TaxTMI 
TaxTMI 
2006 (8) TMI 230
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.... section 158BC was issued. Return of income for the relevant block period was filed by the assessee on 22-2-2002 declaring undisclosed income of Rs. 95,41,081. In Part IV of the return for the block period, the following information was given:- 1. Tax payable on undisclosed income of the Block Period Rs. 57,24,654 2. Tax paid on undisclosed income before filing the return (attach challan) Rs. 7,50,000 Date of payment 30-6-2001 (out of cash seized) Rs. 6,74,654 3. Balance amount payable Rs. 43,00,000 3. Thus on the basis of the return for the block period, tax of Rs. 43,00,000 was payable on the date when the block return was filed on 20-2-2002. The total tax has b....
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....1-2004 under section 158 BFA(2) levying penalty of Rs. 4,13,873 with reference to the addition of Rs. 6,76,264. This order was passed with the previous approval of the Additional Commissioner of Income-tax as required under the relevant provisions of law. Against this order, the assessee filed appeal before the CIT(A), which was pending when proceedings were initiated by the Commissioner of Income-tax, Central-II, Mumbai under section 263 intimating the assessee as under:- "After careful perusal of the said penalty order and the relevant records, it is noticed that the said penalty order is erroneous insofar as it is prejudicial to the interest of revenue having regard to the fact that Assessing Officer has not examined the case and satisfied herself whether the assessee has fulfilled the conditions lay down in proviso to section 158BFA(2) specifically clause (ii) and accordingly decided the quantum of penalty livable. For reasons mentioned above, I am of the opinion that the penalty order dated 30-1-2004 is erroneous as well as prejudicial to the interest of revenue and hence I propose to take remedial action under section 263 for which an opportunity of being heard is allowed to....
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.... rightful tax levied thereunder. If such contingencies are not visualized and such leaks are not plugged, no taxation law can be effective and satisfactorily implemented. In order to satisfactorily and effectively implement their provisions, penalties are generally provided for in all taxation laws. Without such a sanction, there is the danger of the evasion of tax. Thus provision for levy and collection of penalties for contravening their requirements has become an integral part of such enactments. It has now been well recognized that a provision dealing with penalty must be strictly construed. Penalties are to be construed within the term and language of the particular statute. Penalty provision should be interpreted as it stands and in case of doubt in a manner favourable to the taxpayer. If the Court finds that the language of a taxing provision is ambiguous or capable of more meanings than one, then the Court has to adopt the interpretation which favours the assessee, more particularly so, where the provision relates to the imposition of penalty. Useful reference may be made in this regard to the observations in the decisions in CIT v. Vegetable Products Ltd. 1973 CTR (SC) 177....
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....read as under: 'Provided that no order imposing penalty shall be made in respect of a person if- (i) such person has furnished a return under clause (a) of section 158BC; (ii) the tax payable on the basis of such return has been paid or, if the assets seized consist 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.' In other words, it gives the situations and prescribes the circumstances under which penalty shall not be levied. The Assessing Officer, the CIT(A) and the learned Departmental Representative are trying to canvass that if these circumstances are not satisfied cumulatively, the assessee is automatically levied with penalty, which proposition cannot be accepted in the light of the principle laid down by the Supreme Court and followed by every High Court while dealing with penalties and the provisos dealing with penalties. The Legislature, in our view, has not prescribed the circumstances under which the penalty has to be levied. It has only said the circumsta....
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.... Officer's order has to be erroneous as well as prejudicial to the interest of the revenue. The learned counsel has relied on the following cases: (i) CIT v. Gabrial India Ltd. [1993] 203 ITR 108 (Bom.) (ii) Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) (iii) CIT v. Arvind Jewellers [2003] 259 ITR 502 (Guj.) (iv) CIT v. Max India Ltd. [2004] 268 ITR 128 (Punj. & Har.) 8. The learned Departmental Representative strongly supported the order of the learned CIT and submitted that the Assessing Officer has completely ignored the provisions of sub-section (2) of section 158BFA. Thus there is non-application of mind on the part of the Assessing Officer on the correct penalty leviable and, therefore, his order has been rightly held to be erroneous and prejudicial to the interest of the revenue. 9. We have given a very careful consideration to the rival submissions vis-a-vis the facts of the case and we have also gone through the cases relied upon by the learned counsel for the assessee. The provisions of sub-section (2) of section 158BFA along with the provisos may be reproduced below: "(2) The Assessing Officer or the Commissioner (Appeals) in the course of any proceedi....