Joginder Singh, Judicial Member - (1.) THIS appeal by the assessee is arising out of the order of Commissioner of Income Tax(A)-III, Bangalore dated 10.03.2003. The appeal before the Learned CIT(A) was filed against an order levying penalty under Section 158BFA(2) of the Income Tax Act, 1961 (the Act). The only issue in appeal relates to levy of penalty under Section 158BFA(2).
(2.) The search under Section 132 was conducted at the residential premises of the assessee on 29.7.99. An order under Section 158BC was passed on 27.7.2001. The undisclosed income determined consisted of Rs. 6,58,366/- being the difference between the value of residential house declared by the assessee and as estimated by the Departmental Valuation Officer (DVO). The other item of addition as undisclosed income consisted of Rs. 1,72,653/- being the unexplained credit mentioned in the statement of affairs filed during the course of assessment proceedings. The Assessing Officer found that since the additions were made as undisclosed income as ultimately decided after the order of Learned CIT(A) which has been accepted by the assessee, the same amounts to concealed income and penalty under Section 158BFA(2) is leviable. Learned CIT(A) held that since the undisclosed income determined by the Assessing Officer is more than the returned income, levy of penalty under Section 158BFA(2) is mandatory even though an opportunity is to be given to the assessee before levy of penalty. The assessee is in further appeal before us. The learned counsel for the assessee Shri George Mathan submitted that penalty is not automatic. The assessment proceedings and penalty proceedings are distinct things. Only because the amount is treated as undisclosed income in search assessment proceedings, the same does not amount to concealed income for levy of penalty under Section 158BFA(2). The additions made itself are uncalled for. No additions can be made under Section 69 on the basis of DVO's report as held by Hon'ble Supreme Court in the case of Smt. Amiya Bala Paul v. CIT (262 ITR 407). Similarly, no addition can be made as undisclosed income resorting to the valuation officer as held by Hon'ble Bombay High Court in the case of CIT v. Vinod Danchand Godawat (247 ITR 448). If the amount cannot be considered as undisclosed income as per Chapter XIV-B, penalty is not leviable. It was further submitted that the provision of Section 158BFA(2) pre-supposes affording an opportunity of being heard. The words used are "may" and not 'shall'. Thus levy of penalty is not mandatory but on the circumstances of each case. Since. Penalty under Section 158BFA(2) is akin to penalty under Section 271(1)(c) of the Act, the penalty is leviable only if there is a guilty mind of the assessee. If penalty is automatic, even appeal against such order would not have been provided for. Since the assessee has all the reason to believe that there is no concealed income, the assessee was justified in not offering the amount treated as undisclosed income while filing return of income for the block period. The assessee may not choose to file an appeal against the assessment. This cannot be viewed otherwise so as to levy penalty under Section 158BFA of the Act. However, this does not conclusively prove any guilty mind or furnishing inaccurate particulars in the return of income.
(3.) LEARNED Departmental Representative Smt Archana Choudhary submitted that since the assessment is made under Chapter XIV-B and the undisclosed income is computed as a result of search, nothing further is required to be proved. The amount is undisclosed income which is sufficient to levy penalty under Section 158BFA(2). In resect of addition under Section 69 in respect of investment under house property, the same is not challenged in further appeal. In respect of certain credits appearing under statement of affairs, no material is brought on record justifying such credit entries rather the assessee conceded the issue. Thus the amount treated as undisclosed income necessarily attracts penalty under Section 158BFA(2). In reply, the learned counsel for the assessee submitted that though further appeal is not preferred before the Hon'ble Tribunal, yet the amount added under Section 69 is challenged by way of rectification application before the LEARNED CIT(A) as the decision of Hon'ble Supreme Court in the case of Smt. Amiya Bala Paul (supra) was rendered subsequent to the order of LEARNED CIT(A) in quantum proceedings.;