TaxTMI 
TaxTMI 
2005 (8) TMI 289
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncome at Rs. 5,47,09,980. This order was not challenged in appeal. Since there is a difference in undisclosed income declared by the assessee and the one determined by the Assessing Officer, ld. Assessing Officer issued notice under section 158BFA(2) of the Act, inviting respondent's explanation as to why the penalty be not imposed. The assessee filed a detailed reply vide letter dated 8-10-2001 which has been reproduced in the penalty order of ld. Assessing Officer In the reply assessee has pleaded the circumstances responsible for the difference and also pleaded its bona fide in not disclosing the undisclosed income for the block period equivalent to one determined by the Assessing Officer. Ld. Assessing Officer has gone through the explanation of the assessee in detail and rejected the same primarily on the ground that expression "shall" has been used in section 158BFA(2) which indicted the Assessing Officer to impose a penalty under section 158BFA(2) whenever he finds the difference in the undisclosed income declared by an assessee and ultimately determined by the Assessing Officer. Ld. Assessing Officer has dealt with the case law relied upon by the assessee in detail but ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T v. K.P. Sampath Reddy [1992] 197 ITR 232 (Kar.) (9) K.P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC) (10) CIT v. R. Sadayappan [2002] 253 ITR 203 (Mad.) (11) CIT v. Dr. A. Mohd. Abdul Khadir [2003] 260 ITR 650 (Mad.) (12) Ravi & Co./Rani & Co. v. Asstt. CIT [2004] 271 ITR 286 (Mad.) (13) CIT v. Kishore Kumar Shamji [2000] 244 ITR 702 (Ker.) (14) CIT v. D.K.B & Co. [2000] 243 ITR 618 (Ker.) (15) Laxman v. CIT [1988] 174 ITR 465 (Bom.) (16) K. Apparoa v. Chairman, CBDT [2001] 252 ITR 269 (AP). 5. On the other hand, ld. Counsel for the assessee relied upon the order of ld. CIT(A) and contended that similar penalty was levied in the cases of other group concerns. The ld. CIT(A) has deleted the penalty and the Tribunal has confirmed the order of ld. CIT(A). He placed on record the copies of the Tribunal's order passed in IT(SS)A.No.226/Mum./02 and IT(SS)A.No. 107/Mum./ 02, wherein deletion of similar penalties have been upheld. 6. The ld. D.R while replying the submission of ld. Counsel for the assessee contended that the difference in the undisclosed income involved in the present case is of Rs. 2,87,09,980, which is a substantial amount and such a difference co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g working capital. In such facility, the entire set of documents in respect of purchases made from respective parties are submitted to the bank against which bank releases the funds after deducing the discounting charges and at the end of the tenure (by which time the payment for supply is supposed to be made), the amount is re-paid to the bank. Normally, there is requirement to keep certain percentage as deposit in the form of margin money deposit. In case of the assessee-company, Dena Bank has sanctioned L/Cs. Facility which till December 1997 were utilized by way of paper entries through paper parties and the group concerns only. In respect of these transactions, separate submissions have been made vide our letter dated 14-4-1999, 24-1-2000 and 23-4-2000. In these facilities, there was no question of booking any purchases and/or sales. However, somewhere from January 1998, the utilization of L/C facility was started for such paper entries of purchases and sales with other than group parties and although no particular movement of goods or actual purchase or sales was there, the entry of trading purchases and sale were made and income thereof was offered. The assessee-company is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rges 68,30,970 98,48,354 Transport charges 6,51,360 Nil Total 74,82,330 98,48,354 However, it is observed that the L/C charges and transportation charges considered in the return of income for assessment year 1999-2000 on ad hoc basis in fact pertain to the block period and as such the disallowance thereof in assessment year 1999-2000 in regular return is incorrect as the same forms part of the undisclosed income during the block period. Hence, all the L/C charges & transportation charges for paper transactions are to be covered in the block period itself. Accordingly Rs. 74,61,000 on account of L/C charges and Rs. 32,17,298 on account of transportation charges are further disallowed and added to the undisclosed income in the assessment year 1999-2000. Accordingly, the following additions are made: Particulars Assessment year 1998-99 Assessment year 1999-2000 Disallowable finance charges 68,30,970 98,48,354 74,61,000 Transportation charges 6,51,360 32,17,298 Total 74,82,330 2,05,26,652 8. On the strength of above detail assessee has tried to demonstrate that difference in the undisclosed income as returned by the assessee and determined by the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and in such cases the penalty shall be imposed on that portion of undisclosed income determined which is in excess of the amount of undisclosed income shown in the return. (3) No order imposing a penalty under sub-section (2) shall be made,- (a) unless an assessee has been given a reasonable opportunity of being heard; (b) by the Assistant Commissioner or Deputy Commissioner or the Assistant Director or Deputy Director, as the case may be, where the amount of penalty exceeds twenty thousand rupees except with the previous approval of the Joint Commissioner or the Joint Director, as the case may be; (c) in a case where the assessment is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later; (d) in a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the penalty. The expression "may" employed in this section specifically postulate that discretion lies on the Assessing Officer or CIT(A) as the case may be to apply their mind before directing a party to pay the penalty. The expression "shall" coming in the second proviso in fact, is to restrict the applicability of the penalty only to the difference in the income and not to the entire income. The operative force of the word "shall" is directed towards the quantum and not on basic consideration as whether penalty is to be levied or not. Therefore, in a given case the competent authority even may refuse to levy the penalty. If we accept the contention of ld. D.R regarding sub-section (3) and hold that opportunity of hearing is restricted to the extent of the rate penalty is imposable then in our opinion very purpose of the section would otiose. 11. As far as additions are concerned we find that while filing return for assessment year 1999-2000 assessee voluntarily noticed that certain expenses to the tune of Rs. 106.78 lakhs were not co-relatable with the income and hence it disallowed them. This was purely a voluntary disclosure by the assessee. The rest of disallowances emerged ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....filed a revised return offering an additional income of Rs. 3,24,650 under the head "Other Sources". The Assessing Officer initiated penalty proceedings under section 271(1)(c) on the view that the revised return filed by the assessee admitting a higher income could not be treated as a voluntary one as the same was filed only after the Department had started enquiries with regard to the credit balance and with regard to the demand draft accounts. The Tribunal cancelled the penalty being of the view that the income as shown in the revised return was accepted in the assessment and so there was full and complete disclosure of income by the assessee. On reference Hon'ble High Court has held that the impounding of books for the purpose of scrutiny of entries itself was a factor which had not been considered by the Tribunal in its proper perspective. The revised return was filed as an attempt to plug the loopholes after detection and it was not intended to bring on record the materials which were discovered subsequent to the filing of the return. The inevitable conclusion was that the penalty was imposable and the Tribunal was not justified in cancelling it. 15. Thus from this decis....