2013 (9) TMI 1101 - AT - Income Tax

Tribunal cancels penalty for estimated income, cites case law

The Tribunal allowed the appeal, deleting the penalty of Rs. 5,23,160 levied under Section 158BFA(2) of the IT Act, 1961. The Tribunal held that penalty ... Penalty u/s 158BFA(2) - Held that:- Having confirmed the addition made by the AO on account of estimated gross profit merely on the basis that the entries found in the ledger account found in the possession of the third party pertains to the assessee and not on the basis of any material found in the possession of the assessee during the search, penalty under sec. 158BFA(2) of the Act was not leviable. - Decided in favour of assessee Issues Involved:1. Confirmation of penalty levied under Section 158BFA(2) of the IT Act, 1961.2. Jurisdiction and validity of penalty proceedings initiated under Section 158BFA(2).3. Applicability of penalty under Section 158BFA(2) based on estimated income.4. Consideration of double taxation and bona fide explanations.5. Limitation period for imposing penalty.Issue-wise Detailed Analysis:1. Confirmation of Penalty Levied under Section 158BFA(2) of the IT Act, 1961:The appeal was filed against the order of CIT(A), Central, Jaipur, confirming the penalty of Rs. 5,23,160 levied by the AO under Section 158BFA(2). The AO had determined the total undisclosed income at Rs. 27,95,013, which included various amounts for different assessment years. The penalty proceedings were initiated because the undisclosed income assessed exceeded the income shown in the return filed in Form No. 2B.2. Jurisdiction and Validity of Penalty Proceedings Initiated under Section 158BFA(2):The assessee argued that the provisions for levy of penalty under Section 158BFA(2) were not applicable as there was no deliberate concealment of income. The additions were based on estimates or non-acceptance of bona fide explanations. The assessee also objected to the jurisdiction of proceedings under Section 158BC/158BD, claiming they were arbitrary and contrary to the facts. The AO, however, rejected these objections and proceeded with the penalty.3. Applicability of Penalty under Section 158BFA(2) Based on Estimated Income:The assessee contended that penalty under Section 158BFA(2) could not be imposed merely because the assessment was made on additional income disclosed in the return. The AO must show conscious and deliberate concealment of income or furnishing of inaccurate particulars. The AO, however, did not find merit in this explanation and upheld the penalty, stating that the only requirement for levy of penalty under Section 158BFA(2) was that the undisclosed income determined by the AO exceeded the income shown in the return.4. Consideration of Double Taxation and Bona Fide Explanations:The assessee argued that the income had already been assessed in the hands of the searched persons, leading to double taxation. The CIT(A) had initially deleted the additions, but the Tribunal later upheld some of them. The assessee maintained that the true facts were not properly presented before the Tribunal and that the penalty should not be levied based on these facts. The AO, however, held that the assessee had consciously concealed income and imposed the penalty.5. Limitation Period for Imposing Penalty:The assessee also argued that the levy of penalty was barred by the limitation period. However, this argument was not addressed in detail in the judgment.Separate Judgments Delivered by Judges:The judgment was delivered collectively, with no separate judgments mentioned.Conclusion:The Tribunal, after considering the submissions and the material on record, observed that the remaining addition was based on estimated gross profit on sales outside the books of account. Citing the jurisdictional High Court's judgment in CIT v. Dr. Girraj Aggarwal and the Tribunal's decision in Sadhu Ram Goyal v. Dy. CIT, it was held that penalty under Section 158BFA(2) was not leviable on estimated income. Consequently, the penalty levied by the AO and sustained by the CIT(A) was deleted, and the appeal of the assessee was allowed.