ACIT, New Delhi V. M/s. Cellcap Invofin India Pvt. Ltd., New Delhi

ITSSA 6/DEL/2013

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0981 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 20-08-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 27-07-2015
• Assessment Year: misc
• Appeal Filed On: 14-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Search and seizure; Question of law; Difference of opinion; Block assessment; Onus to prove
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `B NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.(SS)A.NO.5 & 6/DEL/2013 ASSESSMENT YEAR/BLOCK PERIOD : 1/4/1989 TO 13.1.200 0 ACIT, VS CELLCAP INVOFIN INDIA PVT. LT D., CENTRAL CIRCLE-2, A-60, NARAIN INDUSTRIAL A REA-I, ROOM NO.323, NEW DELHI-110028 3 RD FLOOR, ARA CENTRE, (PAN: AAACC4102A) JHANDEWALAN EXTN. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT B Y: SHRI RAVI JAIN, CIT DR RESPONDENT BY : SHRI ROHIT JAIN, ADV ., MS DEEPASHREE RAO, CA DATE OF HEARING: 30.07.2015 DATE OF PRONOUNCEMENT: 20.08.2015 O R D E R PER CHANDRAMOHAN GARG, J.M. THESE APPEALS BY THE REVENUE HAVE BEEN DIRECTED AGA INST THE ORDER OF CIT(A)-III, NEW DELHI DATED 29.01.2013 PASSED IN AP PEAL NO. 22 AND 25/11- 12/CIT(A)-III FOR THE BLOCK PERIOD FROM 1.4.89 TO 3 1.1.10. THE REVENUE HAS RAISED FOLLOWING GROUND IN THIS APPEALS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE CIT(A) HAS ERRED IN CANCELLING THE PENALTY OF RS.10 ,15,733/- IMPOSED BY THE AO U/S 158BFA(2) OF THE INCOME TAX A CT, 1961 IN RESPECT OF THE ADDITION CONFIRMED BY THE HONBLE DE LHI HIGH COURT VIDE ORDER DATED 29.11.2010. IT(SS) NO. 5 & 6/DEL/2013 2 2. LD. DR SUPPORTING THE ACTION OF THE AO SUBMITTED THAT THE AO IMPOSED PENALTY U/S 158BFA(2) OF THE INCOME TAX ACT, 1961 ( FOR SHORT THE ACT) RIGHTLY FOUND THAT THE ASSESSEE COMPANY IS LIABLE FOR IMPOS ITION OF PENALTY UNDER THE SAID PROVISION IN RESPECT OF ITS UNDISCLOSED INCOME OF RS.15,38,990 FOR THE PERIOD UNDER CONSIDERATION. LD. DR FURTHER SUBMITT ED THAT IN VIEW OF THE FACTS OF THE CASE AND DECISION OF HONBLE HIGH COURT WHER EIN THE ADDITION PERTAINING TO SAID UNDISCLOSED INCOME OF THE ASSESSEE HAS BEEN SUSTAINED, THE PROVISIONS OF SECTION 158BFA(2) OF THE ACT ARE SQUARELY APPLICABL E AND THEREFORE, THE AO WAS QUITE JUSTIFIED IN IMPOSING PENALTY OF RS. 10,15,73 3 I.E. @100% OF TAX ON UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. LD. DR HAS PLACED RELIANCE ON THE JUDGMENT OF HONBLE HIGH COURT OF RAJASTHAN DATED 12.2.2014 IN THE CASE OF APEX METCHEM (P) LTD. VS ACIT IN DB ITA-5/2 014 , THE JUDGMENT OF HONBLE GUJARAT HIGH COURT DATED 8.11.2011 IN THE C ASE OF KONDOI BHOGILAL MULCHAND VS DCIT IN ITA NO.2467 OF 2010, O RDER OF ITAT MUMBAI E BENCH DATED 30.6.2011 IN THE CASE OF TRI UMPH INTERNATIONAL FINANCE LTD. VS ACIT IN IT(SS)A NO. 160/MUM/2007 AND DECISION OF ITAT H BENCH DATED 30.4.2009 IN THE CASE OF M/S AHUJAS ONS SHAWLWALE PVT. LTD. VS DCIT IN IT(SS)A NO. 146 (DEL) OF 2005 AND ALSO PLACED CONTENTIONS OF THE REVENUE BY WAY OF READING THE RELEVANT PARAS OF THESE JUDGEMENTS AND ORDERS. IT(SS) NO. 5 & 6/DEL/2013 3 3. REPLYING TO THE ABOVE, LD. COUNSEL OF THE ASSESS EE, AT THE VERY OUTSET, PLACED HIS RELIANCE ON RECENT ORDER OF ITAT E BEN CH NEW DELHI DATED 20.4.2015 IN THE CASE OF DCIT VS M/S MEHROTRA INVOF IN INDIA PVT. LTD. IN IT(SS)A NO. 11/DEL/2013 AND SUBMITTED THAT WHERE TH ERE IS A DIFFERENCE OF OPINION EITHER BETWEEN DIFFERENT BENCHES OF TRIBUNA L OR THE HIGH COURT WHICH IS FINALLY SETTLED BY THE PENDING JUDGEMENT OF THE SUP REME COURT AND ALL NECESSARY FACTS ABOVE BEEN DISPOSED BY THE ASSESSEE IN ITS RE TURN, THE PENALTY IS NOT WARRANTED. LD. COUNSEL FURTHER CONTENDED THAT THE IMPOSITION OF PENALTY U/S 158BFA(2) IS NOT AUTOMATIC OR MANDATORY, THEREFORE, THE CIT(A) WAS CORRECT IN DELETING THE PENALTY. 4. LD. COUNSEL OF THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF ITAT A BENCH DELHI DATED 13.1.2015 IN THE CASE OF DCIT VS M/S A.T. INVOFIN INDIA P. LTD. IN IT(SS) NO.12/DEL/2013 AND SUBMITTED THAT THE TRIBUNAL HAS FOLLOWED THE RATIO OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF CIT VS H.V. LEASING & FINANCE CO. LTD. REPORTED AS 334 ITR 367 (DEL) THAT THE ISSUE CAN BE SAID TO BE DEBATABLE WHEN SU CH SUBSTANTIAL QUESTION OF LAW HAS BEEN ADMITTED AND W HEN QUANTUM PROCEEDINGS ARE DEBATABLE, THEN PENALTY CANNOT BE IMPOSED. SUP PORTING THE IMPUGNED ORDER OF THE CIT(A), LD. COUNSEL ALSO POINTED OUT THAT TH E LEGISLATURE DID NOT INTEND IMPOSITION OF PENALTY U/S 158BFA(2) BY ITSELF TO BE MANDATORY RATHER IT INTENDED THE SAME TO BE LEFT TO THE DISCRETION WHICH HAS TO BE EXERCISED UPON JUDICIAL IT(SS) NO. 5 & 6/DEL/2013 4 CONSIDERATION OF AO. LD. COUNSEL FURTHER POINTED O UT THAT AS PER DECISION OF THE TRIBUNAL DATED 3.8.2007 IN QUANTUM PROCEEDINGS, THE FACT OF ASSESSEES CASE, THE CAPITAL GAIN OF SHARES IS NOT TO BE TREATED AS UNDI SCLOSED INCOME WHEREAS THE HONBLE HIGH COURT IN ITS JUDGMENT DATED 29.11.2010 WAS OF THE VIEW THAT SINCE THE RETURN OF INCOME IS NOT FILED BY THE DUE DATE, THE CAPITAL GAIN IN QUESTION HAS TO BE TREATED AS UNDISCLOSED INCOME OF THE ASSESSEE , THEN WHERE THERE IS A DIFFERENCE OF OPINION EITHER BETWEEN DIFFERENT BENC HES OF THE TRIBUNAL OR HIGH COURT WHICH IS FINALLY SETTLED BY THE PENDING JUDGM ENT OF HONBLE SUPREME COURT AND SPECIALLY WHEN ALL NECESSARY FACTS HAVE B EEN DISCLOSED BY THE ASSESSEE IN ITS RETURN, THE PENALTY IS NOT WARRANTE D. HOWEVER, BEFORE PARTING WITH THE ARGUMENT, LD. COUNSEL OF THE ASSESSEE FAIR LY SUBMITTED THAT THE SLP (CIVIL) NOS. 9018-9022/2011 INCLUDING SLPS OF THE A SSESSEE AGAINST THE ORDER OF HONBLE HIGH COURT DATED 29.10.2012 HAVE BEEN DISM ISSED AT THE ADMISSION STAGE WITHOUT ANY DETAILED DELIBERATIONS. 5. LD. DR ALSO PLACED A REJOINDER TO THE ABOVE SUBM ISSIONS OF THE ASSESSEE AND SUBMITTED THAT WHEN THE ISSUE HAS ATTAINED FINA LITY IN THE HANDS OF HONBLE APEX COURT WHEREIN THE SLPS FILED BY THE ASSESSEE H AVE BEEN DISMISSED, THEN THE ISSUE DOES NOT REMAIN DEBATABLE AND ATTAINS FIN ALITY. LD. DR FURTHER POINTED OUT THAT THE ORDERS OF THE TRIBUNAL AS RELIED BY TH E LD. COUNSEL OF THE ASSESSEE (SUPRA) PERTAIN TO A SITUATION WHEN THE PENALTY WAS DELETED ON THE GROUND THAT THE ISSUE HAS NOT ATTAINED FINALITY AS THE SLP IS P ENDING BEFORE HONBLE APEX IT(SS) NO. 5 & 6/DEL/2013 5 COURT IN THE PRESENT CASE, THE ISSUE HAS ATTAINED F INALITY, THEREFORE, THE PENALTY CANNOT BE DELETED MERELY ON THE BASIS THAT THE ISSU E HAS NOT ATTAINED FINALITY DUE TO PENDING SLP BEFORE THE HONBLE SUPREME COURT. 6. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS AN D VIGILANT PERUSAL AND CONSIDERATION OF THE RELEVANT MATERIAL AND RATIO OF THE ORDERS AND JUDGMENT RELIED BY BOTH THE PARTIES, AT THE VERY OUTSET, WE NOTE THAT IN THE UNACCOUNTED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET WHICH WER E SEIZED DURING THE SEARCH, IT WAS FOUND THAT THE ASSESSEE HAD EARNED LONG TERM CA PITAL GAIN OF RS.15,67,996/- AND RS.9704/- IN THE RESPECTIVE FINANCIAL PERIODS B UT THE SAME WAS SHOWN IN THE RETURN OF INCOME FOR AY 1999-2000 FILED ON 31.3.200 3. WE FURTHER OBSERVE THAT SINCE THE RETURN WAS FILED AFTER THE DUE DATE I.E. 31.3.1999, THE CASE OF THE ASSESSEE FELL WITHIN THE AMBIT OF PROVISIONS OF SEC TION 158BB(I)(C) OF THE ACT AND ACCORDINGLY, THE AO ASSESSED THE IMPUGNED SAID INCOME AS UNDISCLOSED INCOME OF THE ASSESSEE. 7. AGGRIEVED BY THE ABOVE ASSESSMENT ORDER, THE ASS ESSEE PREFERRED FIRST APPEAL BEFORE THE CIT(A) BY PLEADING FOLLOWING SUBM ISSIONS:- 2.2 AGGRIEVED BY THE ABOVE ACTION OF THE AD, IN T HE FIRST APPEAL THE APPELLANT PLEADED BEFORE THE CIT ( A): (A) AS THE DOCUMENTS RELATING TO THE SALE OF SHAR ES MADE DURING THE ASSESSMENT YEAR 1999-2000 ON WHICH THEY HAD EARNED A LONG TERM CAPITAL GAIN OF RS.15,67,996, WE RE NOT RECEIVED FROM THE BROKER IN TIME, THEREFORE RETURN OF INCOME WAS KEPT PENDING WITH THE INTENTIONS OF FILING IT BEFOR E THE DUE DATE PRESCRIBED UNDER SECTION 139(4) OF THE ACT I.E. 31. 03.2000 AND IT(SS) NO. 5 & 6/DEL/2013 6 SUBSEQUENTLY THE RETURN WAS FILED DECLARING THE SAI D INCOME ON 31.03.2000 AND (B) FURTHER AS THE SHARES IN QUESTION WAS DULY BEE N RECORDED IN THE BOOKS OF ACCOUNTS IN THE YEAR IN WH ICH THEY WERE PURCHASED AND THE RETURN OF INCOME FOR THOSE YEARS WERE FILED IN TIME AND (C) ALSO GIVEN THE FACT THAT THE SALE PROCEEDS GA IN ARE DULY BEEN DEPOSITED IN THE DECLARED BANK ACCOUNT FO R THE YEAR UNDER CONSIDERATION. THEREFORE THERE WAS NO INTENTION TO HIDE SAID INCOM E AND IT WAS ONLY A TECHNICAL FAULT THAT THE RETURN OF INCOM E WAS FILED UNDER SECTION 139(4). IN SUPPORT OF THIS THE APPELL ANT ALSO RELIED ON ITATS PUNE BENCH DECISION IN THE CASE OF VIDYA MADAN LAL MALANI VS ACIT (115 ITD 316). 8. FINALLY, THE CIT(A) DID NOT ACCEPT THE ASSESSEE S ABOVE SUBMISSIONS AND HE ALSO HELD THAT THE LONG TERM CAPITAL GAIN WAS UN DISCLOSED INCOME AS THE RETURN OF INCOME WAS NOT FILED BY THE DUE DATE I.E. 31.12. 1999 AND THE SAME WAS FILED LATER ON 31.3.2000. THE ASSESSEE CARRIED THE MATTE R TO THE ITAT WHERE IN ORDER DATED 3.8.2007, IT WAS HELD THAT THE SAID LONG TERM CAPITAL GAIN WAS NOT AN UNDISCLOSED INCOME OF THE ASSESSEE. WE FURTHER RES PECTFULLY NOTE THAT THE HONBLE DELHI HIGH COURT HELD THAT SINCE THE RETURN OF INCOME WAS NOT FILED BY THE DUE DATE WHICH FALLS BEFORE THE DATE OF SEARCH, THEREFORE, PROVISIONS OF SECTION 158BB(1)(C) OF THE ACT WERE RIGHTLY APPLIED BY THE AO AND THEREFORE, IMPUGNED LONG TERM CAPITAL GAIN HAS TO BE TREATED A S UNDISCLOSED INCOME OF THE ASSESSEE AND THE ACTION OF THE AO WAS CONFIRMED BY THE HONBLE HIGH COURT. SUBSEQUENTLY, THE AO LEVIED PENALTY U/S 158BFA(2) A ND THE AGGRIEVED ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORIT Y I.E. CIT(A) BY SUBMITTING THAT IT(SS) NO. 5 & 6/DEL/2013 7 THE AO HAD WRONGLY CONCLUDED THAT THE PENALTY U/S 1 58BFA(2) IS AUTOMATICALLY LEVIABLE IF THE INCOME IS TREATED AS UNDISCLOSED IN COME AND THE AO HAS NOT APPLIED HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE ON THE ISSUE OF RECORDING SATISFACTION. IT WAS ALSO SUBMITTED ON B EHALF OF THE ASSESSEE THAT THE AO HAS IGNORED THE SUBMISSIONS OF THE ASSESSEE THAT THE MATTER OF DETERMINATION OF UNDISCLOSED INCOME BEING SUB JUDICE BEFORE THE H ONBLE SUPREME COURT ON ACCOUNT OF SLP FILED BY IT, HENCE, PENALTY NEEDS TO BE KEPT IN ABEYANCE. 9. ON CAREFUL AND VIGILANT READING OF THE FINDINGS OF THE CIT(A), FROM PARA 4 TO 4.9 OF THE IMPUGNED ORDERS, WE NOTE THAT IN THE BEGINNING OF THE ORDER, THE CIT(A) NOTED THAT THE ASSESSMENT PROCEEDINGS AND PE NALTY PROCEEDINGS ARE TWO DIFFERENT PROCEEDINGS AND THE ISSUE MAY CALL FOR AN ADDITION IN THE ASSESSMENT PROCEEDINGS BUT THE ADDITION IN ITSELF CANNOT BE TH E SOLE CRITERIA OR GROUND FOR IMPOSITION OR LEVY OF PENALTY. THE CIT(A) FURTHER NOTED THAT FOR IMPOSITION OF PENALTY, THE AO HAS TO WALK A LITTLE EXTRA MILE TO PROVE THAT THE ASSESSEE HAS CONCEALED OR IS LIKELY TO CONCEAL THE INCOME OR FUR NISHING THE INACCURATE PARTICULARS OF ITS INCOME. THE CIT(A) FURTHER NOTE D THAT SINCE THE SEARCH TOOK PLACE ON 30.1.2010 AND BY THAT TIME, THE RETURN OF INCOME FOR AY 1999-2000 WAS NOT FILED BEFORE THE DUE DATE WHICH WAS 31.12.2 009, THEREFORE, THE AMOUNT OF LONG TERM CAPITAL GAIN WAS RIGHTLY BEING ASSESSE D AS UNDISCLOSED INCOME WITHIN THE MEANING OF SECTION 155BB(1)(C) OF THE AC T. THE CIT(A) IN LAST OPERATIVE PARA 4.8 NOTED THAT AS PER SPIRIT OF DECI SION OF HONBLE DELHI HIGH IT(SS) NO. 5 & 6/DEL/2013 8 COURT IN THE CASE OF CIT VS SARLA FABRICS P. LTD. D ATED 20.7.2012 IN ITA 788/2011 IT WAS HELD THAT WHERE THERE IS A DIFFEREN CE OF OPINION EITHER BETWEEN DIFFERENT BENCHES OF TRIBUNAL OR THE HIGH COURTS, WHICH IS FINALLY SETTLED BY THE PENDING JUDGMENT OF THE SUPREME COURT AND ALL NECES SARY FACTS HAVE BEEN DISCLOSED BY THE ASSESSES IN ITS RETURN, THE PENALT Y IS NOT WARRANTED. 10. FOR THE SAKE OF CLARITY IN OUR FINDINGS, WE FIN D IT APPROPRIATE TO REPRODUCE THE CONCLUSION/FINDINGS OF THE CIT(A) IN THE OPERAT IVE PART OF THE IMPUGNED ORDER WHICH READS AS UNDER:- 4. I HAVE GONE THROUGH THE ABOVE SUBMISSIONS OF T HE APPELLANT AND HAVE PERUSED THE AO'S ORDER AND CONSI DERED THE FACTS AND EVIDENCES ON RECORD AND JUDICIAL PRONOUNC EMENTS ON THIS ISSUE. 4.1 IT IS AN ESTABLISHED PREPOSITION THAT THE ASSES SMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE TWO ALL TOG ETHER DIFFERENT PROCEEDINGS. AN ISSUE MAY CALL OR AN ADDI TIONS IN THE ASSESSMENT PROCEEDINGS, BUT THAT ADDITION IN ITSELF CANNOT BE THE SOLE GROUND FOR IMPOSITION OR LEVY OF PENALTY. FOR THE PURPOSE OF IMPOSING PENALTY, THE AO HAS TO WALK A LITTLE EXTRA MILE TO PROVE THAT THE APPELLANT HAS CONCEALED OR LIKELY TO CONCE AL THE INCOME OR FURNISHED THE INACCURATE PARTICULAR OF ITS INCOM E. 4.2 FURTHER BEFORE DISCUSSING THE FACTS OF THE PRE SENT CASE AND TO SEE WHETHER THE PENALTY UNDER SECTION 158BFA (2) IS IMPOSABLE, IT IS WORTH RE-ITERATING HERE THE GENERA L RULES TO BE FOLLOWED FOR THE PURPOSE OF LEVYING THE PENALTY AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. S HROFF VS. CIT (2007) (291 ITR 519 (SC) AND T. ASHOKE PAI VS. CIT (2007) (292 ITR 11) (SC). I.E. (I) BOTH THE EXPRESSIONS 'CONCEALMENT OF INCOME' AN D FURNISHING OF INACCURATE PARTICULARS' INDICATE SOM E DELIBERATION ON THE PART OF THE ASSESSEE, THOUGH THE WORD 'DELIB ERATELY' AND THE WORD WILFULLY ARE NO LONGER PART OF THE STATUE . IT(SS) NO. 5 & 6/DEL/2013 9 (II) MERE OMISSION OR NEGLIGENCE WOULD NOT CONSTIT UTE A DELIBERATE ACT OF SUPPRESSIIO VERI OR SUGGESTIO F ALSI. (III) PRIMARY BURDEN OF PROOF IS ON THE REVENUE. TH E STATUTE REQUIRES SATISFACTION ON THE PART OF THE ASSESSING OFFICER. HE IS REQUIRED TO ARRIVE AT A SATISFACTION SO AS TO SHOW THAT THERE IS PRIMARY EVIDENCE TO ESTABLISH THAT THE ASSESSEE HAD CONCEALED THE AMOUNT OR FURNISHED INACCURATE PARTICULARS AND THIS ONUS IS TO BE DISCHARGED BY THE DEPARTMENT. (IV) THE ASSESSING OFFICER WHILE CONSIDERING LEVY O F PENALTY SHOULD CONSIDER WHETHER THE ASSESSEE HAS BEEN ABLE TO DISCHARGE HIS PART OF THE BURDEN. HE SHOULD NOT BEGIN WITH TH E PRESUMPTION THAT THE ASSESSEE IS GUILTY. (IV) THOUGH PENALTY PROCEEDINGS UNDER THE INCOME-T AX LAW MAY NOT BE CRIMINAL IN NATURE, THEY ARE STILL Q UASI-CRIMINAL REQUIRING THE DEPARTMENT TO ESTABLISH THAT THE ASSE SSEE HAS CONCEALED HIS INCOME. 4.3 NOW LOOKING INTO THE FACTS OF THE PRESENT CASE IT IS OBSERVED THAT: (I) THE INVESTMENT IN SHARES (WHICH WERE SOLD DUR ING THE YEAR AND ON WHICH LONG TERM HAS BEEN EARNED) WE RE DULY BEEN REFLECTED IN THE FINANCIAL ACCOUNT OF THE YEAR IN WHICH THEY WERE PURCHASED. (II) THE SALE CONSIDERATION/GAIN WHICH HAS BEEN RECEIVED DURING THE YEAR UNDER CONSIDERATION HAS DU LY BEEN DEPOSITED IN THE DECLARED BANK ACCOUNT OF THE APPEL LANT. {III} THE UNAUDITED PROFIT AND LOSS ACCOUNT AND BA LANCE SHEET WHICH WERE FOUND DURING THE SEARCH, DULY CONT AINS THE RECORDING OF THE TRANSACTION OF SALE OF THESE SHARE S, ON WHICH THE CAPITAL GAIN OF RS. 15,67,996 HAS BEEN EARNED AND (IV) THE RETURN OF INCOME FAR ASSESSMENT YEAR 199 9- 2000 THOUGH WAS NOT FILED BY THE DUE DATE I.E. 31.1 2.1999, BUT THE SAME WAS FILED AN 31.03.2000 I.E. THE TIME ALLOWED AS PER THE PROVISION OF SECTION 139{4}, AND IN THEIR RETURN OF INCOME THE LONG TERM CAPITAL GAIN HAVE DULY BEEN REFLECTED. 4.4 NOW LOOKING INTO THE ABOVE FACTS, SINCE THE SEA RCH TOOK PLACE AN 13.01.2000, AND BY THAT TIME THE RETURN OF INCOME FOR ASSESSMENT YEAR 1999-2000 WAS NOT FILED BEFORE THE DUE DATE I.E. IT(SS) NO. 5 & 6/DEL/2013 10 31.12.1999, THEREFORE THE AMOUNT OF LONG TERM CAPIT AL WAS RIGHTLY BEEN ASSESSED AS 'UNDISCLOSED INCOME' WITH THE MEAN ING OF SECTION 158BB(1)(C). BUT THE FACT THAT SUCH SHARES WERE DULY BEEN RECORD ED IN UNAUDITED BALANCE SHEET, PROFIT AND LOSS ACCOUNT AN D SALE PROCEEDS HAVE BEEN DEPOSITED IN THE DECLARED BANK A CCOUNT AND ALSO THE INVESTMENT IN SHARES (WHICH WERE SAID IN T HE YEAR UNDER CONSIDERATION} WERE FOUND TO' BE DULY RECORDED IN T HE REGULAR BOOKS OF ACCOUNTS, IN MY HUMBLE VIEW ALL THE THESE FACTS DOESN'T CALLS FOR IMPOSITION OF PENALTY UNDER SECTION 158BF A(2). THE AO WHILE CONSIDERING THE LEVY OF PENALTY SHOULD NOT BE GIN WITH THE PRESUMPTION THAT THE APPELLANT IS GUILTY OF CONCEAL ING THE PARTICULARS OF INCOME, THE AO BEFORE LEVYING THE PE NALTY MUST BRING ON RECORD THE PRIMARY EVIDENCE TO ESTABLISH T HAT THE APPELLANT HAD UNDISCLOSED INCOME WHICH HE WAS CONCE ALING OR LIKELY TO CONCEAL. THE LEVY OF PENALTY UNDER SECTION 158BFA(2) IS NOT AN AUTOMATIC ACTION, THE WARDS 'MAY DIRECT' MENTIONED IN SECTION 158BFA(2) HAS TO BE GIVEN ITS NORMAL MEANING. THE W ARD 'MAY' CANNOT BE READ AS 'SHALL'. 4.5 LOOKING INTO THE FACTS OF THE APPELLANT'S CASE , IT IS QUITE LIKELY THAT THE APPELLANT MIGHT BE WAITING FO R THE REQUISITE DETAILS OF SHARES SOLD AND THIS MAY BE THE GENUINE REASON FOR NOT BEEN ABLE TO FILE THE RETURN OF INCOME BY DUE DATE I.E. 31.12.1999, BUT THE FACT REMAINS THAT HE DID FILE THE RETURN WI THIN THE TIME ALLOWED UNDER SECTION 139(4). FURTHER, WHILE INVOKI NG THE PENAL PROVISION APART FROM ABOVE THE AO CANNOT OVERLOOK T HIS FACT, THAT THE FINANCIAL STATEMENTS (FOUND DURING THE SEARCH) DID RECORD THE TRANSACTION RELATING TO SHARES ON WHICH CAPITAL GAI N IS EARNED AND DULY BEEN DECLARED IN THE RETURN OF INCOME FILE ON 31.03.2000. 4.6 HERE 1 WOULD LIKE TO RELY ON THE DECISION OF IT AT CHENNAI BENCH DATED 07.06.2011 IN THE CASE OF K. RA MAKRISHNAN (HUF) VS. DCIT (IT(55) NO. 7 OF 2011), WHERE ON THE SIMILAR FACTS THE ITAT HAS HELD PENALTY UNDER SECTION 158BF A (2) IS NOT LEVIABLE IF THE RETURN OF INCOME IS NOT FILED BY TH E DUE DATE, BUT THE INCOME BE ASSESSED AS UNDISCLOSED INCOME WITHIN THE MEANING OF SECTION 158BB(1)(C). IT(SS) NO. 5 & 6/DEL/2013 11 FACTS A SEARCH AND SEIZURE ACTION UNDER SECTION 132 WAS C ARRIED OUT IN THE CASE OF THE ASSESSEE. THE SEIZED MATERIA LS MADE OUT A CASE OF UNDISCLOSED INCOME. THE ASSESSING OFFICER T HUS INITIATED PROCEEDINGS UNDER SECTION 158BD. THE ASSESSEE FURNI SHED A RETURN DECLARING NIL UNDISCLOSED INCOME. THE ASSESS ING OFFICER PROCEEDED TO COMPLETE THE ASSESSMENT TREATING THE C APITAL GAINS IN THE HANDS OF THE ASSESSEE AS UNDISCLOSED INCOME. THE CAPITAL GAINS BEING ASSESSED IN THE BLOCK ASSESSMENT, TAX W AS LEVIED AT RATE OF 60 PER CENT. IT WAS IN VIEW OF THE ABOVE TH AT THE PENALTY WAS ALSO LEVIED. HOWEVER, IT WAS ALSO ON RECORD THA T IMMEDIATELY 'AFTER THE SEARCH ACTION, THE ASSESSEE HAS FILED A VOLUNTARY RETURN OFFERING THE CAPITAL GAINS FOR TAXATION. THE ASSESS EE COMPUTED THE TAX LIABILITY AT 20 PER CENT, APPLICABLE TO LONG TE RM CAPITAL GAINS. THE RETURN FILED BY THE ASSESSEE WAS ANYHOW BELATED . THE ASSESSING OFFICER DID NOT TAKE INTO COGNIZANCE THE, BELATED RETURN AND COMPLETED THE ASSESSMENT ACCORDINGLY. ON APPEAL , THE COMMISSIONER {APPEALS} CONFIRMED THE BLOCK ASSESSME NT ORDER AS WELL AS PENALTY ORDER PASSED UNDER SECTION 1588F A(2). HELD IT WAS A UNIQUE CASE. TECHNICALLY SPEAKING, THE RET URN FILED BY THE ASSESSEE IMMEDIATELY AFTER THE SEARCH OPERAT ION WAS NOT VALID IN THE EYE OF LAW. THE SAID BELATED RETURN WA S NON EST. THEREFORE, THE NIL RETURN FILED BY THE ASSESSEE COU LD NOT HAVE BEEN ACCEPTED BY THE ASSESSING AUTHORITY FOR THE PU RPOSE OF BLOCK ASSESSMENT. THE BLOCK ASSESSMENT SHOULD HAVE BEEN C OMPLETED BY TAKING INTO CONSIDERATION THE CAPITAL GAINS AND RIG HTLY CHARGING TAX AT 60 PER CENT. THE TAX PAID BY THE ASSESSEE AT 20 PER CENT ALONG WITH ITS RETURN COULD NOT HAVE BEEN ACCEPTED. ALL THESE FACTORS WERE VERY RELEVANT FOR COMPLETING THE QUANT UM ASSESSMENT AND DEMANDING THE TAX AT 60 PER CENT FRO M THE ASSESSEE. BUT THE ABOVE FACTORS WERE NOT SUFFICIENT TO IMPOSE PENALTY UNDER SECTION 158BFA. THE REASON THAT THE ASSESSEE HAD NOT FURNISHED ANY UNDISCLOSED INCOME IN THE BLOCK RETUR N FILED BY IT IN PURSUANCE OF NOTICE UNDER SECTION 158BO WAS NOT A G RIEVOUS MISTAKE WHEN THE EARLIER BELATED RETURN FILED BY TH E ASSESSEE AND AVAILABLE IN THE FILES OF THE ASSESSING AUTHORITY W AS ALSO LOOKED INTO. THE FACT THAT THE ASSESSEE HAD NOT FILED ANY RETURN OF INCOME THROUGH ITS BLOCK RETURN WAS A LEGAL ERROR BUT NOT A GROUND TO IT(SS) NO. 5 & 6/DEL/2013 12 IMPOSE PENALTY. THE BLOCK ASSESSMENT ITSELF HAD BEE N COMPLETED BY THE ASSESSING OFFICER BY ADOPTING THE AMOUNT OF CAPITAL GAINS OFFERED BY THE ASSESSEE IN ITS BELATED RETURN FILED IMMEDIATELY AFTER THE SEARCH OPERATION. THEREFORE, EVEN THOUGH LEGALLY AND TECHNICALLY NOT VALID, THE ASSESSEE HAD ALREADY RET URNED THE CAPITAL GAINS LIABLE FOR TAXATION IN ITS HANDS. IF THAT AMOUNT OF CAPITAL GAINS WAS IMPREGNATED IN THE BLOCK RETURN F ILED BY THE ASSESSEE, THE EQUATION WOULD BECOME COMPLETED. THE ONLY CORRECTION WAS CALCULATING TAX AT 60 PER CENT INSTE AD OF 20 PER CENT. IF THE ASSESSEE HAD NOT FURNISHED ITS BELATED RELAT ED IMMEDIATELY AFTER THE SEARCH, THE ASSESSEE WOULD HA VE DEFINITELY OFFERED THE CAPITAL GAINS FOR TAXATION IN ITS BLOCK RETURN. IF THAT AMOUNT WAS OFFERED THROUGH THE BLOCK RETURN THERE W OULD BE NO CAUSE OF ACTION TO IMPOSE PENALTY. THEREFORE, THE O NLY MISTAKE COMMITTED BY THE ASSESSEE WAS ATTRACTED A LITTLE OV ER SMART AND OVER CAUTIONS/ EVEN THOUGH THE ENDEAVOUR OF THE ASS ESSEE WAS NOT PRODUCTIVE. [PARA 6] IN THE FACTS AND CIRCUMSTANCES OF THE CASE/ IT WAS OPINED THAT THE LEVY OF PENALTY WAS NOT JUSTIFIED. IT WAS TO BE DELETED. [PARA8] IN RESULT APPEAL FILED BY THE ASSESSEE WAS TO BE AL LOWED. 4.7 HERE, I WOULD ALSO LIKE TO TAKE STRENGTH FROM T HE DECISION DATED 12.11.2008 OF DELHI HIGH COURT IN TH E CASE OF CIT VS. HARKARAM DAS VED PAL (117 TAXMAN 398) DELHI WHE RE HON'BLE COURT HAS HELD THAT THE PENALTY IMPOSABLE U NDER SECTION 158BFA(2) IS NOT MANDATORY, AND AO MUST USE HIS JUD ICIAL CONSIDERATION BEFORE IMPOSING THE PENALTY. THE FOOT NOTES OF THE SAID DECISION READ AS UNDER: 'SECTION 1588FA OF THE INCOME-TAX ACT, 1961 - BLOCK ASSESSMENT IN SEARCH CASES - LEVY OF INTEREST AND P ENALTY IN CERTAIN CASES - BLOCK PERIOD 1-4-1999 TO 6-7-2000- WHETHER LEGISLATURE DID NOT INTEND IMPOSITION OF PENALTY UN DER SECTION 1588FA(2) BY ITSELF TO BE MANDATORY; RATHER IT INTE NDED SAME TO BE LEFT TO DISCRETION, WHICH OF COURSE HAS TO BE EX ERCISED UPON JUDICIAL CONSIDERATIONS OF ASSESSING OFFICER - HELD , YES - WHETHER A PRE-CONDITION FOR IMPOSITION OF PENALTY UNDER SEC TION 1588FA(2) IS THAT THERE MUST BE A DETERMINATION OF UNDISCLOSED INCOME BY ASSESSING OFFICER UNDER CLAUSE (C) OF SEC TION 1588C - HELD, YES - WHETHER WHERE UNDISCLOSED INCOME HAD BE EN IT(SS) NO. 5 & 6/DEL/2013 13 COMPUTED MERELY ON BASIS OF SURRENDER MADE BY ASSES SEE IN COURSE OF BLOCK ASSESSMENT PROCEEDINGS AND DE HORS SURRENDER, THERE WAS NO EVIDENCE WHICH COULD HAVE BEEN SAID TO HAVE BEEN FOUND AS A RESULT OF SEARCH, 'COMPUTATION' OF UNDIS CLOSED INCOME BY ASSESSING OFFICER IN BLOCK ASSESSMENT PROCEEDING S COULD NOT BE CONSTRUED AS A 'DETERMINATION' OF UNDISCLOSED IN COME CONTEMPLATED UNDER SECTION 158BC(C) OR SECTION 1588 8 AND NO PENALTY WOULD BE IMPOSABLE UNDER SECTION 158BFA(2) IN SUCH CASE - HELD, YES 4.8 ALSO IT IS A TRITE LAW THAT WHERE TWO VIEWS ARE POSSIBLE ON THE ISSUE, THE PENALTY IS NOT IMPOSABLE IN SUCH CASES. APPLYING, THIS PRINCIPLE TO THE FACTS OF THE PRESEN T CASE, IT IS SEEN THAT AS PER ITAT'S DECISION DATED 03.08.2007 IN THE FACTS OF THE APPELLANT'S CASE THE CAPITAL GAIN ON SHARES IS 'NOT TO BE TREATED AS UNDISCLOSED INCOME', WHEREAS THE HON'BLE DELHI H IGH COURT VIDE THEIR DECISION DATED 29.11.2010, WAS OF THE VI EW THAT SINCE THE RETURN OF INCOME IS NOT FILED BY DUE DATE, THE CAPITAL GAIN IN QUESTION HAS TO BE TREATED AS 'UNDISCLOSED INCOME', FURTHER EVEN AGAINST THE SAID ORDER OF HIGH COURT THE APPELLANT HAS FILED AN SLP BEFORE THE APEX COURT ON 01.03.2011. THEREFORE IN SUCH AN EVENT AS PER THE SPIRIT OF DECISION OF DELHI HIGH C OURT IN THE RECENT CASE OF CIT VS. SARLA FABRICS P. LTD . (ITA 788/2011) DATED 20.07.2012) THE HON'BLE COURT BY RELYING ON T HEIR OWN DECISION IN THE CASE OF CIT-IV DELHI VS. IP INDIA P . LTD. (204 TAXMAN 368) (2012) HAVE HELD THAT: 'WHERE THERE IS A DIFFERENCE OF OPINION EITHER BETW EEN DIFFERENT BENCHES OF TRIBUNAL OR THE HIGH COURTS, W HICH IS FINALLY SETTLED BY THE PENDING JUDGMENT OF THE SUPREME COUR T AND ALL NECESSARY FACTS HAVE BEEN DISCLOSED BY THE ASSESSES IN ITS RETURN, THE PENALTY IS NOT WARRANTED. ' 4.9 THUS IN VIEW OF THE ABOVE DISCUSSIONS, I AM OF THE CONSIDERED VIEW THAT IN THE FACTS OF THE APPELLANT' S CASE, THE IMPOSITION OF PENALTY UNDER SECTION 158BFA(2) IS NO T ON AUTOMATIC FALL OUT OR MANDATORY, HENCE THE PENALTY LEVIED BY THE AO, IS DELETED. 11. IN VIEW OF ABOVE, IT IS VIVID THAT THE CIT(A) G RANTED RELIEF FOR THE ASSESSEE DELETING THE IMPUGNED PENALTY BY OBSERVING THAT THE SPECIAL LEAVE PETITION WAS PENDING BEFORE THE HONBLE SUPREME COURT AGAINST TH E QUANTUM ORDER OF THE IT(SS) NO. 5 & 6/DEL/2013 14 HONBLE HIGH COURT DATED 29.11.2010, WHERE PENALTY U/S 158BFA IS NOT AN AUTOMATIC FALL OUT OR MANDATORY SPECIALLY WHEN THE OLD NECESSARY FACTS HAVE BEEN DISCLOSED BY THE ASSESSEE IN ITS RETURN. 12. NOW, WE PROCEED TO CONSIDER THE RATIO OF THE OR DERS OF THE TRIBUNAL IN THE CASE OF DCIT VS M/S A.T. INVOFIN INDIA P. LTD. IN IT(SS) NO.12/DEL/2013 AND DCIT VS M/S MEHROTRA INVOFIN INDIA PVT. LTD. (SUPRA ) WHICH SUPPORT THE VIEW TAKEN BY THE CIT(A) THAT WHERE THERE IS A DIFFERE NCE OF OPINION EITHER BETWEEN DIFFERENT BENCHES OF TRIBUNAL OR THE HIGH COURTS, W HICH IS FINALLY SETTLED BY THE PENDING JUDGMENT OF THE SUPREME COURT AND ALL NECES SARY FACTS HAVE BEEN DISCLOSED BY THE ASSESSEE IN ITS RETURN, THE PENALT Y IS NOT WARRANTED. BUT WE RESPECTFULLY NOTE THAT THE BENEFIT OF THE RATIO OF THE ORDERS OF THE TRIBUNAL (SUPRA) IS NOT AVAILABLE FOR THE ASSESSEE IN THE PRESENT AP PEALS AS THE SLPS FILED BY THE ASSESSEE AGAINST THE ORDERS OF THE HONBLE HIGH CO URT DATED 29.11.2010 HAVE BEEN DISMISSED ON 29.10.2012 AND THE ISSUE HAS ATT AINED FINALITY AGAINST THE ASSESSEE. 13. IN SUM AND SUBSTANCE. ON CAREFUL PERUSAL OF IM PUGNED ORDER WE CLEARLY OBSERVE THAT THE CIT(A) MAINLY GRANTED RELIEF TO TH E ASSESSEE BY NOTICING THAT THE SLPS ARE PENDING BEFORE HONBLE SUPREME COURT AND I SSUE IS DEBATABLE BUT IN THE LIGHT OF SUBSEQUENT ORDER OF HONBLE APEX COURT DISMISSING THE SLPS OF THE REVENUE WE CAN SAFELY HOLD THAT THE ISSUE HAS ATTAI NED FINALITY. WE ALSO NOTE THAT THE CIT(A) HAS ALSO NOT CONSIDERED THE SECOND PROVISO TO SECTION 158 IT(SS) NO. 5 & 6/DEL/2013 15 BFA(2) WHICH IS RELEVANT TO DECIDE THE ISSUE AT LE VY OF PENALTY. THEREFORE, WE DEEM IT JUST AND PROPER TO RESTORE THIS ISSUE TO TH E FILE OF THE CIT(A) FOR A FRESH ADJUDICATION FOR BOTH THE APYS IN THE LIGHT OF THE ORDER OF HONBLE SUPREME COURT DATED 29/10/2012 AND SECOND PROVISION TO SECT ION 158BFA(2) OF THE ACT AND ALL OTHER RELEVANT PROVISIONS OF THE ACT. WE O RDER ACCORDINGLY. NEEDLESS TO SAY THAT THE CIT(A) SHALL ALLOW OPPORTUNITY OF BEIN G HEARD TO THE ASSESSEE DURING READJUDICATION PROCEEDINGS. ACCORDINGLY, SOLE GROU ND OF THE REVENUE IN BOTH THE APPEALS IS DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AS INDICATED ABOVE. 14. IN THE RESULT BOTH THE APPEALS OF THE REVENUE A RE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20.08.2015. SD/- SD/- (N.K. SAINI) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 20TH AUGUST 2015 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR IT(SS) NO. 5 & 6/DEL/2013 16