Ita/96/2012 Of Dr. C. Mohanan v. The Deputy Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.M.JOSEPH &THE HONOURABLE MR.JUSTICE K.HARILAL THURSDAY, THE 6TH DAY OF DECEMBER 2012/15TH AGRAHAYANA 1934 ITA.No. 96 of 2012 () ---------------------IT(S&S)A.4/2010 OF INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH APPELLANT(S)/APPELLANT:---------------------- DR. C. MOHANAN 15/551 EEMMEL COLONY KUNNATHURMEDU PALAKKAD PAN: AEHMPM8415N. BY ADVS.SRI.ANIL D. NAIR SRI.J.R.PREM NAVAZ SMT.NIVEDITA A.KAMATHRESPONDENT(S):-------------- THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1, PALAKKAD 678001. BY SRI.JOSE JOSEPH, STANDING COUNSEL, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 06-12-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX PETITIONER'S EXHIBITS: ANNEXURE-A:COPY OF ASSESSMENT ORDER COMPUTED UNDER SEC.158BD DATED23.3.2007.23.3.2007. ANNEXURE-B:COPY OF ORDER UNDER SEC.158 BFA(2) OF THE INCOME TAXACT, 1961.ACT, 1961. ANNEXURE-C:COPY OF THE ORDER DATED 19.3.2010 OF THE APPELLATEAUTHORITY.AUTHORITY. ANNEXURE-D:COPY OF THE ORDER DATED 2.2.2010 OF THE INCOME TAXAPPELLATE TRIBUNALAPPELLATE TRIBUNAL RESPONDENT'S EXHIBITS:NIL //TRUE COPY// sou. P.A. TO JUDGE (C.R) K. M. JOSEPH & K. HARILAL, JJ------------------------------------------------I.T.A. No.96 OF 2012 ------------------------------------------------- Dated this the 6[th] day of December, 2012 J U D G M E N T K. M. Joseph,J The appellant calls in question the order passed by theIncome Tax Appellate Tribunal, Cochin Bench (Annexure- D). Bythe same the appeal filed by the appellant against the orderpassed by the Commissioner of Income Tax (Appeals) confirmingthe order of penalty under section 158BFA (2) of the Income TaxAct, 1961, has been affirmed. A search and seizure was takenunder section 132 of the Act in the case of appellant's wife at herpremises on 26.2.2003. During the course of search, certaindocuments and diaries, cash, fixed deposits etc. were seized.Block assessment under section 158 BC was completed in hercase. During the course of said search at the premises of wife ofthe appellant, certain documents and diaries pertaining to theappellant was found and seized. Proceedings under section 158 ITA. No.96/12 BD were initiated by way of issuance of notice under section 158BC read with section 158 BD of the Income Tax Act. In response,the assessee filed return in Form No.2B on 25.4.2005 declaringthe undisclosed income as 'Nil'. The assessment was completed.Thereafter the officer decided to issue notice for imposing penaltyunder section 158 BFA(2). The appellant filed objections. Overruling the objections, the Officer imposed penalty at the minimumamount of Rs.9.95 Lakhs. It is the said order that has beenaffirmed by the First Appellate Authority and also the Tribunal.Hence the appeal. 2. The question of law which is raised for consideration inthis appeal is as follows : “In the facts and circumstances of the case, ought notthe Tribunal have held that in view of the conduct of theassessee in co-operating with the Department in theproceedings of assessment penalty under section 158BFA(2) was not leviable?” 3. We heard learned counsel for the appellant and the learned Senior Government Pleader for Revenue. 4. Learned counsel for the appellant submits that there is no basis for imposing penalty. According to him, the appellanthad filed revised return for the assessment years in question on26.6.2003. Therefore, there is no basis for imposing penalty. He ITA. No.96/12 would further contend that on perusal of the relevant proviso, theappellant is justified in contending that penalty proceedings willnot lie against the appellant. “In the facts and circumstances of the case, ought notthe Tribunal have held that in view of the conduct of theassessee in co-operating with the Department in theproceedings of assessment penalty under section 158BFA(2) was not leviable?” 3. We heard learned counsel for the appellant and the learned Senior Government Pleader for Revenue. 4. Learned counsel for the appellant submits that there is no basis for imposing penalty. According to him, the appellanthad filed revised return for the assessment years in question on26.6.2003. Therefore, there is no basis for imposing penalty. He ITA. No.96/12 would further contend that on perusal of the relevant proviso, theappellant is justified in contending that penalty proceedings willnot lie against the appellant. 5. As far as the filing of revised return is concerned, it isclear that the revised return is filed only after the date of thesearch. More over, under section 139(5) of the Act, no revisedreturn can be filed after a period of one year from the end ofassessment year or passing of assessment orders which ever isearlier. The assessment years in question are 1997-98 to 2003-2004. No doubt, for a period of one year or so the bar undersection 139 may not apply. As far as other years are concerned,it is not even open to the appellant to contend that he has filedrevised return as understood by section 139. Be that as it may,we will pass on to consider the effect of proviso to section 158BFA. It is the point sought to be focused before us by the learnedcounsel for appellant. Section 158 BFA (2) and the provisos readas follows : Levy of interest and penalty in certain cases.158 BFA. (2) The Assessing Officer or theCommissioner (Appeals) in th course of anyproceedings under this Chapter, may direct that aperson shall pay by way of penalty a sum which shallnot be less than the amount of tax leviable but whichshall not exceed three times the amount of tax so leviable in respect of the undisclosed incomedetermined by the Assessing Officer under clause (c)of section 158BC : Provided that no order imposing penalty shall bemade in respect of a person if - (i) such person has furnished a return under clause (a)of section 158BC;of section 158BC; (ii) The tax payable on the basis of such return hasbeen paid or, if the assets seized consist of money,the assessee offers the money so seized to beadjusted against the tax payable;been paid or, if the assets seized consist of money,the assessee offers the money so seized to beadjusted against the tax payable; (iii) evidence of tax paid is furnished along with thereturn; and return; and (iv) an appeal is no filed against the assessment ofthat part of income which is shown in the return:that part of income which is shown in the return: Provided further that the provisions of the precedingproviso shall not apply where the undisclosed incomedetermined by the Assessing Officer is in excess of theincome shown in the return and in such cases thepenalty shall be imposed on that portion of undisclosedincome determined which is in excess of the amount ofundisclosed income shown in the return. 6. Learned counsel for the appellant would fairly submit that appellant has not filed the return as contemplated under clause(1) of proviso that is to say he does not dispute that fling of 'Nil'return pursuant to notice will not satisfy the requirements ofclause (1) to the proviso. His contention however is that, if wepass on to the next clause namely, he has offered the money.According to him, he offered that tax due can be adjusted fromthe amount seized. Therefore, requirement of clause (2) would be ITA. No.96/12 6. Learned counsel for the appellant would fairly submit that appellant has not filed the return as contemplated under clause(1) of proviso that is to say he does not dispute that fling of 'Nil'return pursuant to notice will not satisfy the requirements ofclause (1) to the proviso. His contention however is that, if wepass on to the next clause namely, he has offered the money.According to him, he offered that tax due can be adjusted fromthe amount seized. Therefore, requirement of clause (2) would be ITA. No.96/12 satisfied. Since clause (2) is satisfied, as also the fact that he hasnot filed any appeal against the assessment of that part of incomeshown in the return, the requirements of the proviso are satisfiedand consequently he is legally protected from penaltyproceedings, it is submitted. In this context, he drew ourattention to an unreported judgment of this court in ITA.323 of2002, particularly to the following passage: “It may be noticed that penalty under the aboveprovision is the general Rule in the event ofassessment of undisclosed income under section158BC and exclusion from penalty is an exceptioncovered by the first proviso to the main section, whichis subject to the second proviso thereto. What is clearfrom the first proviso is that if, pursuant to the noticeissued under section 158 BC(a) assessee files return,remits tax and does not proceed to contest theundisclosed income returned based on whichassessment is made, there is no scope for any penalty.However, the second proviso is an exception to thefirst proviso which makes it clear that if anyundisclosed income is assessed over and above theundisclosed income returned by the assessee in thereturn filed pursuant to notice issued under section158 BC(a), penalty is to be levied on such excessincome assessed.” 7. Per contra, learned senior counsel for revenue would draw our attention to a judgment of this court reported in (2011) 337 ITR 359 Commissioner of Income Tax v. HeeraConstruction Company Private Ltd. 8. We are unable to see merit in the contention of learned ITA. No.96/12 counsel for the appellant. Admittedly the appellant has not filedthe return within the meaning of clause (1) to the proviso. Thereturn filed being 'Nil' return, he cannot also lay store by therevised return filed earlier. The law is very clear that the partyseeking protection from the penalty must file return pursuant tonotice under section 158 BD. Learned counsel for the appellantconcedes that 'Nil return filed does not satisfy the proviso. On aperusal of the provisions contained in the proviso, we are of theclear view that requirements which are to be satisfied arecumulative. The law contemplates that on receipt of notice undersection 158 BD, the party must file return disclosing the income.He must pay the tax or he must offer that the money seized maybe adjusted against the tax payable. He must provide theevidence for tax paid along with the return in clause (iii). We alsonotice the presence of the word 'and' after clause (iii) which isfollowed by clause (iv) which deals with the last of fourrequirements to be fulfilled by the assessee, namely, that heshould not appeal the assessment of that part of income shown inthe return. The provisions of clause (iv) clearly indicate that hemust not file any appeal against that part of income which isshown in the return. This signifies that the assessee must indeed ITA. No.96/12 file a return and not a 'Nil' return and that all the clauses must befulfilled. Therefore, we are of the view that there is no merit inthe appeal. We answer the question against the appellant. Theappeal is dismissed. Sd/- K. M. JOSEPH, JUDGE Sou. Sd/- K. HARILAL, JUDGE. // True copy // P.A. To Judge