- (1.) The subject matter of challenge in the appeal is a judgment and order dated 13th February, 2009 passed by the learned Income Tax Appellate Tribunal "C" Bench, Kolkata in I.T.(S.S.)A. No.85/Kol/2008 pertaining to the block period commencing from 1st April, 1996 to 5th July, 2002, by which the learned Tribunal dismissed an appeal preferred by the revenue. Aggrieved revenue has come up in appeal. The following question of law was formulated on 17th December, 2009 when the appeal was admitted: - " Whether on the facts and circumstances of the case the Income Tax Appellate Tribunal is justified in not considering the penalty is leviable under Section 158BFA(2) of the Income Tax Act, 1961 on the quantum of undisclosed income determined by the Commissioner of Income Tax (Appeals) -
(2.) The search and seizure took place on 5th July, 2002. The respondent -assessee and its director Shri S.M.Shroff were both required to furnish returns. Shri S.M.Shroff furnished a return showing an undisclosed income of Rs.2,02,66,971/ - whereas the company filed a NIL return. The assessing officer was of the opinion that the undisclosed income of the company was Rs.491.50 lakhs. In an appeal preferred by the assessee company the sum of Rs.491.50 lakhs was reduced by the CIT(A) to a sum of Rs.37 lakhs. The CIT did not direct commencement of any penalty proceedings. The assessing officer as already indicated had on the basis of seized documents assessed the undisclosed income of the company at a sum of Rs.491.50 lakhs and had also started penalty proceedings. When the amount of undisclosed income was reduced by the CIT(A), in the quantum appeal, no fresh penalty proceeding was initiated. The reduction of the undisclosed amount was affirmed by the Tribunal in an appeal preferred by the revenue.
(3.) Now the question is whether the penalty proceedings initially started by the assessing officer for an undisclosed income of a sum of Rs.491.50 lakhs should be allowed to continue for the sum of Rs.37 lakhs which has ultimately been found to be the undisclosed income of the assessee. This question was answered in the negative by the CIT(A) for the following reasons: - "According to the discussion with the Department, the entire income on the basis of seized document was to be declared in the case of the Managing Director of the company Shri S.M.Shroff. He, accordingly, made the disclosure of Rs.2.16 Crore u/s. 132(4) and gave a detailed working in his petition dt.20.09.2002. He, accordingly, filed his return for the same amount and as the consequence of this, the appellant company was bound to declare NIL undisclosed income. Later, the basis of determination undisclosed income was changed by the Assessing Officer of Shri S.M.Shroff and the appellant company, after giving all appeal affects, finally arrived at the picture of undisclosed income, in which Shri S.M. Shroff has the income of Rs.2,02,66,971/ - and the appellant company has Rs.37 Lacs of this nature. The aggregate amount of Rs.2,39,66,971/ - is close to the original disclosure u/s 132(4) of Rs.2.16 Crore by Shri S.M.Shroff." ;