Case Law Details
RELEVANT PARAGRAPH
5. The assessee was subjected to search assessment, whereupon additions were made, which included disallowance of interest expenditure Rs.54,1800/- ; addition for unexplained cash credit Rs.10,500/-, and another disallowance of claim of set off of business loss Rs.18,698/-; totalling Rs.83,378/-. The assessee contended before the AO that the disallowance of interest expenditure on bank loan was only a technical addition. The assessee did not appeal against the same because of the smallness of the amount. Coming to the next addition of cash credit, it was stated that this was voluntarily offered by the assessee. Regarding set off of loss, it was stated that amendment to section 158BB(1)(b) for non-grant of set off of losses disclosed in regular returns filed came with retrospective effect by Finance Act 2002 and the assessee could not be penalized since the law that stood as on the date of filing of the block return was different one. The AO did not accept the above contention. He held that clause (2) to sub-section (1) of section 158BFA does not give any discretion in the matter of levy of penalty. There is no question of any agreed additions in the block assessment since the additions are made on the basis of documents / evidences found as a result of search or on the basis of subsequent enquiries conducted. He further held that the element of mense rea is not relevant since the proceedings under section 158BFA(2) were different from the proceedings in regular assessment.
6. The contention taken by the assessee was rejected by the AO and further the CIT(A) rejected the same. The CIT(A) held that with regard to interest disallowance there is no evidence to show that the money borrowed by the assessee was advanced to the sister concern exclusively for the business purpose and further holding that the assessee advanced the money so as to reduce its tax liability. With regard to cash credit, the CIT(A) observed that no explanation was offered by the assessee and it was only during the assessment proceedings the assessee admitted the undisclosed income.
7 On the premises of the above facts, learned Accountant Member decided the issue against the assessee and confirmed the orders of the revenue authorities. While coming to the above conclusion, he noted that regular assessment procedure and block assessment procedure are different since Chapter-XIVB is a special procedure for assessment of search cases. Learned AM held that the assessee, under Chapter XIVB, has been given a chance to file the return and come clean. Under section 158BFA{2), penalty is leviable only on that portion of the undisclosed income determined by the AO, over and above the amount disclosed by the assessee in the return. The learned AM further held that section 158BFA(2) is materially different from section 27l(1)(c). and under section 271(1)(c), the element of concealment is necessarily to be present for invoking the section 271(1)(c); not so for invoking section 158BFA(2). Though discretionary power is given to AO under the said section to levy or not to levy the penalty. Coming to the instant case, the learned AM held that since the assessee was not able to give explanation regarding the cash credit or the interest paid on account of diversion of loan, the AO rightly levied the penalty and the CIT(A) confirmed it. Since there was no explanation, reliance placed by the assessee in the case of DCIT vs Koatex Infrastructure Ltd. (2006) 100 ITD 510 (Mum), the learned AM held, is not applicable The learned AM distinguished the decision relied by the assessee observing as under –
“In the case of Dy CIT vs. Koatex Infrastructure Ltd., [2006] (100 ITD 510)(Mum) this Tribunal had ruled that it was humanly not possible in the circumstances of that case for the assessee to correctly compute his income due to the voluminous records seized and therefore deleted the penalty levied under Section 158BFA(2). About 54 files containing 10000 sheets involving 31 concerns were seized in that case. On the other hand, here, there are only two items of additions and there is nothing on the record to show that these involved any voluminous record. Hence, the Koatex Infrastructure Ltd. (supra) has no applicability in the circumstances of this case”.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
