By TIOL News Service

MUMBAI, JAN 05, 2018: THE issue before the Bench is - Whether stay can be granted for recovery of penalty levied u/s 271(1)(c), if the same is levied as a result of enhancement of income by the CIT(A). And the ITAT verdict is YES.

Facts of the case

A search and seizure operation was carried out in the case of one Shri Anoop Mehta and his group and certain documents showing availability of bank accounts with HSBC Bank, Geneva in the name of Yeel Investment Inc, Euro Investment Ltd and Investment Lexcor S.A. were found. Shri Anoop Mehta's brother named Shri Rajesh Mehta, who was residing in Dubai, owned two bank accounts held in the name of Euros Invest limited and Investment Lexcor S.A. It was noticed that the third company named Yeel Investment Inc belonged to the father of Shri Anoop Mehta, named Shri Vrajlal Mehta, who had expired long back. Accordingly, executors of the Estate of late Shri Vrajlal Mehta, who were also the Assessee in instant case, took steps to bring money lying in the HSBC bank, Geneva into India. Monies were remitted from HSBC Bank Geneva to the account of the Assessee during the FY relevant to AY 2012-13 and said receipts were offered as income in AY 2012-13.

However, the AO reopened the assessment for AY 2007-08 since certain monies were found deposited during the year relevant to AY 2007-08. Though, the entire receipts received from the HSBC bank was offered as income in AY 2012-13, yet in order to buy piece of mind, returns were filed for AY 2007-08 offering the deposit amounts as income. The AO completed the assessment by making certain additions. On appeal, the CIT(A) enhanced the income of the Assessee by including the amount found in the accounts of other two concerns, which were owned up by Shri Rajesh Mehta. The said enhancement had resulted in additional demand of tax. The CIT(A) also levied penalty u/s 271(1)(c) of the Act.

After hearing the parties, the Tribunal held that,

++ the explanation of the assessee that two bank accounts belonged to Shri Rajesh Mehta have been accepted by the search officials as well as AO. We notice that the balance available in those bank accounts have been assessed by the CIT(A) only, that too for want of certain documents. It had been submitted that the assessee was in process of obtaining those documents from Shri Rajesh Mehta. It was noticed that the assessee had already paid a sum of Rs. 2 crores and further a sum of Rs. 85.84 lakhs requires adjustment. Under these set of facts, the view was taken that the balance of convenience was in favour of granting partial stay to the assessee. Accordingly assessee was directed to pay a sum of Rs. 1.20 crores in quantum proceedings, which may be paid in two equal installments. The first installment shall be paid on or before 31st December, 2017 and the second installment shall be paid on or before 15th January, 2018. Since penalty demand was the result of enhancement, the view was taken that the same may be stayed fully. Accordingly, subject to the payment of such instalments, Revenue was directed not to enforce the collection of outstanding demand in the case of quantum appeal proceeding as well as in the penalty proceedings till the disposal of the appeals of the assessee or till six months from the date of this order, whichever period expires earlier.

(See 2018-TIOL-25-ITAT-MUM)