ORDER
Dinesh K. Agarwal, J.M.
1. This appeal preferred by the Revenue is directed against the order passed by the learned CIT(A), dt. 28th April, 2003, for the block period relevant to the asst. yrs. 1988-89 to 1998-99 (upto 11th Nov., 1997) against which the assessee has filed cross-objection. Both, the appeal and the cross-objection are disposed of by this common order for the sake of convenience.
2. Briefly stated, facts of the case are that a search under Section 132 of the IT Act was conducted at the residence and group concerns of the assessee on 11th Nov., 1997. The assessee vide his letter dt. 19th Feb., 1998, filed before the A.D.(Inv.), declared Rs. 50 lakhs as his undisclosed income for the block period and accordingly, filed his return for the block period on 23rd Oct., 1998, disclosing undisclosed income at Rs. 50 lakhs. However, the assessment was completed at an income of Rs. 75,63,300 vide order dt. 28th June, 1999 passed under Section 158BC(c)/143(3) of the IT Act and no appeal was preferred by the assessee against the said assessment. In the penalty proceeding under Section 158BFA(2), it was submitted by the assessee that the disclosure of Rs. 50 lakhs was bona fide, the regular income for the asst. yrs. 1996-97 and 1997-98 totalling to Rs. 10,66,222 is also added in the undisclosed income, the total income as determined by the AO has been accepted and no appeal has been filed and the assessee is a very old man, co-operated in the assessment and in making the payment of tax, therefore, penalty initiated be dropped. The AO was of the view that the undisclosed income determined is in excess of the amount of undisclosed income shown by the assessee in the return by Rs. 25,63,300 and accordingly, he imposed penalty under Section 158BFA(2) amounting to Rs. 15,37,980 equivalent to the amount of tax so leviable in respect of undisclosed income determined under Section 158BC(c)/143(3) of the IT Act. The assessee preferred first appeal before the learned CIT(A). The learned CIT(A) while sustaining the penalty under Section 158BFA(2) considered the amount of undisclosed income for the purpose of penalty Rs. 2,67,114 only and accordingly, he reduced the penalty to Rs. 1,60,268 as against Rs. 15,37,980 imposed by the AO.
3. Being aggrieved by the order of the learned CIT(A), the Revenue and the assessee both are in appeal before us.
4. The Revenue in all its grounds of appeal has challenged the relief allowed by the learned CIT(A) whereas the assessee is agitating the sustenance of the amount of penalty by the learned CIT(A).
5. The learned Departmental Representative while relying on the order of the AO submits that as a result of search undisclosed income was computed under Chapter XIV-B of the Act at Rs. 75,63,300 as against Rs. 50 lakhs disclosed by the assessee, therefore, on the difference of Rs. 25,63,300 the assessee is liable for penalty under Section 158BFA(2) of the IT Act. He further submits that in respect of the amount of addition no relief was allowed in quantum appeal, therefore, the difference of the amount of undisclosed income is sufficient to levy penalty under Section 158BFA(2) by the AO. He further submits that since the income was determined under Chapter XIV-B, nothing further is required to be proved. He further submits that under Section 158BFA(2), the word “shall” is used, therefore, it is mandatory to impose penalty when the undisclosed income is enhanced by the AO and the discretion of the AO is limited to determine the quantum of penalty between minimum 100 per cent and maximum 300 per cent of the amount of tax so leviable in respect of undisclosed income determined in the block assessment. The learned Departmental Representative also filed his written submissions analysing the provision of Section 158BFA(2) which reads as under:
“It is submitted that Section 158BFA(2) lays down that it is mandatory to impose a penalty where the returned undisclosed income has been enhanced and the AO’s discretion is limited to determining the quantum of the penalty between the minimum 100 per cent of tax and maximum 300 per cent thereof. This is the conclusion that emerges from a reading of the full provision.
The main limb of Section 158BF(2) only stipulates that penalty shall be imposed. It is important to note that in itself it does not lay down any condition or default for imposition of penalty. Why is this so ? Is it because penalty is to be imposed in all cases of undisclosed income ?
The first proviso is a saving provision for assessee’s benefit. It lays down four conditions which have to be fulfilled cumulatively, in order to avoid the imposition of a penalty. Thus, even if one of these requirements is not satisfied, penalty is to be imposed. Thus, in such a situation penalty would be imposable even if there is no enhancement to the returned undisclosed income. All these conditions are very innocuous or simple conditions : return to be filed within the time allowed in the notice, tax to be paid on the returned undisclosed income, evidence of payment to be attached with the return and returned income not to be contested in appeal. In other words, the intention is that the tax evader must comply promptly and wholeheartedly with his duty to pay tax on the income he has concealed so far. But if there is any dithering, slackness or recalcitrance on his part in strictly complying with these requirements then he has to be visited with a penalty. In other words a person who has been caught red-handed evading tax, must henceforth exhibit exemplary behaviour to avoid the imposition of this mandatory penalty. By his act and attitude he must show a complete change of heart. The full and prompt disclosure followed by payment of tax would be a token of his repentance and atonement for the tax evasion done by him in the earlier years.
The second proviso provides that where the assessed undisclosed income exceeds the returned undisclosed income, penalty shall be imposed on the excess portion. In case of any addition, the assessee loses the protection of the first proviso. The use of the word shall in the second proviso makes the imposition of a penalty in such a situation mandatory. The only area where discretion operates is how much penalty to impose between the minimum 100 per cent and maximum 300 per cent of the tax relatable to the addition. Where the quantum exceeds Rs. 20,000 previous approval of Jt. CIT has to be taken.
In view of this appreciation of the law, the AO has correctly imposed the mandatory penalty.
One question may trouble the minds of the learned Members. Whether the provision of a mandatory penalty runs counter to the basic propositions of tax jurisprudence, as in a number of cases it has been held that for a venial or technical breach penalty is not to be imposed. That penalty is quasi-criminal in nature and, therefore, to be imposed only where a grave default is established. In this context, it may be appreciated that imposition of mandatory penalty is not at all unfair. It may be pointed out that penalty is being imposed in a case where the person has been proved to be having undisclosed income. In other words, under the regular tax law, he is a person who has concealed income and also been caught red-handed. In the normal course, he would have been liable for interest, concealment penalty and prosecution. It may also be noted that under Section 276C, in a case where income evaded is more than Rs. 1 lakh, law prescribes a mandatory minimum punishment of six months of rigorous imprisonment. This rigorous imprisonment may go upto 7 years. Person would also be liable for fine. In addition, for earlier years, if returns have been filed where full income has not been disclosed, the verification therein becomes false. This too is punishable under Section 277 with a minimum mandatory rigorous imprisonment of 6 months, extendable upto 7 years. If a person wishes to avoid prosecution, he is permitted under administrative guidelines, to compound his offence by paying a big compounding fee. Earlier this was 5 times the tax default (now it has been reduced). Though it must be mentioned that in concealment cases, generally proceedings were not compounded, unless there were exceptional circumstances.
Thus it is clear that in this case we are dealing with a situation where the assessee has concealed the income and is liable for a mandatory rigorous imprisonment sentence. However, for undisclosed income taxed under block assessment, there is apparently no prosecution provision. He is offered one chance to come clean by paying his taxes at the higher rate of 60 per cent. But his behaviour now has to be exemplary. He must make a full disclosure, perhaps even erring on the side of caution, as after all in the past he has been a tax evader. He must redress this imbalance. He must also not enter into litigation on the disclosed amount. As a measure of good behaviour he must also furnish the block return in time, pay the tax on the returned undisclosed income and attach the proof of payment. Thus, there must be a change of heart and it must be in toto. If there is any compromise, the proven tax evader has to suffer a mandatory penalty. Depending on the level of his recalcitrance, the quantum of penalty may vary from the mandatory minimum of 100 per cent to a maximum of 300 per cent.
The next question that arises is how should the quantum of penalty be decided ? In a case after the search, if the assessee has still not made a full disclosure, i.e., in a case where second proviso applies, the rate of penalty should be only 300 per cent. This would put it on par with the compounding fee for prosecution.
The Hon’ble Members’ kind attention is also invited to the fact that the penalty provisions of Section 158BFA(2) were introduced by an Ordinance. Clearly the Government was desirous of checking some mischief very urgently. A press note was issued along with the Ordinance [(1997) 223 ITR (St) 89]. A reading of para (iv) of the press note brings out that penalty is leviable on the mere ground that taxes have been evaded earlier. The only situation in which assessee is saved, is given in the first proviso. But the benefit of first proviso is not available as per second proviso, if there is any addition to the returned undisclosed income. Therefore, if as per the press note, penalty is exigible in every case where undisclosed income comes to light it can safely be concluded that it is mandatory where any addition is made.
In view of above discussion the following propositions emerge :
(i) Penalty is exigible in all cases where any undisclosed income is assessed even if the returned income is not enhanced.
(ii) Where all conditions of first proviso are fulfilled no penalty is to be imposed.
(iii) Where all conditions of first proviso are fulfilled but returned undisclosed income is enhanced as per second proviso the computation base is restricted to tax relatable to the quantum of addition. However, if all conditions of first proviso are not fulfilled the quantum would be the full amount of tax on assessed undisclosed income (inclusive of the returned undisclosed income).
(iv) Once the objective conditions are fulfilled, penalty has to be levied. It is mandatory. The law has created a strict liability.
(v) Discretion is limited to quantification between 100 per cent to 300 per cent.
Operative part of learned CIT(A)’s order is in the last para of p. 15. He has based his view on the case law relating to Section 271(1)(c). This is completely incorrect. The foregoing analysis of Section 158BFA(2) would show that far from operating on a common premise, the two provisions are a study in contrast. They cover entirely different ground. Thus, under Section 158BFA(2), AO is not required to establish that the explanation given by the assessee is false and mala fide. There is also no requirement to prove that the assessee is guilty of contumacious conduct. Therefore, learned CIT(A) has completely misdirected himself in appreciating the provisions of Section 158BFA(2). He has allowed relief on the basis of considerations which are totally irrelevant to the scheme of Section 158BFA(2).
The order of the learned CIT(A) should be set aside and AO’s order restored. I, therefore, rely fully upon the AO’s order.”
5.1 The learned Departmental Representative further submits that:
“Written submissions in the above case were filed on 24th Sept., 2004. Subsequently, the question whether this provision provides for a mandatory penalty, was considered in the case of Smt. Mala Dayanithi v. Dy. CIT (2005) 92 TTJ (Bang) 270 : (2004) 91 ITD 46 (Bang). It has been held that penalty under Section 158BFA(2) is not mandatory. At the outset it may be mentioned that the arguments submitted in the earlier written submissions have not been considered by the Hon’ble Bangalore Bench. In this context, the following further submissions may kindly also be considered.
In the above case, the penalty was levied in respect of an addition based upon the DVO’s report regarding cost of construction. No evidence was found in the search to suggest that the investment made was more than the disclosed amount. The addition was confirmed. However, as regards the penalty, note was taken of the decision in the case of Smt. Amiya Bala Paul v. CIT (2003) 262 ITR 407 (SC) to appreciate that even the addition was unwarranted.
In this case it has been held that the word used is “may” and an appeal has been provided against the penalty order. This implies that if there is a reasonable cause, no penalty is to be imposed. On this point it is submitted that the discretion relates only to the quantum of penalty (100 per cent minimum going upto 300 per cent maximum). Therefore, in appeal also only quantum can be agitated. Moreover, the provision also uses the word “shall” in the main limb, as well as the second proviso, which has not been considered at all.
In this context it is important to note that where the law considered that penalty should not be imposed if there was a reasonable cause, it has specifically provided for it is Section 273B. Section 158BFA(2) is not included in the list of provisions mentioned in Section 273B. The implication of this exclusion has not been considered by the Hon’ble Bangalore Bench. Therefore, a relevant provision of law has been oversighted while deciding this issue. It is submitted that existence of reasonable cause has not been provided as a ground for non-imposition of this penalty under Section 273B. The omission is significant and a clear reflection of the legislature intent that a strict liability is involved.
Another instance of strict liability may kindly also be noted. Chapter XXII of the Act deals with crimes punishable by fine/imprisonment, including rigorous imprisonment. These are specified in Sections 275A, 275B, 276, 276A, 276AB, 276B, 276BB, 276C, 276CCC, 276D, 277, 278 and 278A. However, as per Section 278AA, only in respect of three provisions, i.e., 276A, 276AB and 276B can a person escape punishment on the ground of ‘reasonable cause’. Thus, for the remaining provisions ‘reasonable cause’ is not a ground for exoneration.
In view of this scheme of the Act for dealing with tax offences, it would be wholly incorrect to read in an exception of ‘reasonable cause’, where none has been specifically provided in the Act. If law has not specifically provided an exception, it must be taken to mean that none was intended by the legislature.
The Hon’ble Bangalore Bench has also held that in case of penalty reasonable cause has always to be inferred. If this is so, then Section 273B becomes redundant. Therefore, this observation of the Hon’ble Bench does not appear to be correct.
In para 5 (almost end of p. 51), it has been observed that ‘…To put in different words, since penalty is for concealment of particulars of income….’ para 6 makes it apparent that the concealed income under contemplation is income not disclosed even in the block return.
This appreciation does not appear to be correct. How the Hon’ble Bench has concluded that, penalty is only exigible for enhancement of the returned income, is not clear. No reasons have been given for this view. It has already been noted earlier that the main limb of Section 158BFA(2) does not specify the exact default for which penalty is exigible.
If the penalty is really exigible only for addition to the returned income, then why does the main limb prescribes that minimum penalty shall be 100 per cent of tax leviable in respect of undisclosed income. This means the whole of the undisclosed income assessed by the AO and not just the enhancement to the returned undisclosed income. This is a very important point and again this aspect of the provision has not been considered at all. In fact, this view is reinforced by the second proviso which restricts the penalty imposed in respect of cases covered by it to the tax relatable to the quantum of addition. Therefore, only in respect of cases which are covered by the second proviso does the penalty get restricted to the base of tax on addition. Cases which fall under the main limb and are not covered by the first proviso, shall suffer the minimum mandatory penalty of 100 per cent of the tax on undisclosed income.
Another very important point is that if in the first place penalty is exigible only on the tax relatable to the enhancement to the returned undisclosed income, then what was the necessity of the second proviso ? This provision rendered redundant by this interpretation. Therefore, this view is obviously not correct.
To sum up, the decision under consideration has been rendered without considering all aspects of Section 158BFA(2). Further, it has also not appreciated the scheme of this provision. The scheme of this provision is that the main limb creates the charge. The first proviso creates an exception to the imposition of the penalty. The second proviso creates an exception to the first proviso for imposition of a lesser penalty. The only discretion with the AO is with regard to the quantum of the penalty. Therefore, only the quantum can be appealed against if more than the minimum 100 per cent has been imposed.
It may also be mentioned that if the operation of this law results in undue hardship, relief can be obtained by way of waiver under Section 273A(4). In other words, once the objective conditions specified in this provision are fulfilled, the mandatory penalty has to be imposed.
The order of the learned CIT(A) should be set aside and AO’s order restored. I, therefore, rely fully upon the AO’s order.”
6. On the other hand, the learned counsel for the assessee submits that the penalty is not automatic. The assessment proceedings and penalty proceedings are two distinct things. The learned counsel for the assessee further submits that in this case the assessee has not filed any appeal against the assessment order passed by the AO, but that does not mean that the addition made by the AO in the assessment has been accepted by the assessee. He further submits that only because the amount of difference in the income returned and income assessed, the same does not amount to conceal the income for the purpose of Section 158BFA(2). He further submits that under Section 158BFA(2) there is a word “may” and not “shall” which indicates that the authority concerned has a discretion either to levy penalty or not to levy penalty. Thus, the levy of penalty is not mandatory but depends upon the facts and circumstances of each case. He further submits that if penalty is automatic, the appeal against such order would not have been provided for. The reliance was placed on the decision reported in the case of CIT v. Wesman Engineering Co. (P) Ltd. (1976) 104 ITR 605 (Cal) which was rendered on the provision of Section 140A(3) wherein the word “shall” is provided even then it has been held by the Hon’ble jurisdictional High Court that the AO has a discretion not to impose any penalty for contravention of Section 140A(1). Relying on the said judgment, the learned counsel for the assessee submits that the penalty is not automatic. He further submits that the provision of Section 158BFA(2) presupposes affording an opportunity of being heard, therefore, the penalty is discretionary and not mandatory. The reliance was also placed on the decision in the case of Smt. Mala Dayanithi v. Dy. CIT (2005) 92 TTJ (Bang) 270 : (2004) 91 ITD 46 (Bang) and C.P. Nanda v. Dy. CIT (2004) 84 TTJ (Pune) 125.
7. On merits, the learned counsel for the assessee submits that the assessee is an old man of over 70 years of age and had been suffering for long and because of gangrene his legs were amputed. He further submits that in the course of search, large number of loose papers were found and seized. The assessee vide letter dt. 19th Feb., 1998, filed before the ADI(Inv.) appearing at p. 1 of the assessee’s paper book submitted that on going through the various documents including the bunch of loose papers, certain amount of cash received not exceeding Rs. 40 to Rs. 45 lakhs from different persons has been utilised in the business. However, it was difficult to produce such persons whose names are recorded in the loose papers and to prove the genuineness of such amount borrowed and also to buy peace and to avoid litigation with the IT Department, the assessee declared Rs. 50 lakhs as his unaccounted income for the block period with the request not to initiate any penalty proceedings. The learned counsel for the assessee further submits that the difference in the income-tax returned and assessed is Rs. 25,63,300 which is comprising of undisclosed cash Rs. 13,55,000, FDR interest Rs. 82,090, income disclosed in the regular returns for asst. yrs. 1996-97 and 1997-98 Rs. 10,66,210 and Tokai seeds income Rs. 60,000.
7.1 The learned counsel for the assessee explaining the item wise difference submits that the difference in the undisclosed cash is on estimate basis as it was not possible to work out the exact amount due to the large number of loose papers found during the course of search.
7.2 As regards FDR interest, he submits that the FDR interest was shown by the assessee as bank accounts, however, the AO has taken the same on higher amount. At this stage, he submits that the learned CIT(A) has treated the entire amount of FDR interest amounting to Rs. 33,749 for asst. yr. 1995-96, Rs. 93,351 for asst. yr. 1996-97 and Rs. 1,40,014 for asst. yr. 1997-98 aggregating to Rs. 2,67,114 as concealed income whereas the assessee has duly disclosed the interest income as per bank account including the interest income Rs. 45,010 for asst. yr. 1996-97 which was also considered by the AO at p. 7 of the assessment order while determining the undisclosed income for the asst. yr. 1996-97.
7.3 As regards the income shown in the returns for the asst. yrs. 1996-97 and 1997-98 filed by the assessee after the search, the learned counsel for the assessee submits that all the particulars of income disclosed in the returns are on the record of the Department. Even in the search no material relating to the income disclosed by the assessee in these returns was found and the assessments were also completed on the basis of the returns filed by the assessee, therefore, the income disclosed by the assessee in the returns filed after the search does not come under the purview of the undisclosed income.
7.4 As regards income from Tokai seeds, the learned counsel for the assessee submits that the same was included in the total undisclosed income declared at Rs. 50 lakhs.
7.5 He, therefore, submits that the penalty imposed by the AO and sustained by the learned CIT(A) be deleted.
8. We have carefully heard the rival submissions of the parties and perused the materials available on record. We find that Section 158BFA was inserted by the IT (Amendment) Act, 1997, w.e.f. 1st Jan., 1997. Section 158 BFA reads as under:
“158BFA(1)–Where the return of total income including undisclosed income for the block period, in respect of search initiated under Section 132 or books of account, other documents or any assets requisitioned under Section 132A on or after the 1st day of January, 1997, as required by a notice under Clause (a) of Section 158BC, is furnished after the expiry of the period specified in such notice, or is not furnished, the assessee shall be liable to pay simple interest at the rate of two per cent of the tax on undisclosed income, determined under Clause (c) of Section 158BC, for every month or part of a month comprised in the period commencing on the day immediately following the expiry of the time specified in the notice, and–
(a) where the return is furnished after the expiry of the time aforesaid, ending on the date of furnishing the return; or
(b) where no return has been furnished, on the date of completion of assessment under Clause (c) of Section 158BC.
(2) The AO or the CIT(A), in the course of any proceedings under this Chapter, may direct that a person shall pay by way of penalty a sum which shall not be less than the amount of tax leviable but which shall not exceed three times the amount of tax so leviable in respect of the undisclosed income determined by the AO under Clause (c) of s, 158BC;”
From the reading of Section 158BFA(2) we find that the word used in Sub-section (2) before the word “shall” is “may” unlike the word “shall” in Sub-section (1). We further find that same expression that “he may direct that such person shall pay by way of penalty” is contained under Section 271(1)(c) of the Act. In the context of 271(1)(c), it is settled that first “may” is discretionary while the other word “shall”, i.e., quantum of penalty is fixed, certain and mandatory. The IT authorities have been empowered to impose penalty only if there exists one or more of the circumstances enumerated in Clauses (a), (b) and (c) of Section 271(1)(c) but not otherwise. But where any of these circumstances exist the authority has power to impose penalty. Under Clause (c) it is for the authority to decide whether there has been concealment of particulars of income or that there was any inaccurate furnishing of the particulars. If the AO is satisfied that under Clause (c) there was concealment or inaccurate furnishing of the particulars, he may impose the penalty.
9. According to the learned author Chaturvedi & Pithisaria’s Income-tax Law, 5 Vol., Fifth Edn., at p. 8642, the “Discretion” means “when it is said that something is to be done within the discretion of the authorities then that something is to be done according to the rules of reason and justice, not according to private opinion; according to law and not humour. It is not to be arbitrary, vague, and fanciful but legal and regular. And it must be exercised within the limit, to which an honest man, competent to the discharge of his office ought to confine himself” [Per Lord Halsbury in Susannath Sharp v. Wakefield (1891) AC 173, 179 (HL); U.J.S. Chopra v. State of Bombay AIR 1955 SC 633, 642. Also see TVL Kathiresan Yarn Stores v. State of Tamil Nadu (1978) Tax LR 2176 (Mad)(FB)].
10. In the case of Hindustan Steel Ltd. v. State of Orissa (1972) 83 ITR 26, 29 (SC), it has been held by the Hon’ble Supreme Court that “penalty will not be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute”.
11. Therefore, the word “may” in Section 271 indicates that the authority concerned has a discretion either to levy penalty or not to levy penalty. The power to impose penalty has to be exercised judicially with due regard to all the facts and circumstances of each case and cannot be exercised mechanically.
12. In the case of CIT v. Bengal Iron Galvanising Works (1987) 165 ITR 249, 252-53 (Cal), it has been held by their Lordship that it is not mandatory under Section 271 that a penalty must be imposed in every case. If the conditions laid down in the said section are established, then the authority concerned “may direct” that the person committing the default within the meaning of the said section pay the penalty imposed.
13. Since the provisions of Section 271(1)(c) are similar to the provisions of Section 158BFA(2), therefore, we are of the view that the same will apply mutatis mutandis and the ratio as laid down by the various Courts while dealing with the penalty relating to concealment of income will also apply. Therefore, respectfully following the decision of Tribunal, Bangalore Bench, “C” in the case of Smt. Mala Dayanithi v. Dy. CIT (supra), we do not find any merit in the plea of the learned Departmental Representative that the penalty under Section 158BFA(2) is mandatory and not discretionary and accordingly, the same is rejected.
14. With regard to the merits of the case, we find that the penalty was imposed by the AO on the difference of undisclosed income shown and assessed, i.e., Rs. 25,63,300 which is comprised of undisclosed cash Rs. 13,55,000, difference in FDR interest Rs. 82,090, income disclosed in the returns after the search for asst. yrs. 1996-97 and 1997-98 Rs. 10,66,210 and income from Tokai seeds Rs. 60,000. We find that the assessee after considering all the documents including the bunch containing loose papers found at the time of search has disclosed unaccounted income for the block period at Rs. 50 lakhs. In the course of assessment, the AO on the basis of the same has worked out the undisclosed cash at Rs. 63,55,000 plus Rs. 60,000 income from Tokai seeds aggregating to Rs. 64,15,000 as against Rs. 50 lakhs disclosed by the assessee. Since no particular item of income was brought on record by the Revenue to show that the same was not considered by the assessee while disclosing the undisclosed income at Rs. 50 lakhs and the undisclosed income was computed by the AO by applying certain formula appearing at p. 6 of the assessment order and likewise income from Tokai Seeds commission was also assessed on estimate on the basis of the same bunch of seized papers, therefore, we are of the view that the income determined by the AO on account of undisclosed cash and Tokai seeds is based on estimate and in the absence of any other contrary material brought on record by the learned Departmental Representative, we are of the view that no penalty under Section 158BFA(2) is leviable on this account and therefore, we uphold the order of the learned CIT(A) in this regard.
15. With regard to the imposition of penalty on the income disclosed in the returns filed after the search for the asst. yrs. 1996-97 and 1997-98, we find that no material was brought on record by the Revenue to show that the particulars of income as shown by the assessee in the said returns have not been disclosed to the Revenue prior to the date of search. We further find that the assessee has also paid advance tax and TDS prior to the date of search on the income disclosed in the returns filed after the date of search, therefore, income disclosed in the returns filed after the date of search is not an undisclosed income in view of the provisions of Section 158B(b) of the IT Act. This view also finds support from the recent decision of the Hon’ble Guwahati High Court in the case of Dr. (Mrs.) Alaka Goswami v. CIT (2004) 268 ITR 178 (Gau). In this view of the matter, the income disclosed in the returns filed after the date of search is not liable for penalty under Section 158BFA(2) of the IT Act and accordingly, we are inclined to uphold the order of the learned CIT(A) in deleting the penalty on this account also.
16. As regards the FDR interest, we find that the learned CIT(A) has taken entire FDR interest of Rs. 2,67,114 as undisclosed income. The learned counsel for the assessee submits that the FDR interest was shown by the assessee as per bank statements. He further submits that in the block return, in the asst. yr. 1996-97, the assessee has shown FDR interest at Rs. 45,010 whereas the same was assessed at Rs. 93,351. However, the learned CIT(A) has considered the entire amount of interest of Rs. 93,351 as undisclosed income. Since the learned counsel for the assessee has failed to bring on record any reconciliation statement showing the difference of the FDR interest and keeping in view the plea of the learned Departmental Representative that for this purpose the issue may be restored back to the file of the learned CIT(A) and also in the interest of justice, we consider it fair and reasonable to set aside the order of the learned CIT(A) and accordingly, we set aside the order of the learned. CIT(A) to this extent and restore the matter to his file who shall work out the net amount of FDR interest which has not been disclosed by the assessee either in the block return or in the regular returns for the asst. yrs. 1995-96, 1996-97 and 1997-98 and work out the net undisclosed amount of interest for the purpose of imposition of penalty under Section 158BFA(2) and to impose a minimum penalty according to law after providing reasonable opportunity of being heard to the assessee. Accordingly, the grounds taken by the Revenue are rejected and that of the assessee is partly allowed for statistical purposes.
17. In the result, Revenue’s appeal stands dismissed and that of the assessee is partly allowed for statistical purposes.