@JUDGMENTTAG-ORDER
Akil Kureshi, J.@mdashAssesses has challenged judgment of the income tax Appellate Tribunal, Ahmedabad ("Tribunal" for short) dt. 14th May 2010, wherein following substantial questions of law are raised for our consideration:
(A) Whether, on the facts and circumstances of the case, the Tribunal was right in law in confirming the penalty of Rs. 1,83,600 levied under s. 158BFA(2) of the IT Act, 1961 in respect of addition of Rs. 3 lacs towards unaccounted investment directed by the Tribunal in quantum appeal ?
(B) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the penalty levied under s. 158BFA(2) of the IT Act, 1961, when the addition of Rs. 3 lacs as unaccounted investment was admitted by Authorised Representative of the appellant to buy peace ?
(C) Whether on the facts and in the circumstances of the case, the order passed under s. 158BFA(2) of the IT Act, 1961 was valid in absence of any substantive provision to levy penalty in respect of undisclosed income under Chapter XIV-B ?
(D) Whether on the facts and in the circumstances of the case, the conclusion reached by the Tribunal to uphold the penalty of Rs. 1,83,600 is such as could have been arrived at from the material on record or is perverse ?
As can be seen from the questions, the issue pertains to penalty of Rs. 1,83,600 levied by the AO and confirmed upto the Tribunal. From the record perused by us with the assistance of learned counsel for the appellant, we find that the block assessment proceedings were carried out against the appellant for the block period from 1st April, 1995 to 8th Jan., 2002. Assessee filed return declaring certain undisclosed income and also paid tax on the same. However, the AO, by his order dt. 30th Jan., 2004 made further additions over and above those declared by the assessee. Since the income determined by the AO under s. 158BC of the IT Act, 1961 ("Act" for short) was more than what was declared by the assessee by Rs. 18.71 lacs, the AO also initiated penalty proceedings under s. 158BFA(2) of the Act. Notice for such purpose was issued.
2. While the penalty proceedings were going on, the assessee carried the additions made by the AO in further appeal. Ultimately, the Tribunal, by order dt. 6th March, 2009 maintained the addition of Rs. 3 lacs, over and above what was declared by the assessee in the return.
3. On the basis of such addition confirmed by the Tribunal, the CIT(A) passed the final order of penalty under s. 158BFA of the Act on 29th Oct., 2009. He imposed minimum penalty of 100 per cent as provided under s. 158BFA of the Act.
4. Once again, the assessee approached the Tribunal against the order of penalty. The Tribunal confirmed the order of penalty and rejected the assessee''s appeal. The Tribunal made following observations:
10. Having heard both the sides, we have carefully gone through the order of authorities below. It is pertinent to note that sales of Rs. 4,23,20,387 was not recorded in the books of account. Out of this unrecorded sales, the assessee in the return of block period declared undisclosed sales of Rs. 7,23,933 at Satellite Shop. In respect of remaining sales, the assessee merely disclosed gross profit @ 28 per cent. However, the AO treated the entire sales as undisclosed income. Admittedly, initial investments for procuring sweets, which are sold outside the books of account, are not recorded in the books of account. In case, it is presumed that cost of production of sweets, which are sold outside the books of accounts, is also recorded in the books of account. In that event, the AO was having no option but to treat the entire sales as undisclosed income. The learned counsel of the assessee before the Tribunal admitted that cost of manufacturing of sweets, which are sold outside the books of accounts, was not recorded in the books of account. On the basis of appreciation of this argument and evidence found during the course of search, the Tribunal estimated the cost of initial investment in respect of sales made outside the books of account at Rs. 3,00,000. Though this income has been estimated but estimate made is fair and reasonable looking to the amount of sales made, which is not recorded in the books of accounts. In our considered opinion, the income, which is detected as a result of search operation under s. 132 is undisclosed income of the assessee within the meaning of s. 158BFA(2) of the Act. With regard to the contention of the assessee that the assessee has correctly disclosed the total sales, we may point out that the assessee has not disclosed the initial investment as undisclosed income. Therefore, correct income of the assessee cannot be computed without making the addition on account of cost incurred by the assessee in making initial investment for procuring Mithai outside the books of account. If the contention of the assessee that cost of production is also recorded in the books of accounts, in that event, in quantum appeal, the appellate authority could have confirmed the entire addition. On addition, which is made on estimate basis also, the penalty for concealment is leviable. In support of this, reliance can be placed on the judgment of the Hon''ble Gujarat High Court in the case of
5. Counsel for the appellant vehemently contended that the authorities erred in imposing the penalty. The Tribunal likewise erred in confirming the penalty in appeal. He contended that the additions were confirmed by the Tribunal on concession given by the counsel for the appellant. Such additions, on the basis of concession, would not give rise to any penal proceedings. Counsel further submitted that initiation of penalty was on the basis of larger addition of income made by the AO. Such addition was, however, not sustained by the Tribunal. The penalty could not have been sustained in view of such changed circumstances since the initiation was on some other basis. In this regard, reliance was placed on the decision of Division Bench of this Court in case of CIT vs. Lakhdhir Lal Ji (1972) 85 ITR 77 (Guj).
6. From the record, however, we find that pursuant to search operation, block assessment proceedings were initiated in case of the assessee-firm. The assessee made certain disclosure of income for the block period, which income was hitherto not offered to tax. While framing the assessment, certain further additions were made by the AO. Portions of additions were confirmed by the Tribunal. The Tribunal confirmed additional income of Rs. 3 lacs over and above what was disclosed by the assessee. It was on this basis, therefore, the AO ultimately imposed penalty under s. 158BFA(2) of the Act.
7. Sec. 158BFA(2) of the Act reads as under:
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 of money, the assessee offers the money so seized to be adjusted against the tax payable;
(iii) evidence of tax paid is furnished along with the return; and
(iv) an appeal is not filed against the assessment of that part of income which is shown in the return:
Provided further that the provisions of the preceding proviso shall not apply where the undisclosed income determined by the 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. If we analyze the provisions contained in sub-s. (2) of s. 158BFA, it would appear that penalty not less than the amount of tax leviable but not exceeding three times the amount of tax so leviable in respect of the undisclosed income determined by the AO under cl. (c) of s. 158BC of the Act is envisaged. First proviso to sub-s. (2) of s. 158BFA, however, provides that no order imposing penalty shall be made if the conditions (i) to (iv) therein are satisfied. In essence, no penalty would be imposed if the assessee furnishes return of income, pays or offers tax by way of adjustment on such income, produces evidence of tax having been paid along with the return and also does not dispute by filing appeal against that portion of assessment which he has shown in his return. By a further proviso, however, it is clarified that such exclusion will not be available where the undisclosed income determined by the AO is in excess of the income shown in the return and in such a case, 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.
9. In essence, therefore, penalty under sub-s. (2) of s. 158BFA of the Act is provided where the AO computes income in excess of what is declared by the assessee for the block period.
10. This proviso thus is vitally different from the penalty provisions contained in s. 271(1)(c) of the Act, which provides for penalty where the assessee has concealed the particulars of his income, or furnished inaccurate particulars of such income. It is, therefore, often stated by different Courts that mere disallowances of a claim or additions made by the AO would not ipso facto give rise to penalty proceedings under s. 271(1)(c) of the Act. What is further required to be established is that the assessee had either concealed the particulars of his income or furnished inaccurate particulars of such income. In contrast, no such language is used in s. 158BFA of the Act. We may recall that under s. 158BFA(2) of the Act, penalty proceedings would arise while the AO had assessed income for the block period in excess of the income declared by the assessee.
11. In the present case, as already noted, addition of Rs. 3 lacs was confirmed by the Tribunal over and above the income declared by the assessee for the block period in question. The AO, therefore, imposed penalty which was confined to such addition. We do not find AO committed any error in imposing such penalty or the Tribunal in confirming the same.
12. The decision of this Court in case of Lakhdhir Lal ji (supra) was rendered in the background of provisions contained in s. 2719(1)(c) of the Act. The penalty was imposed for furnishing inaccurate particulars while the notice stated that the assessee had concealed the income by suppression of sales. It was in this background that this Court held that the penalty was wrongly imposed. Such facts do not arise in this case. Even otherwise, as pointed out, the penalty envisaged under sub-s. (2) of s. 158BFA is entirely on different background as compared to one that can be imposed under s. 271(1)(c) of the Act.
13. Counsel for the appellant submitted that imposing penalty under sub-s. (2) of s. 158BFA of the Act is discretionary. Even if we were to accept such a contention, nothing is pointed out to demonstrate that such discretion was not properly or correctly exercised. We may recall that the AO imposed penalty which was minimum leviable under s. 158BFA of the Act. The contention that addition was sustained on concession given by the counsel cannot be gone into in this appeal since the previous order of the Tribunal pertaining to addition has achieved finality and is not in appeal before us. In the result, we do not find any question of law arising. Tax appeal is dismissed accordingly.
