TaxTMI 
TaxTMI 
2010 (3) TMI 753
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.... on 30-4-2004 and the total undisclosed income was determined at Rs. 16,12,770. As per this order, the additions made to the declared income are Rs. 1 lac towards household expenses, Rs. 5 lacs towards cash sale of scrap/machinery and Rs. 7,52,000 towards interest received in cash from the builder. Since the assessed undisclosed income was higher than the disclosed income in the block return, the Assessing Officer after considering the assessee's reply dated 21-1-2006 wherein it has been inter alia stated "that on the impugned addition of interest received in cash from builder two appellate authorities took divergent views, thus it is a clear case where additions have been subjected to conflicting process of adjudication at the hands of the appellate and administrative authorities and hence, the addition cannot be subject to levy of penalty under section 158BFA of the Act", was of the view that the assessee has not brought on record any fresh evidence other than repeating the submissions as made before the Assessing Officer and the appellate authorities, who have decided the issue against the assessee, found no merit in the submission of the assessee and accordingly imposed penalty....
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....D 160 (Mum.) held, that the penalty under section 158BFA(2) is leviable in the case of the appellant. However, the penalty should be levied on the basis of tax effect on that part of undisclosed income which is in the excess of the amount of undisclosed income declared in the return. Accordingly he directed the Assessing Officer to levy minimum penalty on this basis and hence, partly allowed the appeal. 3. Being aggrieved by the order of the ld. CIT(A) the assessee is in appeal before us taking following sole ground of appeal : "The ld. CIT(A) has erred in upholding levy of penalty on the basis of tax effect on that part of the undisclosed income which is in excess of undisclosed income declared in the return." 4. At the time of hearing the ld. Counsel for the assessee after giving brief facts of the case submits that with regard to the receipt of interest in cash of Rs. 7.52 lacs no doubt the assessee has replied in answer to Question No. 3 in the statement recorded on 5-9-1997 that he had received cash of Rs. 7.52 lacs towards interest for non-payment of consideration for sale of factory at Andheri (E), Mumbai but subsequently vide affidavit dated 8-3-1999 the assessee retract....
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.... (supra) and Smt. Pramila Pratap Shah's case (supra). He also placed reliance on the decision in CIT v. Dodsal Ltd. [2009] 312 ITR 112 (Bom.) for the proposition that the penalty is discretionary and not mandatory. He further submits that in a recent decision in Union of India v. Rajasthan Spg. & Wvg. Mills [Civil Appeal No. 3527 (SC) of 2009, dated 12-5-2009] has observed in para 24 of its order as under : "24. It must, however, be made clear that what is stated above in regard to the decision in Dharmendra Textile is only insofar as section 11AC is concerned. We make no observations (as a matter of fact there is no occasion for it!) with regard to the several other statutory provisions that came up for consideration in that decision." Reliance was also placed in this regard on the decision in CIT v. Haryana Warehousing Corpn. [2009] 314 ITR 215/182 Taxman 107 (Punj. & Har.). In the light of the above he submits that the decision in Dharmendra Textile is not applicable in assessee's case and therefore the penalty imposed by the Assessing Officer and sustained by the ld. CIT(A) be deleted. 5. On the other hand, the ld. DR , submits that in view of the finding recorded by the Tri....
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.... It is true that all the partners had made their individual statements on oath under section 132(4) admitting the unaccounted income as their own income. They also offered it for taxation in their individual hands. The assessee, namely, Vasant B. Thakoor voluntarily admitted under section 132(4) that unaccounted income of Rs. 37,26,976 was his own income on which he promised to pay tax. He also promised that he would declare the aforesaid income as his undisclosed income in the return for the block period. It is after the expiry of almost 15 months of making the said statement that the assessee turned around to say that the unaccounted income admitted by him to be his own belonged to the firm and filed an affidavit to support his retraction. The retraction made by the assessee, in our view, cannot be accepted for several reasons : (i) There is no evidence on record to prove that declaration made by the assessee under section 132(4) on 5-9-1997 was factually incorrect; (ii) There is no evidence on record to show that the unaccounted income claimed by the assessee to be his own belonged to the firm; (iii) Unaccounted income claimed by the assessee to be his own has not been recorded ....
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.... Thakoor has made the statement. Five brothers who are partners in the same firm have made statements admitting the unaccounted income to be their own. None of them even whispered that the unaccounted income which they were declaring as their own belonged to the firm. It is difficult to believe that all the five partners would have suffered from a common mistaken belief that the unaccounted income individually declared by them under section 132(4) belonged to them and not to the firm. In our view, the statement made by them under section 132(4) was binding on them notwithstanding their attempt to retract from the said statement through the affidavit. 17. The learned Departmental Representative is indeed right in his submission that cash found at the time of search was in the profit sharing ratio. It is therefore not possible to even remotely infer that the factory land, machinery, etc., was sold by the firm as the firm, in that case, would have allocated the sale proceeds in the profit sharing ratio amongst the partners. It rather supports the case of the revenue that the proceeds belonged to the individual partners as the individual partners themselves treated them to be their ow....
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.... Objection taken by the department succeeds." From the fair reading of the above we find that the Tribunal has confirmed the addition of unaccounted income as unexplained income on the basis of acceptance of income in the statement of the assessee recorded under section132(4) of the Act and the Tribunal has rejected the retraction made by the assessee through his affidavit. Thus, there is no dispute that the undisclosed income finally determined in the case of the assessee is in excess of the income shown in the return on which the assessee is liable to penalty on the addition of Rs. 7,51,200. The contention of the assessee's counsel that the two appellate authorities took divergent views on the addition of Rs. 7,51,200 has no merit for the reasons (i) the very basis of retraction made by the assessee which has been accepted by the ld. CIT(A) in quantum appeal has been rejected by the Tribunal, as above (ii) there is no evidence on record to show that the unaccounted income claimed by the assessee to be his own actually belonged to the firm (iii) even at this stage the assessee has failed to produce any supporting material to show that the said income was disclosed and assessed in....
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.... proposition of law and it is not the case of the revenue that the penalty is mandatory. 12. In Haryana Warehousing Corpn.'s case (supra), Their Lordships while distinguishing the decision in Union of India v. Dharmendra Textile Processors [2008] 306 ITR 277/174 Taxman 571 (SC) have held : "Held, dismissing the appeal, that the deduction claimed by the assessee was legitimate and bona fide in terms of the conflicting determination of law on the proposition in question. The categorical finding at the hands of the Tribunal in its order was that the assessee had disclosed the entire facts without having concealed any income. There was no allegation against the assessee that it has furnished inaccurate particulars of its income. The determination of the Tribunal had not been controverted even in the grounds raised in the appeal. The assessee was guilty of neither of the two conditions. Therefore, in the absence of two pre-requisites postulated under section 271(1)(c) it was not open to the Revenue to inflict any penalty on the assessee." (p. 216) Whereas in the case before us the assessee's explanation based on retraction made by the assessee at later stage was not found to be bona ....