2018 (2) TMI 1595

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....ed in the above mentioned decisions that the assessee forfeits the benefit of first proviso with regard to immunity from penalty or tax payable on undisclosed income and further whether as a result the order under reference had turned perverse in law as well as on facts? 2. Whether on the facts and circumstances of the case and in law, the ITAT was correct and justified to record a decision that the penalty u/S.158BFA(2) cannot be levied in respect of undisclosed income recorded in assessee's return furnished u/S.158BC(a) of I.T.Act, by ignoring and not appreciating the fact that the assessee did not pay the tax on its admitted income in return so furnished and hence failed to fulfill the conditions laid down in Clause (ii), (iii) and (iv) of first proviso to Section 158BFA(2) thus taking the case of assessee out from ambit of benefit provided in first proviso to the above Section and further whether the order of ITAT under reference had turned perverse both in law as well as on facts as a result? 3. Whether on the facts and circumstances of the case and in law, the ITAT was correct and justified in relying upon the decision of Ld. ITAT, Cochin Bench, in DCIT vs. ....

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....resent appeal. 3. Mr.K.Raji Reddy, learned senior standing counsel for the Income Tax Department appearing for the appellant, has submitted that under Sub-Section (2) of Section 158BFA of the Act, the assessee is liable to pay penalty a sum which shall not be less than the amount of tax leviable but which shall not exceed three times the amount of tax so leviable in respect of the undisclosed income determined by the Assessing Officer under Clause (c) of Section 158BC of the Act and that as the assessee failed to satisfy some of the four exceptions of the first proviso to Sub-Section (2) of Section 158BFA of the Act, it is liable to pay penalty and that both the appellate fora have committed a serious error in partly setting aside the penalty. 4. Opposing the above submissions, Mr.G.V.N.Hari, learned counsel for the respondent-assessee, has submitted that the language of the provisions of Section 158BFA of the Act clearly suggests that payment of interest is made mandatory by using the words 'shall be liable' in Sub-Section (1) of Section 158BFA of the Act, whereas imposition of penalty on the assessee for the delayed filing of the return and nonpayment of the tax on the undi....

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....st of money, the assessee offers the money so seized to be adjusted against the tax payable; (iii) evidence of tax paid is furnished along with the return; and (iv) an appeal is not filed against the assessment of that part of income which is shown in the return." 6. As could be seen from the above reproduced provision, under Sub-Section (1) of Section 158BFA of the Act, where the assessee furnishes return of total income including the undisclosed income for the block period in the circumstances explained therein after the expiry of the period specified in the notice or has not furnished, the assessee 'shall be liable' to pay simple interest at 1% of the tax on the undisclosed income. Sub-Section (2) of Section 158BFA of the Act envisages that in respect of such undisclosed income determined by the Assessing Officer under Clause (c) of Section 158BC of the Act, he 'may direct' that the assessee shall pay a penalty as prescribed therein. The first proviso to Sub-Section (2) of Section 158BFA of the Act contains four exceptions. Dealing with this provision, the Rajasthan High Court in Satyendra Kumar Dosi (2 supra) held as under. "A bare perusal of Secti....

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....s it clear that there is direction conferred on the Commissioner for the reasons which are set out therein. Whilst considering taxing statute, the Supreme Court has held that it is settled law that the expressions used in a taxing statute would ordinarily be understood in the sense in which it is harmonious with the object of the statute to effectuate the legislative intention. It is equally settled law that, if the language is plain and unambiguous, one can look fairly at the language used and interpret it to give effect to the legislative intention. Tax law, nevertheless, have to be interpreted reasonably and in consonance with justice adopting a purposive approach. See Commissioner of Income tax vs. Gwalior Rayon Silk Manufacturing Co. Ltd. (1992) 104 CTR (SC) 243 : (1992) 196 ITR 149 (SC). In the instant case, both C.I.T. and I.T.A.T. have recorded reasons for exercise of their discretion. Before us the Revenue has not challenged the said finding of fact as to the exercise of discretionary power. We, therefore, uphold the view taken by I.T.A.T. that the Section is directory and not mandatory." 7. While we respectfully agree with the views of both the High Courts referred to ....