Penalty under section 158BFA(2) is not automatic where undisclosed income is determined only on estimate.

Penalty under section 158BFA(2) of the Income-tax Act is not automatic where undisclosed income is determined only on estimate in a search assessment. The Tribunal treated the addition as based on inferences from material found, including alleged discrepancies in bottle issuance, sales and purchase cost, and the Court agreed that such estimated computation did not by itself prove deliberate suppression. On that basis, the penalty could not be sustained on the facts, and the Revenue's challenge failed, leaving the deletion of penalty in place for the block assessment period.

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Issues: Whether penalty under section 158BFA(2) of the Income-tax Act, 1961 was leviable where the undisclosed income was determined on estimate basis.

Analysis: The assessment arose from a search and seizure proceeding under section 158BC of the Income-tax Act, 1961. The undisclosed income was determined by making estimates on the basis of the material found, including the alleged difference in bottle issuance and sales and the inferred inflation in purchase cost. The Tribunal held that penalty under section 158BFA(2) is not automatic in every case of determined undisclosed income and that discretion remains with the assessing authority. The Court agreed that the addition was made on estimate rather than on proof of deliberate suppression, and that the Tribunal's view was proper and sound.

Conclusion: Penalty under section 158BFA(2) was not exigible on the facts, and the issue was decided against the Revenue and in favour of the assessee.

Final Conclusion: The dismissal of the revenue's appeal left intact the deletion of penalty imposed on the assessee for the block assessment period.

Ratio Decidendi: Penalty under section 158BFA(2) of the Income-tax Act, 1961 is not automatic and cannot be sustained where undisclosed income has been determined only on estimate basis without proof of deliberate suppression.

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