M/s Kandoi Bhogilal Mulchand, Ahmedabad v. The Dy.CIT., Cent.Circle-2(1),, Ahmedabad

ITSSA 267/AHD/2010 | misc
Pronouncement Date: 14-05-2010 | Result: Dismissed

Appeal Details

RSA Number 26720516 RSA 2010
Assessee PAN AAEFK1072H
Bench Ahmedabad
Appeal Number ITSSA 267/AHD/2010
Duration Of Justice 1 month(s) 18 day(s)
Appellant M/s Kandoi Bhogilal Mulchand, Ahmedabad
Respondent The Dy.CIT., Cent.Circle-2(1),, Ahmedabad
Appeal Type Income Tax (Search & Seizure) Appeal
Pronouncement Date 14-05-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 14-05-2010
Date Of Final Hearing 06-05-2010
Next Hearing Date 06-05-2010
Assessment Year misc
Appeal Filed On 26-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HON'BLE SH RI D.C. AGRAWAL A.M.) I.T.(S.S.)A. NO. 267/AHD./2010 ASSESSMENT YEAR : BLOCK PERIOD 1.4.1995 TO 8.1.2002 M/S. KANDOI BHOGILAL MULCHAND -VS.- DE PUTY COMMISSIONER OF INCOME TAX AHMEDABAD (PAN : AAEFK 1072 H) CIRCLE-3 AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NIMISH VAYAWALA RESPONDENT BY : SHRI M.C. PANDIT SR. D.R. O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 22.02.2010 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) GANDHINAGAR CO NFIRMING THE PENALTY OF RS.1 83 600/- LEVIED BY THE ASSESSING OFFICER UNDER SECTION 158BF A(2) FOR THE BLOCK PERIOD 1.4.1995 TO 8.1.2002. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING OF VARIOUS SWEETS (MITHAI). A SEARCH UNDER SECTION 132 OF THE INCOME TAX ACT WAS CONDUCTED IN THE BUSINESS AS WELL AS RESIDENTIA L PREMISES OF THE ASSESSEE ON 08.01.2002. DURING THE SEARCH CERTAIN DOCUMENTS ASSETS AND CO MPUTER DATA WERE FOUND AND SEIZED. IN RESPONSE TO NOTICE UNDER SECTION 158BC THE ASSESSE E FILED THE RETURN OF INCOME IN PRESCRIBED FORM ON 18.07.2002 DECLARING TOTAL UNDISCLOSED INCO ME OF RS.18 71 202/-. THE ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 158BC(C) OF THE ACT WHEREIN HE COMPUTED THE TOTAL UNDISCLOSED INCOME OF THE ASSESSEE AT RS.45 73 320/ -. THIS INCOME INTER ALIA INCLUDES ADDITION OF RS.42 32 037/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNRECORDED PROFIT (SALES) OF RS.4 23 20 387/- WHICH COMPRISES OF RS.7 23 933/- AT SATELLITE SHOP AND RS.35 08 104/- IN OTHERS. THE ENTIRE SALES AT SATELLITE SHOP AMOUNTIN G TO RS.7 23 933/- DECLARED BY THE ASSESSEE AS UNDISCLOSED INCOME OF THE BLOCK PERIOD. IN RESPECT OF OTHER SALES THE ASSESSEE HAS DECLARED GROSS PROFIT @ 28%. ON APPEAL THE LEARNED COMMISSIONER O F INCOME TAX(APPEALS) DELETED THE 2 IT(SS)A NO. 267/AHD/2010 ADDITION. HOWEVER ON FURTHER APPEAL BY THE REVENUE THE ITAT C BENCH AHMEDABAD VIDE ORDER DATED 06.03.2009 IN ASSESSEES OWN CASE IN IT (SS)A NO. 278/AHD/2004 RESTRICTED THE ADDITION TO RS.3 00 000/-. THE RELEVANT DISCUSSION IS CONTAINED IN PARA 4 OF THE ORDER OF THE TRIBUNAL DATED 06.03.2009 AND THE SAME READS AS UND ER :- 4. HAVING HEARD BOTH PARTIES WE HAVE CAREFULLY PE RUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. BEFORE US THE LEA RNED DR CONTENDED THAT UNRECORDED SALES WAS RS.42320387/- WHICH COMPRISES OF RS.723933 AT THE SATELLITE SHOP AND RS.35 08 104/- IN OTHERS. THE EN TIRE SALES AT SATELLITE SHOP AMOUNTING TO RS.723933 HAS BEEN DECLARED BY THE ASS ESSEE AS UNDISCLOSED INCOME OF THE BLOCK PERIOD. HOWEVER IN RESPECT OF OTHER SALES HE HAS ONLY DECLARED GP @28%. THE FACTS OF BOTH THE UNRECORDED SALES ARE IDENTICAL. THEREFORE THE ASSESSING OFFICER IS LEGALLY AND FAC TUALLY CORRECT IN TAXING THE ENTIRE UNRECORDED SALES AMOUNTING TO RS.35 08 104/- . ON THE OTHER HAND THE LD. AR OF THE ASSESSEE POINTED OUT THAT IN RESPECT OF SATELLITE SHOP ENTIRE COST OF RAW MATERIALS OF THE SALES MADE OUTSIDE THE BOOKS OF ACCOUNT WAS RECORDED IN THE BOOKS OF ACCOUNT WHEREAS IN RESPEC T OF OTHER SALES AMOUNTING TO RS.35 08 104/- THE COST OF RAW MATERI ALS WERE MADE FROM THE SALES OUTSIDE THE BOOKS OF ACCOUNT ITSELF. HE ACCOR DINGLY SUGGESTED THAT AT THE MOST UNRECORDED INITIAL INVESTMENT IN RAW MATER IALS CAN BE TREATED AS UNDISCLOSED INCOME WHICH ACCORDING TO HIM WORKS OUT TO RS.151 LAKHS AS UNDER :- SALES DURING THE YEAR 01-02 308.68 LAKHS CLOSING STOCK 10.79 OPENING STOCK 27.27 40.06 LAKHS AVERAGE STOCK 20.03 LAKHS INVESTMENT AS % OF SALES 6.47% SAY 6.50%. UNRECORDED SALES IS SPREAD OVER NUMBER OF YEARS. HO WEVER SALES DURING LAST PERIOD IS 30.76 LAKHS. OUT OF THAT RS.7.44 LAK HS ALREADY TAKEN TOTALLY. SALES (30.76 7.44) = 23.32 LAKHS 23.32 X 6.50%= RS.1.51 LAKHS. TO A QUERY FROM THE BENCH THAT IN RESPECT OF UNRECO RDED SALES THE INITIAL INVESTMENT SHOULD BE MINIMUM 10% OF THE SALES THE LEARNED AR OF THE ASSESSEE POINTED OUT THAT IN ORDER TO BUY PEACE HE HAS NO OBJECTION IF ADDITION OF RS.3 LAKHS IS MADE ON THIS COUNT. IN VI EW OF SUCH CONCESSION WE DIRECT THE ASSESSING OFFICER TO FURTHER ADD UNACCOU NTED INVESTMENT AT RS.3 3 IT(SS)A NO. 267/AHD/2010 LAKHS OVER AND ABOVE THE ADDITION SUSTAINED BY THE LEARNED CIT(A.) AND RECOMPUTE THE TOTAL INCOME OF THE ASSESSEE ACCORDIN GLY. 3. SUBSEQUENTLY THE ASSESSING OFFICER VIDE ORDER D ATED 29.10.2009 IMPOSED PENALTY UNDER SECTION 158BFA(2) OF THE ACT OF RS.1 83 600/- BEING 100% OF TAX SOUGHT TO BE EVADED ON CONCEALED INCOME OF RS.3 00 000/-. BEFORE THE ASSES SING OFFICER IN RESPONSE TO SHOW-CAUSE NOTICE ISSUED BEFORE LEVYING THE PENALTY OF RS.1 83 600/- UNDER SECTION 158BFA(2) THE ASSESSEE CONTENDED THAT PENALTY SHOULD NOT BE LEVIED BECAUSE ITAT HAS RECORDED A FINDING THAT THE ADDITION OF RS.3 00 000/- IS MADE ON THE BASIS OF F ACT THAT INITIAL INVESTMENT SHOULD BE MINIMUM 10% OF THE SALES. THIS WAS NOT OBJECTED BY THE ASSE SSEE TO BUY THE PEACE. THIS EXPLANATION WAS REJECTED BY THE ASSESSING OFFICER FOR THE DETAILED REASONS GIVEN IN PARAS 3 & 4 OF THE PENALTY ORDER WHICH READS AS UNDER :- 3. I HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESS EE. THE CONTENTION OF THE ASSESSEE IS MISPLACED. THE ADDITI ON CONFIRMED BY THE HON'BLE ITAT AT RS.3 LAKHS IS ON ACCOUNT OF MIN IMUM INITIAL INVESTMENT REQUIRED AT 10% OF THE SALES WHICH THE A SSESSEE HAS CONFESSED BEFORE THE HON'BLE ITAT THOUGH UNDER THE EXCUSE OF BUYING PEACE. NOW THE ASSESSEE CANNOT TAKE THE PLEA THAT SINCE THE ADDITION IS ON ACCOUNT OF BUYING PEACE NON PENALTY CAN BE LEVIED. THE HON'BLE ITAT IS THE ULTIMATE FACT FINDING AUTHO RITY. THE ADDITION CONFIRMED AT RS.3 LAKHS IS THE PROOF THAT THE ASSESSEE HAS CONCEALED ITS INCOME BY WAY OF FURNISHING INACCURAT E PARTICULARS IN RESPECT OF TOTAL SALES AND 10% OF SUCH SALES WAS THE BASIS FOR THIS ADDITION. ACCORDINGLY I HAVE NO HESITATION IN REJECTING THE ASSESSEES CONTENTION THAT THERE IS NO CASE OF PENA LTY LEVIABLE U/S. 158BFA(2) OF THE I.T. ACT. 4. IN VIEW OF THE ABOVE FACTS AND LEGAL POSITION T HE ASSESSEES CONTENTION ARE REJECTED AND I ORDER TO LEVY THE PEN ALTY U/S. 158BFA(2) FOR UNDISCLOSED INCOME WORKED OUT UNDER C LAUSE (C) OF SECTION 158BC OF THE I.T. ACT WHICH IS RS.1 83 600 /- BEING THE MINIMUM PENALTY LEVIABLE AS AGAINST RS.5 50 800/- T HE MAXIMUM PENALTY. 4. IN APPEAL AGAINST THE PENALTY ORDER UNDER SECTIO N 158BFA(2) BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THE ASSESSEE M ADE THE FOLLOWING SUBMISSIONS :- IN THIS CASE THE SEARCH TOOK PLACE AT THE ASSESSEE S PREMISES. THE BLOCK RETURN WAS FILED. THE A.O. MADE THE ADDITION OF THE UNDISCLOSED SALES WHEREAS THE ASSESSEE GAVE THE DETAILED EXPLANATION AND CONTENDED THAT IN 4 IT(SS)A NO. 267/AHD/2010 SOME PORTION OF SALES ONLY G.P. CAN BE ADDED. THE C IT(A.) ALLOWED THE APPEAL. THE HON'BLE ITAT ALSO IN PRINCIPLE ACCEPTED THE VIEW OF THE ASSESSEE. THE ITAT ALSO RECORDED THE FINDING THAT T HERE IS NO ADVERSE MATERIAL FOUND DURING THE COURSE OF SEARCH. HOWEVER THE ADDITION WAS MADE AT 10% OF TOTAL UNDISCLOSED SALES PRESUMING TO BE INITIAL INVESTMENT. THE CLEAR CUT FINDING HAS BEEN RECORDED THAT THE AD DITION IS MADE ON ESTIMATE BASIS TO BUY PEACE. THE RELEVANT PARA IS AS FOLLOWS :- 4. HAVING HEARD BOTH THE PARTIES. WE HAVE CAREFULL Y PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. BEFORE US THE LEARNED DR CONTENDED THAT UNRECORDED SALES WAS RS.42320387 WHI CH COMPRISE OF RS.723933 AT THE SATELLITE SHOP AND RS.3508104 IN O THERS. THE ENTIRE SALES AT SATELLITE SHOP AMOUNTING TO RS.723933 HAVE BEEN DEC LARED BY THE ASSESSEE AS UNDISCLOSED INCOME OF THE BLOCK PERIOD. HOWEVER IN RESPECT OF OTHER SALES ARE IDENTICAL THEREFORE THE ASSESSING OFFICE R IS LEGALLY AND FACTUALLY CORRECT IN TAXING THE ENTIRE UNRECORDED SALES AMOUN TING TO RS.3508104/-. ON THE OTHER HAND LEARNED AR OF THE ASSESSEE POINTED OUT THAT IN RESPECT OF SATELLITE SHOP ENTIRE COST OF RAW MATERIAL OF THE SALES MADE OUTSIDE THE BOOKS OF ACCOUNT WAS RECORDED IN THE BOOKS OF ACCOU NTS WHEREAS IN RESPECT OF OTHER SALES AMOUNTING TO RS.3508104 THE COST OF RAW MATERIALS WERE MADE FROM THE SALES OUTSIDE THE BOOKS OF ACCOUNTS ITSELF . HE ACCORDINGLY SUGGESTED THAT AT THE MOST UNRECORDED INITIAL INVESTMENT IN R AW MATERIALS CAN BE TREATED AS UNDISCLOSED INCOME WHICH AMOUNTING TO HI M WORKS OUT TO RS.1.51 LAKHS AS UNDER :- SALES DURING THE YEAR 01-02 RS.308.68 LAKHS CLOSING STOCK 10.79 LAKHS OPENING STOCK 27.27 LAKHS 40.06 LAKHS AVERAGE STOCK 20.03 LAKHS INVESTMENT AS % OF SALES 6.47% SAY 6.50%. UNRECORDED SALES IS SPREAD OVER NUMBER OF YEARS. HO WEVER SALES DURING LAST PERIOD IS 30.736 LAKHS. OUT OF THAT RS.7.44 LA KHS. ALREADY TAKEN TOTALLY SALES (30.76-7.44 = 23.32 LAKHS 23.32 X 6.50% RS.1.51 LAKHS. TO A QUERY FROM THE BENCH THAT IN RESPECT OF UNRECO RDED SALES THE INITIAL INVESTMENT SHOULD BE MINIMUM 10% OF THE SALES THE LD. AR OF THE ASSESSEE 5 IT(SS)A NO. 267/AHD/2010 POINTED OUT THAT IN ORDER TO BUY PEACE HE HAS NO OB JECTION IF ADDITION OF RS.3 LAKHS IS MADE ON THIS COUNT. IN VIEW OF SUCH CONCES SION WE DIRECT THE ASSESSING OFFICER TO FURTHER ADD UNACCOUNTED INVEST MENT AT RS.3 LAKHS OVER AND ABOVE THE ADDITION SUSTAINED BY THE LD. CIT(A.) AND RECOMPUTED THE TOTAL INCOME OF THE ASSESSEE ACCORDINGLY. IT WILL BE OBSERVED THAT THE ADDITION MADE IS NOT C ORRESPONDING TO ANY UNDISCLOSED ASSET FOUND DURING THE SEARCH. AGAIN TH E BASIS OF ADDITION SUSTAINED BY THE HON'BLE ITAT IS ALSO TOTALLY DIFFE RENT THAN THAT OF THE A.O. IN SUCH CIRCUMSTANCES AND FACTS NO PENALTY IS LEVIA BLE. (1) SMT. BITOLI DEVI V/S. ACIT 110 TTJ (LUCK) 735 (NO P OSITIVE EVIDENCE NO PENALTY) (2) ENFIELD INUSTRIES LTD. V/S. DCIT 107 ITD 1 KOL. IN ABSENCE OF EXPLANATIONS LIKE 271(1)(C) ONUS TO PROVE CONCEALME NT IS ON DEPARTMENT. JASWANT D. PARMAR V/S. ACIT 163 TAXMAN 39 AHD. WHEN EVIDENCES AND MATERIAL PRODUCED BY THE PENALTY NOT DISPUTED NON PENALTY IS LEVIABLE. ITO V/S. SMT. PREMILA PRATAP SHAH 105 TTJ 140 MUM. DY.CIT V/S. KOTEX INFRATRUCTURE LTD. 102 TTJ 737 MU M. GANDHI SERVICE STATION V/S. ACIT 100 TTJ 1143. THE LEVY OF PENALTY IS NOT AUTOMATIC. EVEN IF THE A DDITION MADE IS SUSTAINED THE A.O. HAS TO SEPARATELY INVESTIGATE TH E MATTER AND PROVE CONCEALMENT. IN SALSIA HIRE PURCHASE LTD. V/S. ACIT 305 ITR 15 L UCK. IT HAS BEEN CLEARLY HELD THAT UNLESS THERE IS DUTY CAST ON THE ASSESSEE TO SHOW THE INCOME IN THE BLOCK RETURN THE ASSESSEE CA NNOT BE VISITED WITH THE PENALTY SIMPLY ON THE GROUND THAT THE INCOME IS ASSESSED AND IT HAS BEEN ACCEPTED. IN CIT V/S. SURESHCHANDRA MITTAL 251 ITR 9 (SC) IN THIS CASE IT WAS HELD THAT EVEN UNDER NORMAL PE NALTY PROCEEDINGS IF THE ADDITIONAL INCOME IS OFFERED TO BUY PEACE THE P ENALTY IS NOT IMPOSSIBLE. IT WILL BE APPRECIATED THAT WE HAVE OFF ERED ADDITIONAL INCOME BEFORE THE ITAT JUST TO BUY THE PEACE. THERE IS NO EVIDENCE AS SUCH OF ASSESSEE MAKING THE FRESH INVESTMENT OF RS.3 LACS. ON THE BASIS OF THESE CASE LAWS IT IS CONTENDED THA T (1) THE A.O. HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW CONCEALMENT (2) THE BASIS OF ADDITION IS DIFFERENT AND NOT THAT OF A.O. (3) THE SAY OF THE ASSESSEE AND MATERIALS PRODUCED BY IT ARE ACCEPTED (4) THE ADDI TION IS MADE ON ESTIMATE BASIS AND THE HON'BLE ITAT HAS ALSO RECORD ED A FINDING THAT 6 IT(SS)A NO. 267/AHD/2010 ADDITIONAL INCOME IS OFFERED TO BUY PEACE AND END L ITIGATION THE PENALTY IS NOT LEVIABLE. TO SUMMARIES THE ISSUE A.O. MADE AN ADDITION OF RS. 4573320. CIT(A.) DELETED ENTIRE ADDITION OF RS.4273320/-. APPEAL TO ITAT BY DEPARTMENT WITH ABOVE MENTION OBS ERVATION AN ADDITION OF RS.3 LAKHS ON THE BASIS OF ASSUMPTION A ND ESTIMATE AS AGREED BY AR WITH A VIEW TO PURCHASE PEACE THUS THERE IS NO MATERIAL ON RECORD WHICH HAS BEEN RELIED UPON AND SUSTAIN ANY ADDITION AT ALL. THUS THERE IS NO QUESTION OF INVOKING PROVISION OF SECTION 271(1) (C). 5. AFTER CONSIDERING THE AFORESAID SUBMISSIONS THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE PENALTY OF RS.3 00 000/- LEVIED BY THE ASSESSING OFFICER FOR THE DETAILED REASONS GIVEN IN PARAS 6 TO 9 OF HIS ORDER WHICH IS RE-PRODUCED HEREUNDER :- 6. THE MATTER HAS BEEN CONSIDERED AND I AM AFRAID IN THE FACTS AND CIRCUMSTANCES OF THE CASE I DO NOT AGREE WITH THE AUTHORIZED REPRESENTATIVE. TO START WITH THE FOLLOWING POINTS NEED TO BE APPRECIATED :- (1) PENALTY U/S. 158BFA(2) IS LEVIABLE ONLY IN CONTEXT OF UNDISCLOSED INCOME U/S. 158BC AND IT IS NOW JUDICIA LLY AND FORMALLY ESTABLISHED THAT NO ADDITION U/S. 158BC CA N BE MADE UNLESS IT IS BASED ON EVIDENCE FOUND DURING TH E COURSE OF ACTION U/S. 132. THEREFORE THE PENALTY IN THE C ONTEXT IS DIRECTLY RELATABLE TO THE EVIDENCE FOUND DURING THE COURSE OF THE SEARCH. (2) THERE IS NO CONCEPT OF REDUNDANCY IN LAW AND THEREF ORE THE FACT THAT PENALTY PROVISIONS U/S. 158BFA HAD BEEN INTRODUCED FOR CASES COVERED U/S. 132 OR U/S. 158BC NOTWITHSTANDING THE EXISTENCE OF PROVISIONS OF SECT ION 271(1)(C) WOULD MEAN THAT THE TWO PENALTIES ARE DI FFERENT ALTHOUGH THE ANALOGIES CAN BE DRAWN FROM THE LATTER . 7. IF VIEWED IN ABOVE PERSPECTIVE THE VARIOUS CASE LAWS CITED BY THE AUTHORIZED REPRESENTATIVE BECOME INAPPLICABLE T O THE FACTS OF THE PRESENT CASE. ASSESSMENT U/S. 158BC HAS BEEN COMPLE TED KEEPING IN VIEW THE EVIDENCES OF UNDISCLOSED SALES FOUND DURIN G THE COURSE OF SEARCH AT THE ASSESSEES PREMISES. THE DISPUTE BETW EEN THE DEPARTMENT AND THE ASSESSEE IS ONLY AS TO WHETHER THE ENTIRE S ALES ARE TO BE ADDED OR ITS GROSS PROFIT. THE TRIBUNAL IN ITS WISDOM D ECIDED TAKE A MIDDLE PATH WHERE OVER AND ABOVE WHAT HAD BEEN DECIDED BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A.) AN ADDITIONAL AM OUNT OF RS.3 00 000/- WHICH WAS HELD TO BE ASSESSED AS UND ISCLOSED INCOME FOR THE BLOCK PERIOD. 7 IT(SS)A NO. 267/AHD/2010 8. THEREFORE THERE IS NEITHER ANY CONJECTURE NOR A NY ESTIMATE INVOLVED IN THE COMPUTATION OF THE UNDISCLOSED INCO ME. THE ITAT IN APPRECIATING THE EVIDENCES FOUND DURING THE COURSE OF SEARCH HAD COME TO A FIRM CONCLUSION THAT THE UNDISCLOSED INCOME DE CLARED BY THE APPELLANT IN THE BLOCK RETURN IS NOT APPROPRIATE AN D THEREFORE COMPUTED THE INCOME AT A HIGHER FIGURE LEADING TO AN ADDITI ON OF RS.3 00 000/-. THE ASSESSEE HAS NO EXPLANATION FOR THE REASONS FOR NON-RECORDING THE SALES WHICH COULD BE UNEARTHED ONLY BECAUSE OF THE ACTION ON THE PART OF THE DEPARTMENT. 9. THEREFORE IN MY VIEW THE ASSESSING OFFICER HAS BEEN RIGHT IN HOLDING THAT THE AMOUNT OF RS.3 00 000/- IS SUBJECT TO PENALTY U/S. 158BFA(2). SINCE THE ASSESSING OFFICER HAS LEVIED T HE MINIMUM PENALTY THE QUANTUM IS NOT IN DISPUTE. 6. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER O F INCOME TAX(APPEALS) THE ASSESSEE IS IN APPEAL BEFORE US. 7. AT THE TIME OF HEARING BEFORE US ON BEHALF OF A SSESSEE SHRI NIMISH VAYAWALA APPEARED AND EXPLAINED THAT THE ASSESSEE FILED THE RETURN OF INCOME DECLARING UNDISCLOSED INCOME OF RS. RS.18 71 202/-. THE FINAL INCOME ASSESSED AFTER GIV ING APPEAL EFFECT TO THE ORDER OF ITAT DATED 05.06.2009 AMOUNTING TO RS.21 71 201/-. THE LD. COU NSEL CONTENDED THAT UNDISCLOSED INCOME AFTER PASSING LEARNED COMMISSIONER OF INCOME TAX(AP PEALS)S ORDER IS SAME AS RETURNED INCOME. THE BASIS OF ADDITION OF RS.3 00 000/- WAS NEVER BEFORE THE LOWER AUTHORITIES. THE FIGURE OF UNDISCLOSED SALES WAS CORRECTLY SHOWN. THE GROSS PROFIT APPLIED BY THE ASSESSEE HAS BEEN ACCEPTED. THE NEW PRINCIPLE OF INITIAL INVESTMENT C ROPPED UP BEFORE THE ITAT ONLY. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE WHOLE AD DITION WAS MADE ON ESTIMATE BASIS THEREFORE PENALTY CONCEALMENT UNDER SECTION 158BFA(2) IS NOT LEVIABLE. 8. ON THE OTHER HAND SHRI M.C. PANDIT SR. D.R. AP PEARING ON BEHALF OF THE REVENUE RELIED ON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT I N THE CASE OF ADDITIONAL COMMISSIONER OF INCOME TAX- VS.- CHANDRAVILAS HOTEL REPORTED IN 165 ITR 300. THE LD. D.R. FURTHER SUBMITTED THAT THE TRIBUNAL VIDE ORDER DATED 05.06.2009 RESTR ICTED THE ADDITION FROM RS.25 25 835/- TO RS.3 00 000/-. THE ENTIRE SALES WHICH IS NOT RECORD ED IN THE BOOKS OF ACCOUNTS AMOUNTING TO RS.42 32 037/- WAS CORRECTLY ADDED BY THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER OF 8 IT(SS)A NO. 267/AHD/2010 INCOME TAX(APPEALS) IS NOT JUSTIFIED IN DELETING TH E ENTIRE SALES. THE TRIBUNAL AFTER APPRECIATING THE ENTIRE FACTS ACCEPTED THE CONTENTION OF THE ASS ESSEE THAT THE ASSESSEE MADE THE PRODUCTION OUTSIDE THE BOOKS OF ACCOUNTS AND ITS SALES IS ALSO NOT RECORDED IN REGULAR BOOKS OF ACCOUNTS. COST OF PRODUCTION/ RAW MATERIAL WERE NOT BOOKED IN REGU LAR BOOKS OF ACCOUNTS. ON THIS BASIS TRIBUNAL ESTIMATED THE INITIAL INVESTMENT FOR MANUF ACTURING SWEETS WHOSE COST OF PRODUCTION WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS. THE ESTIMATE OF RS.3 00 000/- MADE BY THE TRIBUNAL LOOKING TO THE FACT IS FAIR AND REASONABLE THEREFO RE PENALTY LEVIED BY THE ASSESSING OFFICER BE UPHELD. 9. IN REPLY THE LD. COUNSEL OF THE ASSESSEE SUBMIT TED THAT THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF ADDITIONAL COMMISSIONER O F INCOME TAX- VS.- CHANDRAVILAS HOTEL (SUPRA) SHIFTS THE BURDEN ON THE ASSESSEE. THE EXPL ANATION TO SECTION 271(1)(C) IS NOT APPLICABLE TO SECTION 158BFA(A). HENCE THE RELIANCE PLACED ON TH AT DECISION IS NOT RELEVANT FOR DECIDING THE CONTROVERSY INVOLVED IN THIS APPEAL. THE LD. D.R. F URTHER EXPLAINED THAT IN THAT CASE THE CONDUCT OF THE ASSESSEE IS NOT FOUND TO BE RELEVANT. HERE T HE ASSESSEE GOT THE RELIEF. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THE ASSESSING OFFICER NEVER PROPOSED TO MAKE ANY ADDITION IN RESPECT OF INITIAL INVESTMENT AND ONLY TO BUY THE PEACE THE LD. A.R. AGREED TO ADDITION OF RS.3 00 000/-. THERE IS NO EVIDENCE THAT RS.3 00 000/- WAS INITIAL INVESTMENT. THE LD. COUNSEL OF THE ASSESSEE FURTHER POINTED OUT THAT HE HIMSELF CALCULATED THE INITIAL INVESTMENT ACCORDING TO MATHEMATICAL FORMULA AT RS.1.5 LAKH AND THEREAFTER AT THE INSTANCE OF TRIBUNAL AGREED TO ADDITION OF RS.3 00 000/-. THEREFORE THE DECISION OF THE HO N'BLE GUJARAT HIGH COURT IN THE CASE OF ADDITIONAL COMMISSIONER OF INCOME TAX- VS.- CHANDRA VILAS HOTEL (SUPRA) IS NOT APPLICABLE BECAUSE BONA FIDE OF THAT ASSESSEE WAS IN DOUBT WH EREAS IN THE INSTANT CASE NOTHING TO DOUBT THE BONA FIDE OF THE ASSESSEE. 10. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT SALES OF RS.4 2 3.20 387/- WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS. OUT OF THIS UNRECORDED SALES THE ASSESSE E IN THE RETURN OF BLOCK PERIOD DECLARED UNDISCLOSED SALES OF RS.7 23 933/- AT SATELLITE SHO P. IN RESPECT OF REMAINING SALES THE ASSESSEE MERELY DISCLOSED GROSS PROFIT @ 28%. HOWEVER THE A SSESSING OFFICER TREATED THE ENTIRE SALES AS UNDISCLOSED INCOME. ADMITTEDLY INITIAL INVESTMENTS FOR PRODUCING SWEETS WHICH ARE SOLD OUTSIDE THE BOOKS OF ACCOUNTS ARE NOT RECORDED IN THE BOOK S OF ACCOUNTS. IN CASE IT IS PRESUMED THAT COST 9 IT(SS)A NO. 267/AHD/2010 OF PRODUCTION OF SWEETS WHICH ARE SOLD OUTSIDE THE BOOKS OF ACCOUNTS IS ALSO RECORDED IN THE BOOKS OF ACCOUNTS. IN THAT EVENT THE ASSESSING OFF ICER WAS HAVING NO OPTION BUT TO TREAT THE ENTIRE SALES AS UNDISCLOSED INCOME. THE LD. COUNSEL OF THE ASSESSEE BEFORE THE TRIBUNAL ADMITTED THAT COST OF MANUFACTURING OF SWEETS WHICH ARE SOL D OUTSIDE THE BOOKS OF ACCOUNTS WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS. ON THE BASIS OF APPRECIATION OF THIS ARGUMENT AND EVIDENCE FOUND DURING THE COURSE OF SEARCH THE TRIBUNAL EST IMATED THE COST OF INITIAL INVESTMENT IN RESPECT OF SALES MADE OUTSIDE THE BOOKS OF ACCOUNTS AT RS.3 00 000/-. THOUGH THIS INCOME HAS BEEN ESTIMATED BUT ESTIMATE MADE IS FAIR AND REASONABLE LOOKING TO THE AMOUNT OF SALES MADE WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNTS. IN OUR CONSI DERED OPINION THE INCOME WHICH IS DETECTED AS A RESULT OF SEARCH OPERATION UNDER SECTION 132 I S UNDISCLOSED INCOME OF THE ASSESSEE WITHIN THE MEANING OF SECTION 158BFA(2) OF THE ACT. WITH REGAR D TO THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE HAS CORRECTLY DISCLOSED THE TOTAL SALES W E MAY POINT OUT THAT THE ASSESSEE HAS NOT DISCLOSED THE INITIAL INVESTMENT AS UNDISCLOSED INC OME. THEREFORE CORRECT INCOME OF THE ASSESSEE CANNOT BE COMPUTED WITHOUT MAKING THE ADDITION ON A CCOUNT OF COST INCURRED BY THE ASSESSEE IN MAKING INITIAL INVESTMENT FOR PRODUCING MITHAI OUTS IDE THE BOOKS OF ACCOUNTS. IF THE CONTENTION OF THE ASSESSEE THAT COST OF PRODUCTION IS ALSO REC ORDED IN THE BOOKS OF ACCOUNTS IN THAT EVENT IN QUANTUM APPEAL THE APPELLATE AUTHORITY COULD HAVE CONFIRMED THE ENTIRE ADDITION. ON ADDITION WHICH IS MADE ON ESTIMATE BASIS ALSO THE PENALTY FOR CONCEALMENT IS LEVIABLE. IN SUPPORT OF THIS RELIANCE CAN BE PLACED ON THE JUDGMENT OF THE HON'B LE GUJARAT HIGH COURT IN THE CASE OF CIT VS.- CHANDRA VILAS HOTEL [2007] 291 ITR 202 (GUJ.). IN THESE CIRCUMSTANCES THE ASSESSING OFFICER THEREFORE RIGHTLY LEVIED THE PENALTY UND ER SECTION 158BFA(2) OF RS.1 83 600/- ON CONCEALED INCOME RS.3 00 000/- AND THE LEARNED COMM ISSIONER OF INCOME TAX(APPEALS) HAS GIVEN COGENT REASON FOR CONFIRMING THE SAID PENALTY . WE THEREFORE INCLINE TO UPHOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND REJ ECT THE APPEAL OF THE ASSESSEE. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DI SMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 14.05.201 0 SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 14 / 05 / 2010 10 IT(SS)A NO. 267/AHD/2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT AHMEDABAD LAHA/SR.P.S.