. OF THE DISCLOSED INCOME. THEREFORE, IT IS NOT A CASE OF MINOR ADDITION TO THE DISCLOSED INCOME OR A CAS E OF SUBSTANTIAL ADDITION TO THE INCOME DISCLOSED BY THE ASSESSEE. THEREFORE, WE DO NOT THINK IT IS A CASE OF LEVY OF MAXIMUM PENALTY. HOWEVER, THE ASSESSEE'S CONTENTION REGARDING THE IMMUNITY FROM PENALTY ON THE TAX PAYABLE ON THE UNDISCLOSED INCOME RETUR NED BY THEM IS CONCERNED, WE ARE UNABLE TO AGREE WITH THE FINDINGS OF THE TRIBUNAL BECAUSE OF THE PAYMENT OF TAX IN INSTALMENTS UNDER ORDERS ISSUED BY THE COMMISSIONER OF INCOME - TAX IS NOT IN COMPLIANCE WITH THE REQUIREMENT OF CLAUSES (II) AND (III) OF THE FIRST PROVISO TO THE SAID SECTION, WHICH REQUIRES PAYMENT OF FULL TAX ON THE UNDISCLOSED INCOME RETURNED EITHER PRIOR TO OR ALONG WITH FILING OF RETURN AND PRODUCTION OF PROOF OF PAYMENT OF TAX ALONG WITH THE RETURN SO FILED. THE ASSESSEE'S FINANCIAL DIFF ICULTY WHICH FOUND ACCEPTANCE BY THE COMMISSIONER IN GRANTING INSTALMENT FACILITY FOR PAYMENT OF TAX AND THE COMPLIANCE WITH THE SAID DIRECTION OF THE COMMISSIONER, IS NO SUBSTITUTE FOR THE MANDATORY REQUIREMENTS OF CLAUSES (II) AND (III) OF THE FIRST PROV ISO ABOVESTATED. PROBABLY THESE ARE MATTERS WHICH THE ASSESSING OFFICER HAS TO CONSIDER, I.E., WHETHER PENALTY SHOULD BE LEVIED WITH REFERENCE TO THE UNDISCLOSED INCOME RETURNED BY THE ASSESSEE WITHOUT PAYMENT OF TAX ALONG WITH THE RETURN FILED BY IT, OR T HE ASSESSEE FORFEITS THE RIGHT OF IMMUNITY FROM PENALTY, WHICH IN ANY CASE WILL NOT BE AVAILABLE TO THE ASSESSEE BECAUSE OF THE SECOND PROVISO BY WHICH THE BENEFITS OF THE FIRST PROVISO WILL NOT BE AVAILABLE TO THE ASSESSEE AS A MATTER OF RIGHT, IF THE UND ISCLOSED INCOME ASSESSED IS MORE THAN THE UNDISCLOSED INCOME RETURNED BY THE ASSESSEE. 16 ITA NO . 1652 /PN/201 3 11. WE, THEREFORE, HOLD THAT IN VIEW OF THE APPLICATION OF THE SECOND PROVISO, THE ASSESSEE IS NOT ENTITLED TO COMPLETE IMMUNITY FROM PAYMENT OF PENALTY ON THE UNDISCLOS ED INCOME RETURNED BY THEM UNDER CLAUSE (A) OF SECTION 158BC, NOT ONLY BECAUSE OF THEIR FAILURE TO COMPLY WITH THE PROVISIONS OF CLAUSES (I) TO (IV) OF THE FIRST PROVISO BUT BY VIRTUE OF THE ADDITION MADE IN THE ASSESSMENT OF SUBSTANTIAL AMOUNT OF UNDISCLO SED INCOME BY WHICH THE ASSESSEE FORFEITS THE BENEFIT OF THE FIRST PROVISO IN REGARD TO IMMUNITY FROM PENALTY ON THE TAX PAYABLE ON UNDISCLOSED INCOME RETURNED. IN VIEW OF OUR ABOVE FINDINGS, WE HAVE TO NECESSARILY ALLOW THE APPEAL BY VACATING THE ORDERS O F THE TRIBUNAL AND THAT OF THE FIRST APPELLATE AUTHORITY, AND, THEREFORE, WE DO SO. 12. IN THE NORMAL COURSE WE SHOULD REMAND THE MATTER TO THE ASSESSING OFFICER TO RECONSIDER THE PENALTY. HOWEVER, IN VIEW OF THE PROVED FINANCIAL DIFFICULTY OF THE ASSESSEE AND IN VIEW OF THE DISCHARGE OF TAX LIABILITY IN INSTALMENTS GRANTED BY THE COMMISSIONER, WE FEEL THE PENALTY ORDER COULD BE MODIFIED BY EXCLUDING TAX ON UNDISCLOSED INCOME RETURNED BY THE ASSESSEE BUT BY REFIXING THE PENALTY ON THE TAX PAYABLE ON THE ADD ITIONAL INCOME ASSESSED AT TWICE THE AMOUNT OF TAX AS AGAINST ONE TIME FIXED BY THE COMMISSIONER OF INCOME - TAX (APPEALS) AND CONFIRMED BY THE TRIBUNAL. 2 2 . THE FIRST PROPOSITION LAID DOWN BY THE HONBLE HIGH COURT OF KERALA IS THAT WHERE THE FINALLY ASSE SSED INCOME IN THE HANDS OF THE ASSESSEE IS BASED ON THE INCOME RETURNED IN THE RETURN FILED FOR THE BLOCK PERIOD, AND WHERE THE ASSESSEE HAD COMPLIED WITH ALL THE CONDITIONS OF CLAUSES (I) TO (IV) OF THE FIRST PROVISO I.E. PAYMENT OF TAXES ON THE UNDISCLO SED INCOME OR A REQUEST TO ADJUST FULL TAXES AGAINST CASH, IF ANY, SEIZED, AND WHERE NO APPEAL IS FILED BY THE ASSESSEE AGAINST THE UNDISCLOSED INCOME RETURNED, THEN NO PENALTY IS LEVIABLE UNDER SECTION 158BFA(2) OF THE ACT. THE SECOND INSTANCE IS THE CAS E WHERE THE FINALLY ASSESSED INCOME UNDER SECTION 158BC(C) OF THE ACT IS IN EXCESS OF UNDISCLOSED INCOME FILED BY THE ASSESSEE IN THE RETURN OF INCOME FILED, IN SUCH CASES, AS PER THE HONBLE HIGH COURT, THERE IS NO COMPLETE IMMUNITY FROM PENALTY ON THE TA XES PAYABLE ON THE UNDISCLOSED INCOME RETURNED BY THE ASSESSEE EVEN THOUGH THE ASSESSEE HAD COMPLIED WITH ALL THE CONDITIONS OF CLAUSES (I) TO (IV) OF FIRST PROVISO. HERE THE DISCRETION WAS WITH THE ASSESSING OFFICER AND IF THE ADDITION WAS SMALL AND THE ASSESSEE COMPLIED WITH ALL THE 17 ITA NO . 1652 /PN/201 3 CONDITIONS OF THE PROVISO, THEN THE ASSESSING OFFICER COULD NOT BE JUSTIFIED IN LEVYING PENALTY WITH REFERENCE TO TAXES PAYABLE ON THE TOTAL INCOME ASSESSED UNDER CLAUSE (C) OF SECTION 158BC OF THE ACT, WHICH INCLUDES THE TAX ES ON UNDISCLOSED INCOME RETURNED BY THE ASSESSEE. ON THE OTHER HAND, WHERE THE ADDITION MADE TO THE UNDISCLOSED INCOME RETURNED WAS VERY HIGH, THEN NO MATTER WHE THER THE ASSESSEE HAS COMPLIED WITH THE CONDITIONS OF THE FIRST PROVISO, IN RESPECT OF THE UN DISCLOSED INCOME RETURNED BY THE ASSESSEE, THE ASSESSEE WAS EXIGIBLE TO LEVY OF PENALTY UNDER SECTION 158BFA(2) OF THE ACT. THE HONBLE HIGH COURT VIDE PARAS 11 AND 12 HAD CONSIDERED THE FINANCIAL DIFFICULTIES FACED BY THE ASSESSEE AND THE IMMUNITY PROVID ED UNDER FIRST PROVISO TO SECTION 158BFA(2) OF THE ACT AND STATED THAT SINCE THE DISCHARGE OF TAX LIABILITY WAS IN INSTALLMENTS , GRANTED BY THE COMMISSIONER, THE PENALTY ORDER COULD BE MODIFIED BY EXCLUDING THE TAXES ON UNDISCLOSED INCOME RETURNED BE MODIFIED BY EXCLUDING THE TAXES ON UNDISCLOSED INCOME RETURNED BY THE A SSESSEE. HOWEVER, PENALTY ON THE TAXES PAYABLE ON THE ADDITIONAL INCOME ASSESSED WAS DIRECTED TO BE FIXED AT TWICE THE AMOUNT OF TAXES AS AGAINST ONE TIME FIXED BY THE CIT(A) AND TRIBUNAL. 2 3 . IN THE FACTS OF THE PRESENT CASE BEFORE US, THE ISSUE IS TW O - FOLD I.E. FIRST , WHERE THE ASSESSEE HAD NOT PAID THE TAXES ON THE UNDISCLOSED INCOME RETURNED IN THE BLOCK RETURN AND HAD NOT FURNISHED THE EVIDENCE OF PAYMENT OF TAXES ALONG WITH RETURN OF INCOME, IS THE ASSESSEE ENTITLED TO THE BENEFIT OF PROVISO TO SE CTION 158BFA (2) OF THE ACT ? T HE JURISDICTIONAL HIGH COURT IN CIT VS. SMT. ANJU R. INNANI (SUPRA) HAS LAID DOWN THE PROPOSITION THAT THE CONDITIONS LAID DOWN IN THE FIRST PROVISO TO SECTION 158BFA(2) OF THE ACT ARE TO BE COMPLIED WITH IN ENTIRETY. WHERE T HE ASSESSEE HAS 18 ITA NO . 1652 /PN/201 3 FAILED TO PAY THE TAXES AND FURNISH THE EVIDENCE OF PAYMENT OF TAXES ALONG WITH RETURN FOR THE BLOCK PERIOD I.E. NOT COMPLIED WITH CLAUSES (II) AND (III) OF FIRST PROVISO TO SECTION 158BFA(2) OF THE ACT, MERELY BECAUSE THE ASSESSEE HAD PAID THE TAXES AT A LATER DATE, THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT OF PROTECTIVE PROVISIONS CONTAINED IN FIRST PROVISO TO SECTION 158BFA(2) OF THE ACT. APPLYING THE SAID PROPOSITION TO THE FACTS OF THE PRESENT CASE, WE HOLD THAT IN CASE THE ASSESSED UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE UNDER SECTION 158BC(C) OF THE ACT IS EQUIVALENT TO THE UNDISCLOSED INCOME RETURNED BY THE ASSESSEE IN THE RETURN FOR THE BLOCK PERIOD, THEN THE ASSESSEE IS EXIGIBLE TO LEVY OF PENALTY IN VIEW OF THE RATIO LAI D DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. SMT. ANJU R. INNANI (SUPRA) AS THE ASSESSEE HAS FAILED TO COMPLY WITH THE CONDITIONS STIPULATED IN FIRST PROVISO TO SECTION 158BFA(2) OF THE ACT. HOWEVER, THERE IS A SECOND ASPECT TO THE ISSUE RAISED BEFO RE US I.E. IN THE THERE IS A SECOND ASPECT TO THE ISSUE RAISED BEFO RE US I.E. IN THE HANDS OF THE ASSESSEE, THE UNDISCLOSED INCOME WAS ASSESSED AT A HIGHER FIGURE THAN THE ONE DISCLOSED BY THE ASSESSEE IN THE BLOCK PERIOD. THE SAID ISSUE OF DETERMINATION OF UNDISCLOSED INCOME OVER AND ABOVE THE UNDISCLOSED INCOME DECLARE D BY THE ASSESSEE IN THE BLOCK RETURN HAS BEEN REMITTED BACK TO THE FILE OF ASSESSING OFFICER . FOLLOWING THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF KERALA IN CIT VS. HEERA CONSTRUCTION CO. (P.) LTD. (SUPRA) IN CASE THE FINALLY ASSESSED UNDISCLOSED I NCOME IN THE HANDS OF THE ASSESSEE IS H IGH , THEN THE BENEFIT OF PROTECTIVE PROVISIONS CONTAINED IN FIRST PROVISO TO SECTION 158BFA(2) OF THE ACT IS NOT AVAILABLE TO THE ASSESSEE, SO THE PENALTY UNDER SECTION 158BFA(2) OF THE ACT SHOULD BE LEVIED WITH REFER ENCE TO THE TAXES PAYABLE ON THE ENTIRE INCOME ASSESSED. IN THIS REGARD, WE REMIT THE MATTER BACK TO THE FILE OF ASSESSING OFFICER TO 19 ITA NO . 1652 /PN/201 3 ADJUDICATE THE ISSUE OF LEVY OF PENALTY UNDER SECTION 158BFA(2) OF THE ACT AFTER FINALLY DETERMINING THE UNDISCLOSED INCO ME IN THE HANDS OF ASSESSEE AND IN LINE WITH OUR OBSERVATIONS ON THE BASIS OF RATIO S LAID DOWN BY THE HONBLE BOMBAY HIGH COURT AND HONBLE HIGH COURT OF KERALA , AS REFERRED TO US IN THE PARAS HEREINABOVE. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE T HUS, ALLOWED FOR STATISTICAL PURPOSES. 2 4 . IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS THE 29 TH DAY OF JANUARY, 2016 . SD/ - SD/ - ( PRADIP KUMAR KEDIA ) ( SUSHMA CHOWLA ) AC COUNTANT MEMBER JUDICIAL MEMBER PUNE ; DATED : 29 TH JANUARY, 2016 . / GCVSR / COPY OF THE ORDER FORWARDED TO : 1. / THE APP ELLANT 2. / THE RESPONDENT 3. 4. THE CIT (A) - I, NASHIK THE CIT - I, NASHIK 5. 6. , , / DR, ITAT, A PUNE; / GUARD FILE . / BY ORDER, //TRUE COPY// // TRUE COPY // // //TRUE C / SR. PRIVATE SECRETARY , / ITAT, PUNE