2003 (11) TMI 280 - AT - Income Tax

Tribunal Cancels Penalty, Upholds Appeal: Natural Justice Overlooked in Unjustified Income Tax Penalty Case.

The Tribunal allowed the appeal, concluding that the penalty under section 158BFA(2) of the Income-tax Act, 1961, was not warranted. It found that the ... Block Assessment in search case - levy of penalty u/s 158BFA(2) - Whether there was any reasonable cause or bona fide belief on the part of the assessee for not disclosing the so-called income brought to tax u/s 158BC - HELD THAT:- In the present case, it is seen that the income assessed is the difference between the value as determined by the DVO and as disclosed by the assessee. There is no finding that any material was found during search which suggested additional investment by the assessee in acquisition of the property leading to computation of undisclosed income. It is merely an estimate but not conclusively proved that such investment has been made by the assessee. It is not even conclusively proved that the same was spent out of the undisclosed income of the assessee found as a result of search. In the circumstances, the assessee was justified in not disclosing such amount in the return of income. Originally, the Assessing Officer determined the undisclosed income. The Learned CIT(A) reduced the same. Both are based on estimates. In such a situation the assessee is well deserved of making his own disclosure. Thus, no fault can be found with the assessee. Even the addition is not sustainable in view of the decision of Hon'ble Supreme Court in Smt. Amiya Bala Paul's case [2003 (7) TMI 4 - SUPREME COURT] and the decision of Bombay High Court in Vinod Danchand Ghodawat's case [2000 (6) TMI 13 - BOMBAY HIGH COURT] as undisclosed income under Chapter XIV-B. In such a situation to levy further penalty is perpetuation of injustice to the assessee. In our opinion, this addition also should not have been made under Chapter XIV-B as undisclosed income as nothing is found as a result of search. Penalty u/s 158BFA(2) is accordingly, not attracted for this item of addition also. Non-filing of appeal by the assessee before Income-tax Appellate Tribunal cannot be viewed against the assessee so as to attract the penalty u/s 158BFA(2). No other income is treated as undisclosed. We accordingly, cancel the levy of penalty. In the result, the appeal of the assessee is allowed. Issues involved: Appeal against levy of penalty u/s 158BFA(2) of the Income-tax Act, 1961.Summary:1. The appeal was filed against the order levying penalty u/s 158BFA(2) based on undisclosed income determined through a search u/s 132.2. The Assessing Officer considered additions as undisclosed income, leading to the penalty. Assessee argued penalty not automatic, citing legal precedents.3. Assessee contended penalty not mandatory, requires opportunity of being heard. Department argued undisclosed income is sufficient for penalty.4. Tribunal analyzed provisions of section 158BFA and principles of natural justice, concluding penalty not justified in this case.5. Tribunal found no reasonable cause for non-disclosure of income, canceled penalty on valuation difference and unexplained credit.6. Tribunal held penalty not warranted, canceled the levy, and allowed the appeal.