M/s. Pranav Industries, Baroda v. The ACIT., Inv.Circle-1,, Baroda

ITA 1638/AHD/2006 | 1994-1995
Pronouncement Date: 22-01-2010 | Result: Dismissed

Appeal Details

RSA Number 163820514 RSA 2006
Assessee PAN AAHFP0718J
Bench Ahmedabad
Appeal Number ITA 1638/AHD/2006
Duration Of Justice 3 year(s) 6 month(s) 24 day(s)
Appellant M/s. Pranav Industries, Baroda
Respondent The ACIT., Inv.Circle-1,, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 22-01-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 22-01-2010
Date Of Final Hearing 12-01-2010
Next Hearing Date 12-01-2010
Assessment Year 1994-1995
Appeal Filed On 28-06-2006
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI JM AND D.C.AGRAWAL A M M/S PRANAV INDUSTRIES MAKARPURA BARODA. V/S . ASSTT.CIT INV.CIR.1 BARODA PAN NO.AAHFP0718 J (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI MILIN MEHTA AR RESPONDENT BY:- SMT. NEETA SHAH SR. D.R. O R D E R PER D.C. AGRAWAL ACCOUNTANT MEMBER . THESE ARE TWO APPEALS FILED BY THE ASSESSEE FOR AS ST. YEAR 1994-95. ONE IS AGAINST ADDITION OF RS.1 70 384/- CONFIRMED BY LD. CIT(A) AND THE OTHER IS AGAINST LEVY OF PENALTY UNDER SECTION 271( 1)(C) FOR RS.2 29 376/-. SINCE THE FACTS AND ARGUMENTS ARE INTER RELATED TH ESE ARE TAKEN UP TOGETHER FOR THE SAKE OF CONVENIENCE. ITA NO.1637/AHD/2006 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND IN THIS APPEAL :- 1. THE LD. CIT(A) ERRED IN FACT AND IN LAW IN CONFI RMING THE ACTION OF THE AO IN MAKING ADDITION OF RS.1 70 384/ - ON ACCOUNT OF UNACCOUNTED PROFIT ON SALE OF EXCESS STO CK FOUND DURING SEARCH. ITA NOS.1637 & 1638/AHD/2006. ASST. YEAR :1994-95 ITA NOS.1637 & 1638/AHD/2006 ASST. YEAR 1994-95 2 3. THE FACTS OF THE CASE ARE THAT ASSESSMENT IN THI S CASE WAS ORIGINALLY COMPLETED UNDER SECTION 143(3) VIDE ASSESSMENT ORDE R DATED 30.12.1994. IN THIS ORDER THE AO HAD MADE ADDITION OF RS.7 58 1 00/- ON THE GROUND OF EXCESS STOCK. THE ASSESSEE IS DEALING IN BUSINESS O F WOOD PLY-WOOD ETC. A SEARCH ACTION WAS UNDERTAKEN AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEE ON 15.9.1993. DURING THE COURSE OF SEARCH ACTION STOCK WAS PHYSICALLY VERIFIED. BY COMPARING THE STOCK PHY SICALLY FOUND WITH THE STOCK WORKED OUT FROM THE BOOKS A DIFFERENCE OF RS.7.58 LACS WAS FOUND. STATEMENT UNDER SECTION 132(4) OF THE ACT WA S RECORDED IN WHICH ASSESSEE DECLARED SUM OF RS.7 58 000/- BUT WHEN THE ASSESSEE FILED RETURN OF INCOME HE DID NOT DECLARE THE EXCESS STOCK SO FO UND. WHEN ASKED TO EXPLAIN IT WAS SUBMITTED TO THE AO THAT STOCK WAS VALUED AT A HIGHER RATE AS COMPARED TO THE PURCHASE PRICE. THE ASSESSEE FIL ED A STATEMENT OF STOCK ALONG WITH CORRECT VALUE AS HE THOUGHT SUPPORTED BY THE PURCHASE INVOICES. HE ALSO SUBMITTED TO THE AO THAT THERE IS A MISTAKE ON THREE COUNTS WHILE VALUING THE STOCK -FIRST WRONG FORMUL A WAS ADOPTED WHILE CONVERTED LOGS INTO CUBIC FEET SECOND WAS CIRCUMFE RENCE OF BUNDLES OF LOGS WAS MEASURED AS AGAINST INDIVIDUAL CIRCUMFEREN CE OF THE LOGS IT CREATED DIFFERENCE WHILE CONVERTING THE CIRCUMFEREN CE OF THE BUNDLE OF LOGS TO CIRCUMFERENCE OF THE INDIVIDUAL LOGS AND TH E THIRD WAS PRICE ADOPTED FOR VALUING THE STOCK. A.O. HOWEVER DID N OT AGREE AND RELYING ON THE STATEMENT RECORDED UNDER SECTION 132(4) MADE THE ADDITION OF RS.7 58 100/-. IN ADDITION HE INITIATED PENALTY UND ER SECTION 271(1)(C) ALSO. 4. MATTER WENT TO LD. CIT(A) WHO SET ASIDE THE ASSE SSMENT FOR VERIFYING THE FACTS OF CONVERSION FORMULA AND GAPS BETWEEN THE INDIVIDUAL LOGS WHEN PUT TOGETHER TO MAKE A BUNDLE AND ALSO A BOUT THE PRICE ADOPTED ITA NOS.1637 & 1638/AHD/2006 ASST. YEAR 1994-95 3 FOR VALUATION. THEREAFTER THE AO PASSED FRESH ORDER ON 23.1.1998. IN THIS ORDER HE WORKED OUT DIFFERENCE IN STOCK AS UNDER :- TOTAL VALUE AS PER INVENTORY RS.17 90 099/- LESS: DIFF.IN VALUATION OF ITEM NO.150 TO 160 (A) VALUE AS PER INVENTORY 3 48 595/- (B) VALUE AS PER NEW WORKING 2 90 061 RS.58 534/- RS.17 31 565/- FURTHER REDUCTION OF 10% ON ITEM AT SR.84 TO 149 (VALUE AS PER INVENTORY RS.10 23 752/-) RS.1 02 375/- RS.16 29 190/- I.E. RS.16 29 200/- LESS :STOCK AS PER ASSESSEES BOOK AS ON THE DATE OF SEARCH RS.11 31 000/- EXCESS STOCK RS.4 98 200/- AO HAD CONSIDERED ALL THE THREE ASPECTS AS OBJECTED BY THE ASSESSEE BEFORE LD. CIT(A) AND THEREAFTER WORKED OUT THE DIFFERENCE . THE AO ACCORDINGLY MADE THE ADDITION OF RS.4 98 200/- AS AGAINST RS.7 58 1000/- ORIGINALLY PROPOSED. 5. IN ADDITION TO THIS THE AO REQUIRED THE ASSESSE E TO SHOW WHAT HE HAS DONE WITH THE EXCESS STOCK AS EXCESS STOCK WAS NOT CONSIDERED IN THE BOOKS OF ACCOUNT. HE ASKED ASSESSEE TO EXPLAIN WHY NOT THE EXCESS STOCK BE TREATED AS SOLD WITHOUT RECORDING IN THE BOOKS. NO SUBMISSION WAS MADE ON THIS POINT RAISED BY THE A.O. HE FURTHER NO TED THAT ASSESSEE ADMITTED DURING THE SEARCH PROCEEDINGS THAT HE WAS SELLING GOODS OUTSIDE THE BOOKS OF ACCOUNT. IT WAS EXPLAINED TO THE AO DU RING SEARCH THAT EXCESS STOCK FOUND DURING THE SEARCH WAS ACQUIRED B Y HIM FROM HIS UNRECORDED SALES. FROM THAT AO INFERRED THAT ASSESS EE HAS SOLD EXCESS STOCK OUTSIDE THE BOOKS. HE APPLIED GP OF 34.2% AS DECLARED BY HIM IN THE BOOKS AND WORKED OUT ADDITION AT RS.1 70 384/-. ITA NOS.1637 & 1638/AHD/2006 ASST. YEAR 1994-95 4 6. THE MATTER WENT IN APPEAL BEFORE LD. CIT(A) WHO CONFIRMED THE ADDITION OF RS.4 98 200/- ON THE GROUND THAT - (1) STATEMENT WAS GIVEN UNDER SECTION 132(4) T HAT ASSESSEE HAD EXCESS STOCK; (2) STOCK HAS BEEN VALUED AT COST AND ON THAT BASIS DIS CLOSURE WAS MADE AT RS.7.5 LACS. (3) THE BILLS PRODUCED BY THE ASSESSEE CA NNOT BE CO-RELATED WITH THE STOCKS FOUND DURING THE SEARCH AS THERE WAS NO NEXUS BETWEEN THE PURCHASES AND THE STOCK FOUND AND THERE IS NO STOCK REGISTER MAINTAINED BY THE ASSESSEE. LD. CIT(A) CONFIRMED THE ADDITION OF RS.1 70 384/- ON THE GROUND THAT NO GROUND HAS BEEN TAKEN BY THE ASSESSEE ON THIS POINT EVEN THOUGH THE ARGUMENTS WERE ADVANCED. 7. THE MATTER TRAVELED TO THE TRIBUNAL WHICH VIDE I TS ORDER DATED 17.06.2003 CONFIRMED THE ADDITION OF RS.4 98 200/-. THE TRIBUNAL OBSERVED THAT THE CONTENTION OF THE LD. AR THAT THE RE WAS NO QUANTITATIVE DIFFERENCE BETWEEN STOCK TAKEN BY THE AO AND THE ST OCK TAKEN BY THE ASSESSEE FOR THE PURPOSE OF VALUATION IS NOT CORRE CT. THE TRIBUNAL REFERRED TO THE RECONCILIATION STATEMENT A COPY OF WHICH WAS PLACED ON RECORD. FROM THIS STATEMENT INSTANCES OF DIFFERENCE IN QUAN TITY BETWEEN REVISED WORKING AS PER ASSESSEE AND INVENTORY FOUND AT THE TIME OF SEARCH WAS AS UNDER :- SL.NO. DIFFERENCE TOTAL QTY. PRICE 37 -145.00 -403 00 258.00 80 1894.00 594.00 1 300.00 ITA NOS.1637 & 1638/AHD/2006 ASST. YEAR 1994-95 5 82 193.00 15.00 178.00 83 136.00 15.00 121.00 115 18606.00 812.50 17 793.50 119 8488.00 8274.00 214.00 122 8931.00 8662.50 268.50 133 25973.00 24634.60 1338.40 135 2129.00 2035.00 94.00 142 7891.00 7629.40 261.60 150 4522.00 2405.00 2117.00 151 4327.00 2305.00 2022.00 152 15735.00 8385.00 7350.00 153 5184.00 2765.00 2419.00 154 86945.00 40625.00 46320.00 155 2222.00 670.00 1552.00 156 7835.00 2355.00 5480.00 157 10 602.00 14 310.00 3708.00 158 8906.00 4 845.00 4061.00 159 3227.00 1 540.00 1687.00 160 14 564.00 6 950.00 7614.00 161 222.00 0.00 222.00 179 175.00 175.00 0.00 188 4125.00 4125.00 0.00 195 -3666.00 -6576.00 2910.00 204 1501.00 1035.00 466.00 205 904.00 48.50 416.50 207 1790.00 966.00 824.00 THE TRIBUNAL OBSERVED THAT THE ASSESSEE DID NOT MAI NTAIN STOCK REGISTER. THERE WAS A QUANTITATIVE DIFFERENCE. THE DISCLOSURE MADE UNDER SECTION 132(4) HAS NOT BEEN REBUTTED BY ANY COGENT MATERIAL EVIDENCE. THE VOUCHERS DOCUMENTS AND OTHER EVIDENCES SUBMITTED B Y THE ASSESSEE HAVE BEEN PROPERLY CONSIDERED BY THE LOWER AUTHORITIES. THE ASSESSEE DID NOT ITA NOS.1637 & 1638/AHD/2006 ASST. YEAR 1994-95 6 MAINTAIN PROPER ACCOUNT OF THE GOODS. FURTHER THE E STIMATION OF VALUATION OF STOCK HAS BEEN DONE NUMBER OF TIMES FIRSTLY AT T HE TIME OF SEARCH THEN AT THE TIME OF DISCLOSURE AND FINALLY AT THE TIME O F COMPLETION OF ASSESSMENT IN 2 ROUNDS AND THE WORKING DONE IN SECO ND ROUND IS CONFIRMED BY THE CIT(A). THERE ARE NO COGENT MATERI AL EVIDENCES AND CONVINCING REASONS ON WHICH A DIFFERENT ESTIMATION CAN BE MADE AT THIS STAGE. THE TRIBUNAL ACCORDINGLY CONFIRMED THE ADDIT ION OF RS.4 98 200/-. 8. REGARDING ADDITION OF RS.1 70 394/- THE TRIBUNA L REMANDED THE MATTER BACK TO THE FILE OF LD. CIT(A) FOR ADJUDICAT ING THE SAME AFRESH AS PER LAW AFTER AFFORDING REASONABLE OPPORTUNITY OF H EARING TO BOTH THE SIDES. 9. AS A CONSEQUENCE TO THE ORDER OF THE TRIBUNAL L D. CIT(A) PASSED HIS ORDER ON 10.4.2006 WHEREIN HE CONFIRMED ADDITIO N OF RS.1 70 384/- BY OBSERVING AS UNDER :- 2.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. C OUNSEL AND THE FACTS OF THE CASE. AS PER THE SPECIFIC DIRECTIONS OF THE HON. ITAT THIS GROUND IS BEING ADJUDICATED UPON AND THEREFORE THE CONTENTION THAT THE ADDITION WAS NOT MADE AT THE TIME OF ORIGINAL A SSESSMENT DOES NOT HOLD GOOD. MOREOVER THE ADDITION OF RS.1 70 38 4/- IS ON THE SAME ISSUE OF EXCESS CLOSING STOCK AND IT IS NOT TH AT ANY NEW SOURCE OF INCOME HAS BEEN BROUGHT TO TAX BY THE AO DURING THE SET ASIDE PROCEEDINGS. THEREFORE THE CONTENTION OF THE LD. C OUNSEL ON THE ADDITION MADE DURING THE SET ASIDE ASSESSMENT PROCE EDINGS DOES NOT CARRY ANY WEIGHT MORE SO WHEN THE APPELLANT HI MSELF HAD TAKEN IT UP BEFORE THE HON. ITAT. 2.4 IT IS HELD BY MY LD. PREDECESSOR WHILE ADJUDIC ATING UPON THE ADDITION OF RS.4 98 200/- ON ACCOUNT OF EXCESS STOC K THAT AT THE TIME OF SEARCH THE PARTNER OF THE APPELLANT FIRM HA D ADMITTED THAT THE STOCK HAD BEEN VALUED AT COST PRICE. FURTHER I T HAS BEEN HELD THAT THE PURCHASE BILLS RELIED UPON BY THE APPELLAN T COULD NOT BE ITA NOS.1637 & 1638/AHD/2006 ASST. YEAR 1994-95 7 CO-RELATED WITH THE STOCK ACTUALLY FOUND DURING THE COURSE OF SEARCH PRIMARILY DUE TO TWO REASONS -1) THE NEXUS B ETWEEN PURCHASE AND THE STOCK FOUND AND 2) THE ABSENCE OF THE STOCK REGISTER. THE FINDING GIVEN BY MY LD. PREDECESSOR I S REPRODUCED BELOW FOR READY REFERENCE : I HAVE CONSIDERED THE FACTS OF THE CASE. THE AHMED ABAD TRIBUNAL IN THE CASE OF NAGARDAS JASRAJ 28 ITR 386 HAD HELD CASE THAT ST ATEMENT RECORDED DURING THE COURSE OF SEARCH HAS SPONTANEOUS AND WITHOUT AN Y TUTORING AND THEREFORE HAS MORE EVIDENTIARY VALUE THAN THAT RECORDED SUBSE QUENTLY. IN THIS CASE AT THE TIME OF SEARCH THE PARTNER OF THE APPELLANT FI RM HAD ADMITTED THAT THE STOCK HAD BEEN VALUED AT COST PRICE. ON THIS BASIS THE PARTNER HAD ALSO MADE A DISCLOSURE OF RS.7.5 LAKHS. SUBSEQUENTLY THE APPEL LANT GOT ADVICE AND THEREAFTER INSTEAD OF HONOURING ITS DISCLOSURE IT CLAIMED THAT THERE WERE NO EXCESS STOCK. IT WAS ALSO STATED THAT EVEN IF THERE WAS AN EXCESS STOCK WHICH WAS ONLY RS.14 960/-. FOLLOWING THE DECISION OF THE AHMEDABAD TRIBUNAL THE SUBSEQUENT STAND TAKEN IS AFTER CONSULTATION AND TU TORING. THEREFORE THE FACTS OF THE STATEMENT RECORDED AT THE TIME OF THE SEARCH WOULD HAVE TO BE TREATED AS GIVING THE CORRECT FACTS. IN THIS CASE AT THE TIME OF THE EARLIER APPEAL IN RESPECT OF LOGS SOME DEDUCTION WAS REQUIRED AS THI S DEDUCTION HAD NOT BEEN CONSIDERED AT THE TIME OF MAKING THE INVENTORY. AS ON THIS ISSUE THE ASSESSMENT WAS BEING SET ASIDE AND THE AO WAS DIREC TED TO EXAMINE AS TO WHETHER THE INVENTORY HAS BEEN TAKEN ON THE BASIS O F THE COST PRICE OR NOT. THE BILLS PRODUCED BY THE APPELLANT CANNOT BE CO-RELATE D WITH THE STOCKS PRIMARILY DUE TO TWO REASONS (I) THE NEXUS BETWEEN THE PURCHA SE AND THE STOCK FOUND AND (II) THE ABSENCE OF THE STOCK REGISTERS. THEREFORE IN MY VIEW THERE IS NO MERIT IN THE APPELLANTS CASE. THE ADDITION OF RS.4 98 20 0/- IS ACCORDINGLY CONFIRMED. 2.5. IT IS SEEN THAT THE STOCK ACTUALLY FOUND DURING SEA RCH HAS BEEN VALUED AT COST PRICE AS PER THE ADMITTED STATEMENT OF THE PARTNER OF THE APPELLANT FIRM. THIS IS CLEARLY BROUGHT OUT BY THE AO IN HIS ASSESSMENT ORDER BY REFERRING TO THE REPLIES GIVEN BY THE PARTNER OF THE APPELLANT FIRM IN RESPONSE TO VARIOUS QUESTI ONS. IT IS ALSO CONFIRMED BY MY LD. PREDECESSOR AS PER HIS FINDINGS QUOTED ABOVE. IT IS SEEN THAT VALUE OF THE STOCK AS PER TH E BOOKS OF ACCOUNTS HAD ALSO BEEN CALCULATED AT COST AS THIS V ALUE HAD BEEN ARRIVED AT BY ADDING THE OPENING STOCK AND PURCHASE S UPTO THE DATE OF SEARCH AND DEDUCTING THE COST OF SALES (SAL ES-GROSS PROFIT). THUS IT IS SEEN THAT THE STOCK AS PER THE PHYSICAL VERIFICATION AS WELL AS THE STOCK AS PER BOOKS HAD BEEN VALUED ON C OST PRICE. THEREFORE THE DIFFERENCE BETWEEN THE TWO FIGURES AS A NATURAL COROLLARY REPRESENTS QUANTITATIVE DIFFERENCE AND N OT VALUATION DIFFERENCE OF STOCK. ITA NOS.1637 & 1638/AHD/2006 ASST. YEAR 1994-95 8 2.6. THE STATEMENT SHOWING VALUATION ADOPTED BY THE AO A ND THE APPELLANT FILED DURING THE APPELLATE PROCEEDINGS IS IN FACT BASED ON THE SUPPLIERS BILLS WHICH AS ALREADY HELD BY M Y LD. PREDECESSOR CANNOT BE CORRELATED WITH THE STOCKS F OUND DURING THE COURSE OF SEARCH IN THE ABSENCE OF NEXUS BETWEE N THE TWO AND IN THE ABSENCE OF STOCK REGISTER. THIS FINDING OF M Y LD. PREDECESSOR WAS ALSO CONFIRMED BY THE HON. ITAT AH MEDABAD VIDE THEIR ORDER MENTIONED EARLIER. 2.7. IN VIEW OF THE DISCUSSION GIVEN ABOVE THE CONTENTI ON OF THE LD. COUNSEL THAT THERE WAS ONLY VALUATION DIFFERENCE AN D NO QUANTITATIVE DIFFERENCE OF STOCK DOES NOT HELD GOOD . UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE ADDITION OF RS .1 70 384/- MADE BY THE AO ON ACCOUNT OF SALE OF EXCESS STOCK I S IN ORDER AND IS CONFIRMED. ASSESSEE IS IN APPEAL AGAINST THIS ORDER OF LD. CIT (A). 10. BEFORE US LD. AR FOR ASSESSEE SUBMITTED THAT T HE DIFFERENCE ARISING ON VALUATION OF STOCK COMES ON ACCOUNT OF PRICE DIF FERENCE AND NOT ON ACCOUNT OF QUANTITIES. THEREFORE THERE CANNOT BE A NY ADDITION OF G.P.AS THERE IS NO PHYSICALLY EXCESS STOCK. SECONDLY IT IS INCORRECT TO PRESUME THAT STOCK HAS BEEN SOLD OUTSIDE THE BOOKS WHEN THE RE IS NO EXCESS STOCK. THE ASSESSEE HAS NEVER STATED THAT IT HAD ANY EXCES S STOCK. 11. AGAINST THIS LD. DR SUBMITTED THAT THERE IS A FINDING OF THE TRIBUNAL THAT THERE IS A DIFFERENCE IN QUANTITIES A ND NOT MERELY DIFFERENCE IN PRICE. SHE REFERRED TO PAGE NO.152 TO 156 OF THE P.B. WHEREIN ASSESSEE HAS WORKED OUT THE VALUE OF EXCESS QUANTITY OF STOC K AT RS.1 11 016/- OUT OF TOTAL DIFFERENCE OF RS.5 93 913/-. THIS WORKING HAS BEEN DONE BY THE ASSESSEE HIMSELF EVEN THOUGH THE TRIBUNAL HAS FINAL LY ACCEPTED THE ADDITION OF RS.4 98 200/-. THE ASSESSEE HAS NOT MAI NTAINED ANY STOCK REGISTER THE DIFFERENCE HAS NOT BEEN TAKEN IN THE BOOKS OF ACCOUNT ITA NOS.1637 & 1638/AHD/2006 ASST. YEAR 1994-95 9 ASSESSEE HAS BEEN SELLING THE GOODS OUTSIDE THE BOO KS AND ONCE EXCESS STOCK IS NOT TAKEN IN THE BOOKS THE PRESUMPTION IS THAT IT HAS BEEN SOLD. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE ADDITION ON A CCOUNT OF GP IS CALLED FOR BECAUSE ASSESSEE HAS NOT TAKEN STOCK IN THE REG ULAR BOOKS AND THUS AVOIDED TO DECLARE INCOME THEREON WHEN THEY ARE SOL D. ONCE EXCESS STOCK IS FOUND THEN IT IS INCUMBENT ON THE ASSESSEE TO TA KE THEM AS ON THE BOOKS AND MAKE THEM PART OF TRADING ACCOUNT AND OFFER THE TAX ON THE PROFITS GENERATED ON THEIR SALE. WE DO NOT AGREE WITH THE L D. AR THAT DIFFERENCE WAS ONLY ON ACCOUNT OF PRICE. THE TRIBUNAL HAS GIVE N CLEAR FINDING THAT THERE IS DIFFERENCE IN QUANTITY ALSO. THE ASSESSEE HIMSELF WORKOUT DIFFERENCE IN QUANTITIES AT RS.1 11 016/-. TO THIS EXTENT ASSESSEE WAS REQUIRED TO TAKE ADDITIONAL STOCK IN THE BOOKS BUT IT HAS NOT BEEN DONE. THEREFORE THE ASSESSEE HAS CLEARLY EVADED THE TAX ON AT LEAST THE STOCK OF RS.1 11 016/-. HOWEVER WE AGREE WITH THE LD. AR TH AT DIFFERENCE IN STOCK IS ARISING DUE TO DIFFERENT PRICE STRUCTURE ONE AD OPTED BY THE ASSESSEE AND OTHER BY THE AUTHORISED OFFICER WOULD NOT RESULT IN ADDITIONAL QUANTITIES WHICH COULD BE SOLD AND THEREFORE THERE IS NO QUE STION OF THEIR SALE AND GENERATING EXTRA PROFITS. BUT THE SAME IS NOT TRUE IN RESPECT OF DIFFERENCE ARISING ON ACCOUNT OF QUANTITIES. SINCE ASSESSEE HI MSELF HAS WORKED OUT THE QUANTITATIVE DIFFERENCE AT RS.1 11 016/- THEN A T BEST PROFIT COULD BE GENERATED ONLY ON THIS DIFFERENCE AND NOT ON ENTIRE DIFFERENCE OF RS.4 98 200/-. THEREFORE GP RATE OF 34% CAN BE APP LIED ON RS.1 11 016/- ONLY. THIS WILL CALL FOR AN ADDITION OF RS.37 745/ -. ADDITION TO THIS EXTENT IS CONFIRMED. THE ASSESSEE ACCORDINGLY GETS CONSEQU ENTIAL RELIEF. 13. APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NOS.1637 & 1638/AHD/2006 ASST. YEAR 1994-95 10 ITA NO.1638/AHD/2006. 14. THIS IS AN APPEAL AGAINST PENALTY UNDER SECTION 271(1)(C) OF RS.2 29 376/-. THE FACTS HAVE ALREADY BEEN NARRATED IN ITA NO.1637/AHD/2006 DECIDED ABOVE. THE TRIBUNAL CONFIR MED THE ADDITION. THE ASSESSEE BEFORE LEVY OF PENALTY FURNISHED A REP LY ON 6 TH DECEMBER 2004 BEFORE THE AO BUT HE REJECTED THE SUBMISSION O F ASSESSEE FOR THE FOLLOWING REASONS :- (1) DURING THE SEARCH DIFFERENCE IN STOCK WAS FOUND AN D NOWHERE THE ASSESSEE HAS CONTESTED THIS OR DENIED THIS THAT THERE WAS NO DIFFERENCE IN STOCK. (2) ONE OF THE PARTNERS OF THE ASSESSEE FIRM DISCLOSED THIS AMOUNT FOR TAXATION AND AGREED TO PAY TAXES ON IT. THE STATEMENT RECORD ED U/S 132(4) OF THE IT ACT HAS MORE EVIDENTIARY VALUE AS HELD BY THE AHME DABAD TRIBUNAL IN THE CASE OF NAGARDAS JASRAJ 28 ITR 386. IT WAS HELD IN THIS CASE THAT STATEMENT RECORDED DURING THE COURSE OF SEARCH HAS SPONTANEOU S AND WITHOUT ANY TUTORING AND THEREFORE HAS MORE EVIDENTIARY VALUE T HAN THAT RECORDED SUBSEQUENTLY. (3) THE SEARCH WAS TAKEN PLACE ON 15.09.1993 AND THE RE TURN IS FILED ON 20.10.1994 THEREFORE THE ASSESSEE SHOULD HAVE SHOWN DISCLOSURE MADE DURING THE COURSE OF SEARCH IN THE RETURN OF INCOME WHICH HAS NOT BEEN DONE BY THE ASSESSEE AND THEREFORE THE ASSESSEE IS CONCEALED THE PARTICULARS OF INCOME. (4) THE ASSESSEE HAS CONFESSED THAT HE HAS NOT MAINTAIN ED ANY QUANTITY RECORDS HE HAS ALSO CONFESSED THAT STOCK REGISTER IS NOT MAINTAINED. (5) AS REGARDS TO DIFFERENCE IN THE VALUATION IS CONCER N THE VALUATION OF STOCK IS DONE NUMBER OF TIMES FIRSTLY AT THE TIME OF SEA RCH THAN AT THE TIME OF DISCLOSURE THAT AT THE TIME OF COMPLETION OF FIRST ROUND OF ASSESSMENT PROCEEDINGS THAN AT THE TIME OF SECOND ROUND OF ASS ESSMENT PROCEEDINGS. ON ALL THE OCCASION THE DIFFERENCE IN STOCK HAS BEE N WORKED OUT. LEGALLY THIS CASE IS COVERED BY THE EXPLANATION 5 O F PROVISIONS OF SECTION 271(1)(C) OF THE IT ACT. ITA NOS.1637 & 1638/AHD/2006 ASST. YEAR 1994-95 11 THE AO ACCORDINGLY LEVIED PENALTY OF RS.2 86 720/- BEING 125% OF THE TAX SOUGHT TO BE EVADED. THE LD. CIT(A) CONFIRMED T HE PENALTY BUT REDUCED IT TO MINIMUM OF RS.2 29 376/-. 15. BEFORE US LD. AR FOR THE ASSESSEE SUBMITTED TH AT EVEN THOUGH THE TRIBUNAL HAS CONFIRMED THE ADDITION BUT THE ADDITIO N IS BASED ON ESTIMATE. THE ASSESSEE HAD ADOPTED ONE PRICE FOR STOCK WHILE DEPARTMENT HAS TAKEN ANOTHER PRICE FOR VALUING THE STOCK. ON THIS ESTIMA TION NO PENALTY IS LEVIABLE. HE REFERRED TO THE DECISION IN THE CASE O F VISHWANATH AGRAWAL VS. ACIT 71 TTJ 668 (ALL) WHEREIN IT IS HELD THAT W HERE THE ADDITION IS BASED ON VALUATION OF DIFFERENCE PENALTY CAN NOT BE LEVIED. LD. AR ALSO SUBMITTED THAT HIS CASE IS COVERED UNDER EXPLANATIO N 1 IN THE SENSE HE HAS FURNISHED EXPLANATION WHICH IS NOT FOUND FALSE AND HE HAS DISCLOSED ALL THE MATERIAL FACTS NECESSARY FOR ASSESSMENT. HIS EX PLANATION IS BONA FIDE. THUS HIS CASE DOES NOT COME WITHIN THE AMBIT OF EXP LANATION 1(B) ALSO. 16. AS AGAINST THIS LD. DR SUBMITTED THAT IT IS INC ORRECT ON THE PART OF LD. AR TO SAY THAT THERE WAS NO QUANTITATIVE DIFFER ENCE. THE TRIBUNAL HAS ALREADY POINTED OUT IN THE QUANTUM ORDER THAT THERE WAS A QUANTITATIVE DIFFERENCE. EXCESS STOCK WAS FOUND IN TERMS OF QUAN TITY ALSO AS PER WORKING GIVEN BY THE ASSESSEE HIMSELF. VALUE OF SUC H EXCESS STOCK IN TERMS OF QUANTITY WAS WORKED AT RS.1 11 016/- BY AS SESSEE. A STATEMENT WAS GIVEN UNDER SECTION 132(4) BY THE ASSESSEE WHER EIN A DISCLOSURE OF RS.7.58 LACS WAS MADE. THIS WAS NOT DECLARED IN THE RETURN OF INCOME THEREFORE HE IS COVERED WITHIN THE MEANING OF EXPL ANATION 5 TO SEC.271(1)(C). 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THERE ARE REASONA BLE GROUNDS FOR ITA NOS.1637 & 1638/AHD/2006 ASST. YEAR 1994-95 12 LEVYING THE PENALTY ON THE ASSESSEE. STOCK DIFFEREN CE WAS FOUND DURING THE COURSE OF SEARCH THOUGH THERE WAS DISPUTE OVER CERTAIN ITEMS. THOSE DIFFERENCES WERE TAKEN CARE IN THE SECOND INNINGS W HEN ORDER WAS SET ASIDE BY CIT(A) VIDE ORDER DATED 6.6.1995. THE DIFF ERENCE IN STOCK WAS REDUCED TO RS.4 98 200/- WHICH WAS CONFIRMED BY THE TRIBUNAL BY OBSERVING THAT THE CONTENTION OF THE LD. AR THAT TH ERE WAS NO QUANTITATIVE DIFFERENCE IN BETWEEN STOCK TAKEN BY THE AO AND THE STOCK TAKEN BY THE ASSESSEE FOR THE PURPOSE OF VALUATION IS NOT CORRE CT. THE TRIBUNAL REFERRED TO THE RECONCILIATION STATEMENT A COPY OF WHICH WAS PLACED ON RECORD. FROM THIS STATEMENT INSTANCES OF DIFFERENCE IN QUAN TITY BETWEEN REVISED WORKING AS PER ASSESSEE AND INVENTORY FOUND AT THE TIME OF SEARCH WAS TAKEN OUT WHICH IS REPRODUCED BY US IN PARA 7 OF TH IS ORDER. 18. THE ASSESSEE HAD GIVEN A STATEMENT UNDER SECTIO N 132(4) THAT EXCESS STOCK WAS NOT TAKEN IN THE BOOKS OF ACCOUNT. THUS THE ASSESSEES CASE IS ALSO COVERED WITHIN THE MEANING OF EXPLANAT ION 5 TO SECTION 271(1)(C) WHICH READS AS UNDER :- EXPLANATION -5 WHERE IN THE COURSE OF A [SEARCH I NITIATED UNDER SECTION 132 BEFORE THE 1 ST DAY OF JUNE 2007] THE ASSESSEE IS FOUND TO BE TH E OWNER OF ANY MONEY BULLION JEWELLERY OR OTHER VAL UABLE ARTICLE OR THING (HEREAFTER IN THIS EXPLANATION REFERRED TO AS ASSET S) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM B Y UTILIZING (WHOLLY OR IN PART) HIS INCOME - (A) FOR ANY PREVIOUS YEAR WHICH HAS ENDED BEFORE THE DA TE OF THE SEARCH BUT THE RETURN OF INCOME FOR SUCH YEAR HAS NOT BEEN FURNISHED BEFORE THE SAID DATE OR WHERE SUCH RETUR N HAS BEEN FURNISHED BEFORE THE SAID DATE SUCH INCOME HAS NOT BEEN DECLARED THEREIN; OR (B) FOR ANY PREVIOUS YEAR WHICH IS TO END ON OR AFTER T HE DATE OF THE SEARCH THEN NOTWITHSTANDING THAT SUCH INCOME IS D ECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER THE D ATE OF THE ITA NOS.1637 & 1638/AHD/2006 ASST. YEAR 1994-95 13 SEARCH HE SHALL FOR THE PURPOSES OF IMPOSITION OF A PENALTY UNDER CLAUSE (C) OF SUB-SECTION (1) OF THIS SECTION BE D EEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME [UNLESS - (1) SUCH INCOME IS OR THE TRANSACTIONS RESULTING IN SU CH INCOME ARE RECORDED - (I) IN A CASE FALLING UNDER CLAUSE (A) BEFORE THE DATE OF THE SEARCH; AND (II) IN A CASE FALLING UNDER CLAUSE (B) ON OR BEFORE SU CH DATE IN THE BOOKS OF ACCOUNT IF ANY MAINTAINED BY HIM FOR ANY SOURCE OF INCOME OR SUCH INCOME IS OTHERWISE DISCLOSED TO THE {CHIEF COMMISSIONER OR COMMISSIONER} BEFORE THE SAID DATE; OR (2) HE IN THE COURSE OF THE SEARCH MAKES A STATE MENT UNDER SUB SECTION (4) OF SECTION 132 THAT ANY MONEY BULLION JEWELLERY OR OTHER VALUABLE ARTICLES OR THING FOUND IN HIS POSSESSION OR UNDER HIS CONTROL HAS BEEN ACQUIRED OUT OF HIS INCOME WHICH HAS NOT B EEN DISCLOSED SO FAR IN HIS RETURN OF INCOME TO BE FURNISHED BEFORE THE EXPIRY OF TIME SPECIFIED IN SUB-SECTION (1) OF SECTION 139 AND AL SO SPECIFIED IN THE STATEMENT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND PAYS THE TAX TOGETHER WITH INTEREST IF ANY IN RESPECT OF SUCH INCOME.] SINCE EXCESS STOCK WAS FOUND AND IT WAS ADMITTED IN THE STATEMENT UNDER SECTION 132(4) THE ASSESSEE COULD HAVE SAVED HIMSE LF BY CLAUSE (2) TO EXPLANATION 5 BY DECLARING THE EXCESS STOCK IN THE RETURN OF INCOME TO BE FILED UNDER SECTION 139(1). 19. IN ADDITION TO THIS CASE OF ASSESSEE IS ALSO C OVERED UNDER EXPLANATION 1(A) IN THE SENSE THAT EXPLANATION FURN ISHED BY THE ASSESSEE IS THAT THERE IS ONLY DIFFERENCE IN PRICE ADOPTED F OR VALUING THE STOCK HAS NOT BEEN FOUND TO BE CORRECT. ALL THE MATERIAL AS TO HOW THERE IS ONLY PRICE DIFFERENCE NOT QUANTITY DIFFERENCE HAS NOT B EEN FURNISHED. THERE IS NO CO-RELATION OF VOUCHERS SUBMITTED WITH THE STOCK FOUND. THERE IS NO ITA NOS.1637 & 1638/AHD/2006 ASST. YEAR 1994-95 14 CO-RELATION OF PRICES MENTIONED IN THE VOUCHERS WIT H THE RATES ADOPTED BY THE ASSESSEE FOR DIFFERENT TYPES OF STOCKS. 20. IT IS INCORRECT TO SAY THAT ADDITION WAS MADE B Y ESTIMATE ONLY. THERE WAS PHYSICAL VERIFICATION DURING THE COURSE O F SEARCH. SPECIFIC DIFFERENCE IN TERMS OF QUANTITIES WAS FOUND. IT WAS ALSO FOUND THAT RATES ADOPTED BY THE ASSESSEE FOR VALUING THE STOCK WAS L OWER THAN THE COST PRICE OF THE STOCK AS SUBSEQUENTLY ADMITTED BY THE ASSESSEE IN THE CHART PREPARED BY HIM AND PLACED IN THE PB AT PAGES 152 T O 156. IT SHOWS THAT TOTAL DIFFERENCE WAS VALUED AT RS.5 93 913/- WHICH INCLUDED DIFFERENCE ON ACCOUNT OF QUANTITIES AT RS.1 11 016/-. THOUGH THE ADDITION WAS FINALLY REDUCED TO RS.4 98 200/- BUT THIS DOES NOT TAKE AWA Y THE BASIC REASONS FOR LEVYING THE PENALTY THAT BOOKS OF ACCOUNT OF THE AS SESSEE WERE INCORRECT STOCKS WERE VALUED AT LESSER PRICE THEN THE COST PR ICE WHICH WAS SUBSEQUENTLY CORRECTED DURING THE COURSE OF SEARCH. THERE WAS A DIFFERENCE IN QUANTITIES AS HELD BY THE TRIBUNAL IN QUANTUM PROCEEDINGS. THERE WAS A STATEMENT UNDER SECTION 132(4) DECLARIN G CERTAIN INCOME ON ACCOUNT OF STOCK DIFFERENCE BUT NO DIFFERENCE IN ST OCK WERE EITHER TAKEN IN THE BOOKS OR DECLARED IN THE RETURN OF INCOME. IT I S INCORRECT TO SAY THAT VALUATION WAS DONE ONLY BY ESTIMATE. IT WAS DONE ON THE BASIS OF VOUCHERS PRODUCED BY THE ASSESSEE AND THE VALUATION SHOWN BY THE ASSESSEE BY CO- RELATING AS HE THOUGHT CORRECT HIS PURCHASE VOUCHE RS WITH THE STOCK. THE ASSESSEE HAD NOT FILED CORRECT PARTICULARS OF INCOM E IN RESPECT OF VALUATION OF STOCK EVEN THOUGH THEY WERE DISCOVERED DURING TH E COURSE OF SEARCH. WE REJECT THE ARGUMENTS OF ASSESSEE THAT IT WAS A C ASE OF MERE ESTIMATE. IT WAS A CASE WHERE DEFINITE CONCEALMENT WAS FOUND DUR ING THE COURSE OF SEARCH IN RESPECT OF VALUATION OF STOCK BOTH IN TER MS OF QUANTITY AND PRICE. THE ASSESSEE CONTINUED TO FILE INACCURATE PARTICULA RS OF INCOME EVEN AFTER DISCOVERY OF DIFFERENCE IN THE SEARCH. IT DID NOT D ECLARE THE DIFFERENCE ITA NOS.1637 & 1638/AHD/2006 ASST. YEAR 1994-95 15 EVEN WHAT HE THOUGHT THAT THE CORRECT DIFFERENCE IS RS.5 93 913/-. HE DID NOT DECLARE EVEN RS.1 11 016/- BEING THE DIFFERENCE IN TERMS OF QUANTITIES. THUS THE CASE AGAINST THE ASSESSEE IS SQUARELY COVE RED IN MAIN PROVISIONS AS WELL AS UNDER EXPLANATION 1 AND ALSO UNDER EXPLA NATION 5. 21. AS A RESULT WE CONFIRM THE LEVY OF PENALTY AND DISMISS THE APPEAL FILED BY THE ASSESSEE. SD/- SD/- (BHAVNESH SAINI) (D.C.AGRAWAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED : 22/01/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD ORDER PRONOUNCED IN OPEN COURT ON 22/01/2010