TMI Blog2003 (4) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... eizure also included documents mentioned in items A-10 and A-11 in the shape of loose bundles. The same indicated that the assessee had made purchases aggregating to Rs. 20,35,500 outside the books of accounts. Out of these, purchases to the extent of Rs. 19,06,788 related to asst. yr. 1995-96 and purchases to the tune of Rs. 1,31,742 related to asst. yr. 1994-95. When the assessee was confronted with these facts, the assessee admitted that it had made purchases outside the regular books of accounts. The facts on record further show that for asst. yrs. 1995-96 the value of stock which should have been available with the assessee worked out to Rs. 33,87,099. But the stock available with the assessee, as per books, was of the value of Rs. 55,24,858. Thus, stock was found deficient by Rs. 20.00 lakhs. The position of availability of stock was worked out by taking into account the unaccounted purchases. When the assessee was confronted with these facts, the assessee disclosed income of Rs. 28.00 lakhs under s. 132(4) in the hands of the firm. 2.1 As regards unaccounted purchases of Rs. 1,31,742 for asst. yr. 1994-95, Shri Vinod Kumar, partner admitted that these purchases were unacco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the AO imposed a penalty of Rs. 1,03,822. 4. Aggrieved, the assessee impugned the penalty in appeal before the CIT(A). It was submitted before the CIT(A) that Shri Vinod Kumar, partner bad also owned transactions of purchases of Rs. 1,31,742 and had disclosed income of Rs. 1,50,000 in his hands. Therefore, there was no justification for imposing the penalty in respect of the same income under s. 271(1)(c) irrespective of the fact that addition was also made in the hands of the firm and the assessee had not filed any appeal against the said order. As regards addition of Rs. 50,000, the assessee had submitted that addition made by the AO was totally uncalled for as the assessee had not earned any such income in assessment year under reference. The assessee had accepted the addition merely to buy peace but there was no justification for imposing the penalty. The CIT(A) accepted the submissions of the assessee in regard to addition of Rs. 50,000 that no specific charge of concealment was made out. As regards addition of Rs. 1,31,742 the CIT(A) accepted the submission of the assessee that the addition for the same amount having been made and accepted in the hands of Shri Vinod Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entative for the Revenue, Shri D.P. Dhankar heavily relied on the assessment order. He drew our attention to para. 3 of assessment order where addition of Rs. 1,31,742 was made in the hands of the partnership-firm based on documents seized during the course of search. He submitted that in this case the documents showing unaccounted purchases of Rs. 20,35,500 for asst. yr. 1994-95 were found and seized. Out of same, purchases to the tune of Rs. 1,31,742 related to the assessment year under reference and to the assessee. He submitted that income disclosed in the hands of Shri Vinod Kumar, partner, does not mean that no addition could have been made in the hands of the firm when the transactions related to the firm. Similarly he submitted that addition of Rs. 50,000 was made on the basis of documents seized during the course of search. He further submitted that the assessee has accepted the addition and no appeal has been filed. Therefore, the CIT(A) was not justified in cancelling the penalty. 6. Learned counsel for the assessee, on the other hand, heavily relied on the order of CIT(A). He also filed written submissions stating therein that mere fact that additions made by the AO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at penalty can also be imposed under s. 271(1)(c). The requirement of imposing penalty under s. 271(1)(c) is materially different because for the purpose of levy of penalty under s. 271(1)(c), the Revenue is required to establish mala fide and dishonest motive on the part of the assessee. Now in this case, we find that the transactions of Rs. 1,31,742 relate to unaccounted purchases. If there are unaccounted purchases and sales outside regular books, only the resultant profit embedded therein can be added. In addition a possible reasonable amount of investment required in such unaccounted business is liable to be made. Thus, it is not the case where entire unaccounted purchases could be added as income of the assessee Reliance in this regard is placed on the following judgments: (i) CIT vs. Bhalla Bros. (1981) 10 LTR 45 (P H); (ii) ITAT Chandigarh Bench's decision dt. 18th Aug., 1994, in the case of Goyal Mills Store, Patiala vs. ITO in ITA Nos. 1342 1347/Chandi/88 for the asst. yr. 1984-85 (cross appeals); (iii) ITAT, Pune Bench's decision dt. 16th April, 1982, in the case of Bastimal Prakash Chandra Co. vs. ITO (1982) 74 TTJ (Pune) 150; and (iv) ITAT, Jodhpur Bench's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year under reference. In fact, there does not appear to be such source of income in the assessment year under reference. Thus onus was on the Revenue to show that the assessee had in fact, earned such income in the assessment year under reference and such income was not reflected in the return of income. Even during the course of hearing before us. learned Departmental Representative for the Revenue did not place any material on record to show that this was indeed income of the assessee for the assessment year under reference. Merely because the addition was made and accepted, does not mean that the penalty under s. 271(1)(c) can also be imposed. We confirm the order of CIT(A) on this count as well. Thus the appeal filed by the Revenue for asst. yr.1994-95 is dismissed. 8. As regards asst. yr. 1995-96, the AO had considered two items of additions for the purpose of levy of penalty under s. 271(1)(c), the first addition of Rs. 34,736 being unexplained cash found during the course of search. The second addition of Rs. 7.50 lakhs is made on account of unexplained investment in the plot. This amount of Rs. 7.50 lakhs was also disclosed under s. 132(4) of IT Act, 1961. Here, als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortion of statement recorded on 21st Oct., 1994 is as follows: "Question: During the course of search, an amount of Rs. 8,46,935 has been found. Please explain the source of this amount. Answer: About Rs. 2.50 lakhs is as per balances of the cash books of our three concerns stated earlier. Istri Dhan amounting to Rs. 45,000 belongs to the three ladies namely, Smt. Santosh Kumari, Nisha Veena. The remaining amount of Rs. Five lakhs fifty thousand only (5.50 lakhs only) is hereby surrendered being unaccounted for income of the three concerns. The details of which would be given by me shortly." 5. The cash on 21st Oct., 1984, has to be cash as per completed books on the basis of entries and business transacted after writing books on 19th Oct., 1994, and time of search on 21st Oct., 1994. The cash as per books is Rs. 2,50,348 as discussed above. The cash in hand sought to be explained on the basis of the balances in the cash book is Rs. 2.5 lacs. There is, therefore, no discrepancy. Penalty is accordingly deleted and the appeal is allowed." 10. Leaned Departmental Representative for the Revenue relied on the order of AO. However, he was fair enough to concede that the differe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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