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2006 (9) TMI 455 - ITAT AMRITSARAddition u/s 68 - Cash credits - Trading addition - GP rate of 13.58 per cent on sales - Penalty imposed u/s 271(1(c) for concealment of Income. Addition u/s 68 - HELD THAT:- It is an admitted position that these were old credit balances brought forward from the year 1995-96. No addition u/s 68 could be made because such credits did not appear in the books of account of the assessee for the assessment year under consideration. Similarly, addition u/s 41(1) could also not be made because no deduction or allowance in respect of expenses, loss or trading liability had been allowed in the earlier assessment years. Thus, we are of the considered opinion that the learned CIT(A) was justified in deleting the impugned addition. We confirm his order and reject this ground of appeal of the revenue. Trading addition - GP rate of 13.58 per cent on sales - HEDL THAT:- We find that trading addition made by the Assessing Officer on ad hoc basis was without any justification. It is not denied that the gross profit shown by the assessee at 13.58 per cent was better than gross profit shown at 13.33 per cent of the last year. None other defects in the books of account which could show either suppression of sales or inflation of expenses have been pointed out by the Assessing Officer. No doubt, the assessee had not produced or maintained the stock register. This itself could not be a ground for making an ad hoc addition of Rs. 20,000 without pointing out any specific defect or undervaluation of closing stock. No such enquiry was made by the Assessing Officer. Thus, we do not find any justification to interfere with the order of the CIT(A). The same is upheld and this ground of appeal is rejected. Disallowance out of telephone and travelling expenses - HELD THAT:- We modify the order of the CIT(A) and direct the Assessing Officer to disallow 1/7th out of telephone expenses alone. Similarly, the disallowance out of travelling and conveyance expenses @ 1/7th not exceeding the disallowance made by the Assessing Officer would meet the ends of justice. We modify the order of the CIT(A) and direct the Assessing Officer to restrict the disallowance to 1/7th. These two grounds of appeal are treated as partly allowed. Penalty imposed u/s 271(1)(c) - For concealment of income - HELD THAT:- From the facts, it is obvious that assessee had himself disclosed income of Rs. 40,000 In the return without there being any enquiry or detection by the Assessing Officer. It is, therefore, not understood as to how the Assessing Officer was justified in initiating penalty proceedings u/s 271(1)(c) as the assessee had neither concealed the particulars of income nor furnished inaccurate particulars thereof when the income was included in the return voluntarily. Therefore, the action of the Assessing Officer does not appear to be in conformity with the provisions of the Act. Be that as it may, the Assessing Officer had only initiated penalty proceedings. The assessee is free to submit his reply and the Assessing Officer after considering his reply may drop the penalty proceedings. It is settled law that both penalty proceedings and assessment proceedings are separate and independent proceedings. The very fact that penalty proceedings have been initiated does not mean that it would automatically lead to levy of penalty u/s 271(1)(c ). Even if the penalty is levied, there is provision for filing an appeal against the said order. We are, therefore, of the opinion that the direction given by the CIT(A) to drop proceedings initiated u/s 271(1)(c) was not correct. Accordingly, we set aside the order of the CIT(A) and restore that of the Assessing Officer. This ground of appeal is partly allowed. In the result, the appeal of the revenue is partly allowed.
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