Penalty in block assessments upheld as a valid anti-evasion measure, with constitutional challenge rejected.

Section 158BFA(2) of the Income-tax Act, 1961 was examined as a penalty provision in block assessment proceedings under Chapter XIV-B. The provision was treated as a deterrent against tax evasion and as part of the legislative power to levy tax and impose penalties. The Court found no basis to characterise it as hostile, expropriatory, oppressive, or otherwise unconstitutional, and held that no sustainable ground was shown for invoking fundamental rights to invalidate it. The challenge therefore failed and the penalty provision was upheld as valid.

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Issues: Whether section 158BFA(2) of the Income-tax Act, 1961, providing for penalty in block assessment proceedings, is oppressive, punitive, and violative of the fundamental rights guaranteed by the Constitution of India.

Analysis: The penalty provision was considered in the context of Chapter XIV-B search assessments and the scheme for assessment of undisclosed income. The provision was treated as a deterrent against tax evasion and as part of the legislative power to levy tax and impose penalties. The Court found no basis to hold that the provision is hostile, expropriatory, or unconstitutional, and no sustainable foundation was shown for invoking constitutional guarantees to invalidate it.

Conclusion: Section 158BFA(2) was upheld as valid and not violative of the Constitution; the challenge failed.

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