Smt Madhuri Sharma, V. DCIT,

ITSSA 3/PAT/2013

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4887 (ITAT-PATNA)
• Duration Of Justice: 8 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 30-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 08-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Block assessment
• Section: 132; 271(1)(c); 273B; 158BC; 158BFA

Judgement Text

IT(SS)A No. 03/PAT/2013 Block Assessment Year 1992-93 to 2001-02 and from 01.04.2001 to 18.04.2007 Smt. Madhuri Sharma 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA-PATNA ‘DIVISION BENCH’, KOLKATA [Virtual Court Hearing] Before Shri Rajpal Yadav, Vice-President (KZ) & Shri Girish Agrawal, Accountant Member I.T.(SS)A. No. 03/PAT/2013 Assessment Year: Block A.Y. 1992-93 to 2001-02 and from 01.04.2001 to 18.04.2007 Smt. Madhuri Sharma,.................................................................Appellant Ashokapuri, Khajpur, Bailey Road, Patna-14 [PAN: APOPS0340G] -Vs.- Deputy Commissioner of Income Tax,.......................................Respondent Central Circle-3, Patna Appearances by: N o n e, appeared on behalf of the assessee Shri Sanjay Mukherjee, CIT(D.R), appeared on behalf of the Revenue Date of concluding th e hearing : March 15, 2022 Date of pro nouncing the orde r : March 31, 2022 O R D E R Per Rajpal Yadav, Vice-President (KZ):- The assessee is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals)-1, Patna dated 30.01.2013 passed for the block period starting from assessment year 1992-93 and ending on 18.04.2007. 2. In response to the notice of hearing, no one was present on behalf of the assessee. Since it is a very old appeal pending in the Tribunal from the last nine years, therefore, we deem it appropriate to dispose of this appeal ex-parte qua the assessee. IT(SS)A No. 03/PAT/2013 Block Assessment Year 1992-93 to 2001-02 and from 01.04.2001 to 18.04.2007 Smt. Madhuri Sharma 2 3. The solitary substantial grievance of the assessee is that the ld. CIT(Appeals) has erred in confirming the penalty of Rs.80,00,000/-, which was imposed under section158BFA(2) of the Income Tax Act. 4. Brief facts of the case are that a search operation under section 132 of the Income Tax Act was conducted at the residential premises of Shri Tribhuwan Ray, i.e. husband of the assessee on 30.03.2001. According to the ld. Assessing Officer, during the course of search, the key of locker no. 70 of Allahabad Bank, Khajpura, Patna was found and seized. Notice under section 158BC was issued to the assessee as well as her husband. In response to such notice, she filed return for the block period disclosing ‘NIL’ undisclosed income. Ld. Assessing Officer has determined the undisclosed income in the hands of her husband and in her case such undisclosed income was treated on protective basis. The ld. 1 s t appellate authority has confirmed substantive assessment in the case of her husband Shri Tribhuwan Ray. However, ld. CIT(Appeals) has allowed a partial relief to her husband. But the Department filed appeal before the ITAT, Patna against the order dated 27.12.2004 of the ld. CIT(Appeals)-1, Patna. The ITAT, Patna vide its order dated 21.07.2006 in the case of her husband Shri Tribhuwan Ray has ordered that various assets found or detected in the course of search has to be assessed in the hands of Smt. Madhuri Sharma, i.e. assessee. In this way after giving effect to the appellate orders, an undisclosed income of Rs.1,01,66,202/- was determined in the hands of the assessee. Ld. Assessing Officer thereafter issued notice under section 158BFA(2) inviting the explanation of the assessee as to why penalty should not be imposed on her. The Assessing Officer thereafter observed that since the assessee has disclosed ‘nil’ undisclosed income in response to the notice under section 158BC, therefore, the total undisclosed income determined in her hand deserves to be considered for computation of penalty under section 158BFA(2). IT(SS)A No. 03/PAT/2013 Block Assessment Year 1992-93 to 2001-02 and from 01.04.2001 to 18.04.2007 Smt. Madhuri Sharma 3 The tax rate in the block assessment was 60% and therefore, he worked out the penalty upon the assessee as under:- (i) Total undisclosed income determined after giving appeal effets Rs.1,01,66,202/- (ii) Tax @ 60% on Rs.1,01,66,202/- Rs. 60,99,721/- (iii) Minimum imposable penalty Rs. 60,99,721/- (iv) Maximum imposable penalty Rs.1,82,99,163/- 5. Appeal to the ld. CIT(Appeals) did not make any relief to the assessee. 6. As observed earlier, no one has appeared on behalf of the assessee. We heard the ld. CIT(D.R.) and gone through the record carefully. A penalty under section 158BFA(2) is to be imposed altogether under different circumstances than the one imposed under section 271(1)(c) of the Income Tax Act. The Hon’ble Gujrat High Court in the case of CIT –vs.- Beecharbhai P. Parmar (341 ITR 499) has propounded the distinction between both the provisions elaborately. Before embarking upon an inquiry on the facts of the present case, we deem it appropriate to take note of the finding recorded by the Hon’ble Gujarat High Court in the case of CIT Vs.Beecharbhai P. Parmar. The Hon’ble Court has taken note of section 158BFA, and thereafter expounded the meaning and interpretation of this section. The discussion made by the Hon’ble Court from para 8 to 9 in this regard reads as under: “8. Having thus heard learned counsel for the parties, we may take note of the relevant statutory provisions. Sec. 158BFA of the Act is part of Chapter XIV-B, which lays down special procedure for assessment of search cases. Sec. 158BFA pertains to levy of interest and penalty in certain cases. Sub-s. (2) of s. 158BFA, which is relevant for our purpose, reads as under: IT(SS)A No. 03/PAT/2013 Block Assessment Year 1992-93 to 2001-02 and from 01.04.2001 to 18.04.2007 Smt. Madhuri Sharma 4 "158BFA. Levy of interest and penalty in certain cases—(1) ................... (2) The AO or the CIT(A), 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 AO under cl. (c) of s. 158BC : Provided that no order imposing penalty shall be made in respect of a person if— (i) such person has furnished a return under cl. (a) of s. 158BC; (ii) the tax payable on the basis of such return has been paid or, if the assets seized consist 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 AO is in excess of the income 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." 8. Upon perusal of sub-s. (2) of s. 158BFA of the Act, it would emerge that the AO or CIT(A) has the power to impose penalty in course of any proceedings under the said chapter, which penalty would range between 100 per cent to 300 per cent of the tax leviable on the undisclosed income determined by the AO under cl. (c) of s. 158BC of the Act. 8.1 Proviso to sub-s. (2) of s. 158BFA of the Act, however, provides for four conditions, upon satisfaction of which, the assessee would get immunity from such penalty. Such conditions are to be satisfied cumulatively. In essence, it provides that the penalty shall not be imposed if the assessee IT(SS)A No. 03/PAT/2013 Block Assessment Year 1992-93 to 2001-02 and from 01.04.2001 to 18.04.2007 Smt. Madhuri Sharma 5 furnishes a return under cl. (a) of s. 158BC; also pays tax on the basis of such return, or offers for adjustment any money seized, or produces evidence of having paid such tax, and also does not file appeal against assessment on that part of the income which is shown in the return. In other words, in cases of proceedings for block assessment, the assessee would have an additional chance to avoid penalty by furnishing a return, paying tax on such undisclosed return and accepting finality with respect to the same. 8.2. Further proviso to sub-s. (2) of s. 158BFA is merely in nature of clarification and provides that the first proviso would not apply where undisclosed income determined by the AO is in excess of the income shown in the return and in such cases, penalty shall be imposed on that portion of the undisclosed income determined, which is in excess of the amount of undisclosed income shown in the return. 8.3. Closely seen, sub-s. (2) of s. 158BFA makes it clear that it is well within the discretion of the AO, while framing the assessment for the block period, whether or not to impose any penalty or not. The words, "may direct" have to be given its normal meaning, leaving discretion to the officer. In absence of any special reason the word, "may" cannot be read as "shall". 8.4 In case ofHindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR (SC) 26 the apex Court in connection with penalty prescribed in Orissa Sales-tax Act observed : ".. ..An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to imposed penalty, when there is a technical or venial breach of the provisions of the act or where the breach flows from abona fide IT(SS)A No. 03/PAT/2013 Block Assessment Year 1992-93 to 2001-02 and from 01.04.2001 to 18.04.2007 Smt. Madhuri Sharma 6 belief that the offender is not liable to act in the manner prescribed by the statute." 9. The contention of the counsel for the Revenue that only upon satisfaction of the conditions contained in proviso to sub-s. (2) that the assessee, in case of the block assessment can be spared of the penalty cannot be accepted. It is, of course, true that upon satisfying such conditions, the assessee would get immunity from penalty. Nevertheless, this is not a thing as to suggest that in no other case, or on no other ground, the AO may at his discretion, not impose penalty the moment additions under cl. (c) of s. 158BC are sustained. In other words, we are unable to hold that the penalty under s. 158BFA(2) is mandatory in nature. 9.1 It is true that s. 273B of the Act which provides that penalty shall not be imposed in certain cases on the assessee proving that there was reasonable cause for failure to pay tax refers to several provisions such as ss. 271, 271A, etc., makes no mention of s. 158BFA(2). This still does not mean that penalty under s. 158BFA(2) is mandatory.” The Hon’ble Court, thereafter, observed that the Tribunal in that case has deleted penalty for three reasons viz. (a) addition was made only on estimation, (b) there is no concealment of particulars by the assessee, and (c) certain additions would not give rise to penalty proceedings. These reasons did not get approval of the Hon’ble Court, and therefore, penalty in the case of CIT Vs.Beecharbhai P. Parmar (supra) was restored. 7. It is pertinent to mention here that Chapter XIVB starting from Section 158B provide special procedure for assessment of search cases upto the search conducted prior to 31.5.2003. Under the scheme of block assessment, income of an assessee for the block purpose is to be computed under section 158BB. In a series of decisions, it has been held that income from the block is to be computed on the basis of seized material. In other words, when the AO issues notice under section 158BC of the Act, inviting the assessee to file return for the undisclosed income, he would supply copies of seized material on the basis of which the assessee has to compute true undisclosed income. In other words, material on the basis of which income of an assessee has to be determined for the purpose of block period is common. It is the material collected during the course IT(SS)A No. 03/PAT/2013 Block Assessment Year 1992-93 to 2001-02 and from 01.04.2001 to 18.04.2007 Smt. Madhuri Sharma 7 of search. In these circumstances, the allegations or the charge against an assessee should be why he failed to compute true undisclosed income. 8. In the present case, the ld. Assessing Officer himself was not sure in whose hand the undisclosed income for the block period regarding the assets available in the locker and other items required to be added. He treated these assets as belonging to her husband and passed a substantive assessment in the case of assessee’s husband. It is the second appellate authority, i.e. ITAT, where it has been decided that a substantive addition has to be made in the hands of the assessee. Thus even the Department was not sure to whom these assets belonged to. In the present proceeding, we are not concerned about finality of assessment of income. The appeals in this regard may pending before the higher appellate authority. Even assuming for the sake of argument, that undisclosed income determined by the ld. Assessing Officer for the purpose of computing the penalty amount is assessable in the hands of the assessee only, then also a question before us is, whether she can be visited with penalty under section 158BFA(2) or not? 9. As discussed above, a perusal of section 158BFA would indicate that charging against the assessee is, why she failed to compute true undisclosed income from the seized material supplied to her along with the notice under section 158BC. She has computed nil undisclosed income. This stand of her was not doubted by the ld. Assessing Officer. He was not sure whether the undisclosed income on substantive basis is to be assessed in the hands of the assessee or her husband. Therefore, he passed a protective assessment order in her case, which became substantive after adjudication at the level of the second appellate authority. To our mind this is a sufficient reason for not visiting the assessee with penalty under section 158BFA(2) of the Income Tax Act. The imposition of penalty under section 158BFA(2) is not automatic IT(SS)A No. 03/PAT/2013 Block Assessment Year 1992-93 to 2001-02 and from 01.04.2001 to 18.04.2007 Smt. Madhuri Sharma 8 rather it is a discretionary aspect. This has been provided in the provision itself wherein expression “may” has been employed. In other words, the competent authority may visit the assessee with penalty. The expression “shall” as used in this section is with regard to quantification of penalty; Whether the assessee deserves to be visited with penalty or not, it is the discretion of the competent authority after looking into all the material facts. Therefore, considering the totality of the circumstances without getting influenced about the status of assessment of income in the hands of assessee, she does not deserve to be visited with penalty under section 158BFA(2). We allow this appeal and delete the penalty. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on March 31, 2022. Sd/- Sd/- (Girish Agrawal) (Rajpal Yadav) Accountant Member Vice-President (KZ) Kolkata, the 31 st day of March, 2022 Copies to : (1) Smt. Madhuri Sharma, Ashokapuri, Khajpur, Bailey Road, Patna-14 (2) Deputy Commissioner of Income Tax, Central Circle-3, Patna (3) Commissioner of Income Tax (Appeals)-1, Patna (4) Commissioner of Income Tax- (5) The Departmental Representative (6) Guard File TRUE COPY By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.