In The Decision Reported In Commissioner Of Income Tax v. Heera Construction Co. P. Ltd. (2011) 337 Itr 359 (Ker

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR &THE HON'BLE MR. JUSTICE BABU MATHEW P.JOSEPH WEDNESDAY, THE 29TH DAY OF FEBRUARY 2012/10TH PHALGUNA 1933 ITA.No. 26 of 2011 ( ) ------------------------------- IT(S&S)A NO.161/COCH/2005 of INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH ........... APPELLANT(S)/RESPONDENT/ASSESSE E: -------------------------------------------------------------- P.K.RAVINDRAN, PALAKKAPARAMBIL HOUSE,PO,VEMBALLUR KODUNGALLUR, THRISSUR. BY ADVS.SRI.T.M.SREEDHARAN (SR.) SMT.C.K.SHERIN SRI.V.P.NARAYANAN RESPONDENT(S)/APPELLANT/REVENUE: -------------------------------- THE COMMISSIONER OF INCOME TAX, THRISSUR, POONKUNNAM P.O., 680001. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 29-02-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: tss ITA. NO.26/2011 APPENDIX PETITIONER'S ANNEXURES A:- COPY OF ASSESSMENT ORDER DTD. 29.3.2000 PASSED BY THE ASSESSINGOFFICER. B:- COPY OF THE ORDER OF THE CIT(APPEALS) IN ITA NO.14/TCR/DIV. 1/CIT-V/2000-01. C:- COPY OF THE REVISED ORDER DTD. 19.3.04. D:- COPY OF THE ORDE RDTD. 26.8.2004 LEVYING PENALTY U/S.158 BFA(2) PASSED BYTHE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -2(1), RANGE-2, THRISSUR. E:- COLPY OF THE ORDER OF THE CIT (APPEALS )-V, KOCHI, IN ITA NO.24/RII/TCR/CIT-V/04-05 DTD. 25.4.2005. F:- COPY OF THE ORDER DTD. 14.9.2010 IN IT(S&S)A NO.161/COCH/2005 OF THEAPPELLATE TRIBUNAL. G:- COPY OF THE NOTE SUBMITTED BY THE APPELLANT ON 16.6.2010 AT THE TIME OFHEARING BEFORE THE APPELLATE TRIBUNAL. RESPONDENT'S ANNEXURES NIL //TRUE COPY// P.S. TO JUDGE tss C.N. RAMACHANDRAN NAIR& BABU MATHEW P. JOSEPH, JJ. ---------------------------------------------------- I.T. Appeal No. 26 OF 2011 ----------------------------------------------------- Dated this the 29[th] day of February, 2012 J U D G M E N T Ramachandran Nair, J Heard senior counsel Sri.T.M.Sreedharan appearingfor the appellant and the learned Standing Counsel forRevenue. 2.The question raised pertains to levy of penaltyu/s 158BFA(2) of the I.T.Act, that is confirmed by theTribunal. The appellant/assessee was subject to searchand notices were sent to him to file return of undisclosedincome. Pursuant to the notice assessee filed return inForm No.2B declaring undisclosed income of Rs.3 lakhs.However, apart from this declared undisclosed income, theassessing officer made an addition of Rs.4,15,000/-. Eventhough the assessee made specific plea that out of I.T. Appeal No. 26 OF 2011 Rs.4,15,000/- Rs.3 lakhs represents gift received from NonResident Indians, Assessee not only failed to prove it butdid not even pursue the contest against assessment, afterdisposal of the first appeal against the assessee. TheAssessing Officer therefore levied penalty on the entiredifferential amount of Rs.4,15,000/- which is equal to thetax payable. Even though, first appeal was allowed by CIT(A), the Tribunal reversed the order of the first appellateauthority confirming the penalty stating that it ismandatory. It is against this order the assessee is beforeus in this second appeal. 3.Counsel for the assessee relied on the decision ofthe Bombay High Court reported in 312 ITR page 112wherein the said High Court has taken a view that penaltyu/s 158BFA(2) is discretionary. However, the StandingCounsel submitted that the decision of the Tribunal inHeera Construction's case relied on by them in deciding I.T. Appeal No. 26 OF 2011 the matter against the assessee is confirmed by this court in the decision reported in Commissioner of Income Taxv. Heera Construction Co. P. Ltd. (2011) 337 ITR 359(Ker.). 3.Counsel for the assessee relied on the decision ofthe Bombay High Court reported in 312 ITR page 112wherein the said High Court has taken a view that penaltyu/s 158BFA(2) is discretionary. However, the StandingCounsel submitted that the decision of the Tribunal inHeera Construction's case relied on by them in deciding I.T. Appeal No. 26 OF 2011 the matter against the assessee is confirmed by this court in the decision reported in Commissioner of Income Taxv. Heera Construction Co. P. Ltd. (2011) 337 ITR 359(Ker.). 4.After hearing both the sides and after goingthrough the Tribunal's order, we do not find any ground tointerfere with the penalty levied with reference to theundisclosed income of Rs.3 lakhs which though claimed asa gift, the assessee miserably failed to prove it. So muchso, under the 2[nd] proviso to S.158BFA(2) penalty ismandatory at least on this amount. Therefore, we confirmthe order of the Tribunal confirming penalty on thisamount. However, so long as the balance amount ofRs.1,15,000/- is concerned we feel it is only an additionalamount after rejection of cash flow statement. We feelsome leniency can be shown to the assessee in respect ofthis amount because with the tax and penalty and the I.T. Appeal No. 26 OF 2011 interest for delay in payment of tax the assessee wouldotherwise end up paying more than the undisclosedincome. We, therefore, allow the appeal in part byexcluding penalty on Rs.1,15,000/- and by limiting penaltyon Rs.3 lakhs. The appeal is allowed to the above extent. Sd/-C.N. RAMACHANDRAN NAIR,JUDGE. ul/- Sd/- BABU MATHEW P. JOSEPH,JUDGE. [True copy] P.S. to Judge.