2015 (9) TMI 130 - AT - Income Tax

Tribunal directs fresh penalty adjudication under Income Tax Act

The Tribunal allowed the appeals for statistical purposes and directed the CIT(A) to re-adjudicate the penalty imposition issue under Section 158BFA(2) of ... Penalty u/s 158BFA(2) - CIT(A) deleted penalty levy - Held that:- CIT(A) mainly granted relief to the assessee by noticing that the SLPs are pending before Hon’ble Supreme Court and issue is debatable but in the light of subsequent order of Hon’ble Apex Court dismissing the SLPs of the Revenue we can safely hold that the issue has attained finality. We also note that the CIT(A) has also not considered the second proviso to Section 158 BFA(2) which is relevant to decide the issue at levy of penalty. Therefore, we deem it just and proper to restore this issue to the file of the CIT(A) for a fresh adjudication for both the APYS in the light of the order of Hon’ble Supreme Court dated 29/10/2012 and second provision to Section 158BFA(2) of the Act and all other relevant provisions of the Act. - Decided in favour of revenue for statistical purposes. Issues Involved:1. Imposition of penalty under Section 158BFA(2) of the Income Tax Act, 1961.2. Interpretation of 'undisclosed income' and its implications.3. Validity of penalty imposition when the issue is debatable or pending before higher courts.4. The discretion of the Assessing Officer (AO) in imposing penalties.Detailed Analysis:1. Imposition of Penalty under Section 158BFA(2):The primary issue revolves around whether the CIT(A) erred in canceling the penalty of Rs. 10,15,733 imposed by the AO under Section 158BFA(2) of the Income Tax Act, 1961. The AO had imposed the penalty on the grounds that the assessee company was liable for penalty due to its undisclosed income of Rs. 15,38,990 for the period under consideration. The AO's decision was supported by the Hon'ble Delhi High Court's order dated 29.11.2010, which confirmed the addition of the said undisclosed income. The AO justified the penalty as 100% of the tax on the undisclosed income.2. Interpretation of 'Undisclosed Income':The CIT(A) noted that the assessment proceedings and penalty proceedings are distinct. The CIT(A) observed that the long-term capital gain was considered undisclosed income because the return of income was filed after the due date. The CIT(A) acknowledged that the assessee had shown the capital gain in its return filed on 31.03.2000, although the due date was 31.12.1999. The CIT(A) emphasized that the penalty under Section 158BFA(2) is not automatic or mandatory and must be based on judicial consideration.3. Validity of Penalty Imposition When the Issue is Debatable or Pending Before Higher Courts:The CIT(A) relied on the principle that when there is a difference of opinion between different benches of the Tribunal or the High Courts, and the issue is pending before the Supreme Court, penalty is not warranted. The CIT(A) cited the decision in the case of CIT vs. Sarla Fabrics P. Ltd., where it was held that penalty is not justified if the issue is debatable and all necessary facts have been disclosed by the assessee in its return.4. Discretion of the Assessing Officer (AO) in Imposing Penalties:The CIT(A) highlighted that the AO must exercise discretion and judicial consideration before imposing penalties. The CIT(A) referred to the decision in the case of CIT vs. Harkaram Das Ved Pal, which held that penalty under Section 158BFA(2) is not mandatory and should be based on judicial discretion. The CIT(A) also noted that the AO should not presume guilt and must bring primary evidence to establish that the assessee concealed income or furnished inaccurate particulars.Conclusion:The Tribunal observed that the CIT(A) granted relief to the assessee by noting that the Special Leave Petition (SLP) was pending before the Supreme Court and the issue was debatable. However, the Tribunal noted that the SLPs filed by the assessee were dismissed, and the issue had attained finality against the assessee. The Tribunal also noted that the CIT(A) did not consider the second proviso to Section 158BFA(2), which is relevant for deciding the penalty issue. Therefore, the Tribunal restored the issue to the file of the CIT(A) for fresh adjudication in light of the Supreme Court's order and the relevant provisions of the Act. The appeals were allowed for statistical purposes, and the CIT(A) was directed to allow the assessee an opportunity of being heard during the re-adjudication proceedings.