TMI Blog2001 (1) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 representing difference in cost of purchase and market value as on 12th May, 1988, of certain old items brought forward from last year (as on 1st April, 1988), as opening balance as per order of learned CIT, Kanpur dt. 19th May, 1989, of which actual sales taking place after the date of search i.e., 12th May, 1988. (b) Rs. 6,567 Addition on the basis of seized weighment slip found with remark (overleaf). Find out to whom this slip belongs" (noted in Hindi) (c) Rs. 1,047 Addition on the basis difference in stocks as per stock register and inventory prepared during search. (d) Rs. 3,81,371 Cash found during the course of search and declared under s. 132(4). (e) Rs. 31,500 Value of household goods found during the course of search and declared under s. 132(4). 5. The assessee has also challenged the order of CIT(A) on various other grounds i.e. ground Nos. 2 to 8. The learned counsel for the assessee, however, did not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this difference was primary due to incorrect method adopted at the time of inventorization during the course of search and seizure action. (e) Regarding the addition relating 'to unexplained cash of Rs. 3,50,371, the AO held that as the assessee had not disclosed the manner in which this income was derived, he cannot be given benefit of Expln. 5(b)(2) to s. 271(1)(c) of the Act. Applying the deeming clause under s. 271(1)(c), he held that the assessee had concealed particulars of his income in respect of unexplained cash of Rs. 3,81,371. (f) So far as unexplained investment and valuable articles of Rs. 1,25,000 is concerned, the version of the assessee that the investment in these goods have been disclosed and surrendered and there was no justification to impose the penalty on this addition was not accepted by the AO. (g) Regarding the last item, which relates to unexplained investment in jewellery to the tune of Rs. 1,800, the assessee's version that jewellery belongs to his wife was not accepted by the AO. (h) The AO thus, imposed penalty of Rs. 6,83,772 on account of the additions mentioned above. 6.1. In appeal, the learned CIT(A) confirmed the penalty on item No. 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner in which he earned income cannot be justified because the disclosure itself was sufficient for allowing benefit of cl. (2) of Expln. 5 to s. 271(1)(c) of the Act. So far as the penalty on account of addition on the basis of unexplained investment in valuable articles at Rs. 1,25,000 is concerned, after excluding the cost of Maruti and scooter, the CIT(A) had sustained the penalty on other items. Shri Garg submitted that on remaining items also, the penalty should not have been imposed, because the assessee had disclosed the manner of earning income in his statement under s. 132(4). In this regard, he made reference to the statement of the assessee, a copy of which is available at p. 103 of the paper book. He specifically invited our attention to the answer to question No. 4 at p. 105 of the paper book. 10. In support of his arguments, the learned counsel for the assessee placed reliance on various orders of the Tribunal, copies of which have been filed in the paper book. 11. The learned Senior Departmental Representative, on the other hand, supported the order of CIT(A). So far as the order under s. 154 passed by the CIT(A) for cancelling the penalty on the addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, there is no question of penalty under s. 271(1)(c) and my earlier order dt. 26th Nov., 1991, is modified to the extent that the penalty levied by the AO on a sum of Rs. 8 lacs is not justified, and it is deleted." 16. After "examining the entire material on record including the above mentioned order and after considering the rival submissions on this issue, we are of the considered opinion that the CIT(A) was not justified in confirming the penalty on the basis of this addition, because, in our view, the difference in valuation was no account of the method of valuation. The assessee had disclosed all the items in his stock. No item was concealed. The arguments of learned Senior Departmental Representative that the concealment was on account of undervaluation cannot be accepted. Hence, we reverse the finding of CIT(A) on this issue. 17. Coming to the penalty imposed on account of addition of Rs. 6,567 is concerned, we agree with the learned counsel for the assessee that in the context of huge stock to the tune of Rs. 50 lakhs minor variations in the stock or shortage is natural. In our view, no contumacious conduct or design of concealment can be inferred from the conduct of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew was taken by the Tribunal. 22. It may be mentioned here that the assessee Sh. Vishwanath Agrawal in his statement recorded under s. 132(4) while answering Q. No. 4, specifically disclosed that the entire cash in his possession in his house, around Rs. 3 lakhs to Rs. 4 lakhs, is undisclosed and unaccounted cash and he disclosed the same. Likewise, in reply to Q. No. 7, he disclosed that he is declaring the stock of Rs. 8 lakhs in his two firms. In reply to Q. No. 1 he has also disclosed the other amount of Rs. 85,000. After going through the statement of the assessee recorded under s. 132(4), we find that the authorised officer did not put any question to the assessee about the manner in which the income disclosed by him was derived or earned. It may also be pointed out that the assessee being a layman cannot be expected to know the intricacies of the procedure and the specific requirements or technical requirements. Had the authorised officer put a specific question to the assessee about the manner in which these disclosed income was earned, then it was his duty to narrate the manner in which the disclosed income was earned. 23. In view of the above facts and circumstances, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the CIT(A), we are unable to accept the objection of the Department. In our view, the CIT(A) has rightly deleted the penalty on account of addition in three items. 33. Departmental appeal is dismissed. ITA No. 915/All/1992 34. In this appeal, the Department has challenged the order of CIT(A) passed under s. 154 of the Act. 35. We have gone through the entire order of CIT(A). The CIT(A) has deleted penalty levied by the AO on a sum of Rs. 8 lakhs. The addition made by the AO was on the basis of increase in the valuation of the stock, which was estimated at Rs. 10,70,000. The learned counsel for the assessee has pointed out that in the order under s. 132(12), the position has been discussed in detail and table of goods in stock has also been given. According to him, the assessee agreed for the addition of Rs. 8 lakhs just to purchase peace, but it cannot be said that he had concealed the income. 36. While dealing with ground No. 1 in ITA No. 2707/All we have discussed the position relating to valuation of stock and addition made on account thereof. In our considered view and the imposition of penalty on the basis of increase in the valuation of stock was not justifie ..... 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