Principal Commissioner Of Income Tax – 29 v. C. Raja

19 ITXA 599 OF 2017.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.599 OF 2017 …Principal Commissioner of Income Tax – 29 Appellant versus…C. Raja Respondent Mr. Arvind Pinto, for Appellant. None for Respondent. CORAM: AKIL KURESHI & S.J. KATHAWALLA, JJ. th JUNE, 2019 DATE: 11 P.C.: 1.This Appeal is filed by the Revenue to challenge the Judgment of the Income Tax Appellate Tribunal (“the Tribunal” for short). The following question is presented for our consideration : (i) Whether in law and on the facts of the instant case was the Tribunal correct in law in upholding the cancellation of penalty imposed by the AO under Section 158BFA(2); a section that mandates the imposition of penalty in respect of the undisclosed income; where the words 'may direct' refer to variation of the penalty and not to its imposition ? 2.The issue pertains to penalty under Section 271(1)(c) of the Income Tax Act, 1961. 3.The assessee was subjected to search operation during which he admitted SSP 1/3 19 ITXA 599 OF 2017.doc undisclosed income of Rs.30 Lakhs. In the post search assessment, the AssessingOfficer made further addition by disallowing certain labour charges holding that suchexpenditure was inflated. 4.The assessee carried the matter in Appeal. The Commissioner substantiallyreduced the said addition, which became final. 5.The Assessing Officer levied penalty both on income of Rs.30 Lakhsdisclosed by the assessee during the search as well as on the additional incomedetermined during the course of assessment. The assessee carried the matter inAppeal. The Commissioner by a detailed order, deleted the penalty in relation to theadditional income. In relation to the disclosed income of Rs.30 Lakhs, theCommissioner (Appeals) requested the Assessing Officer to examine whether theconditions for dropping the penalty contained in Section 158BFA(2) having satisfied. The observations of the Commissioner in this respect can be noted : “Since the undisclosed amount had been computed merely as an estimatedrate which had subsequently been slashed down to again an estimated rateonly to match the receipts or expenditure presumed to have been existing butunexplained. I hold that in the appellant's case no penalty was imposablebeyond the disclosed amount let alone at an unreasoned percentage of 200. There is no consideration by the A.O. in his penalty order, that the saiddeclared undisclosed income of Rs.30 Lac had been covered by theconditions laid down in the first proviso to Section 158 BFA(2). The A.O.has to take that into account. Otherwise, I find that no additional SSP 2/3 19 ITXA 599 OF 2017.doc undisclosed income had been actually determined as any positive detectionbeyond what had been disclosed in the return by the appellant.” 6.It can thus be seen that with respect to the additional income of Rs.30 Lakhs disclosed by the assessee, the Commissioner has not deleted penalty. He had merely asked the Assessing Officer to verify if the conditions for immunity from penaltycontained in Section 158 BFA(2) is satisfied. 7.With respect to the rest of the component of the penalty, the Commissioner noted that Assessing Officer had made large additions on the basis of estimation. .Substantial portion of these additions were deleted by the Commissioner. Even that which was retained on the basis of estimates. It was in this respect that theCommissioner was of the opinion that the penalty could not have been imposed. The Tribunal reexamined the issue and concurred the view of the Commissioner. 6.It can thus be seen that with respect to the additional income of Rs.30 Lakhs disclosed by the assessee, the Commissioner has not deleted penalty. He had merely asked the Assessing Officer to verify if the conditions for immunity from penaltycontained in Section 158 BFA(2) is satisfied. 7.With respect to the rest of the component of the penalty, the Commissioner noted that Assessing Officer had made large additions on the basis of estimation. .Substantial portion of these additions were deleted by the Commissioner. Even that which was retained on the basis of estimates. It was in this respect that theCommissioner was of the opinion that the penalty could not have been imposed. The Tribunal reexamined the issue and concurred the view of the Commissioner. 8.Several courts have taken a view that penalty on addition made on mereestimation is not justifiable. 9.No question of law arises for consideration. The Income Tax Appeal isdismissed. ( S.J.KATHAWALLA, J. ) ( AKIL KURESHI, J. ) SSP 3/3