TMI Blog2004 (6) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... e closing stock was of inferior quality and accordingly, the market price which was lower than the cost price was adopted for valuation of the closing stock. The explanation of the assessee was rejected by the AO with reference to sales made by the assessee in the beginning of the subsequent assessment year at a higher rate than the rate adopted for valuation of the closing stock. The AO worked out the difference in the closing stock at Rs. 2,64,570. The AO had also made some other additions. On appeal, the learned CIT(A) allowed relief of Rs. 4,380 and sustained addition of Rs. 2,60,190. 5. Penalty proceedings under s. 271(1)(c) had been initiated. Though the assessee objected to the initiation of proceedings under s. 271(1)(c), the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the AO, a specific finding has been recorded for concealment of income for which penalty proceedings under s. 271(1)(c) have been initiated. There is no finding in the assessment order in regard to the addition of Rs. 2,64,570 to that effect. Relying upon the decisions of the Delhi High Court in the case of CIT vs. Ram Commercial Enterprises Ltd. (2001) 167 CTR (Del) 321, Diwan Enterprises vs. CIT (2001) 167 CTR (Del) 324, CIT vs. Super Metal Re-Rollers (P) Ltd. (2003) 185 CTR (Del) 349 : (2004) 265 ITR 82 (Del) and the decision of the jurisdictional High Court in the case of CIT vs. Munish Iron Store (2004) 186 CTR (P H) 159 : (2003) 263 ITR 484 (P H), it was contended that recording of satisfaction of the AO regarding concealment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the assessee had no benefit to undervalue the stock. 8. The learned Departmental Representative, on the other hand, contended that there is a categorical finding on undervaluation of closing stock in the assessment order which has been confirmed by the CIT(A) as well as by the Tribunal. According to the Departmental Representative, no additional material is required to be placed on record in the penalty proceedings when the addition made in the assessment stands confirmed. In this connection, reliance has been placed on the following decisions: (i) Shiv Narain Khanna vs. CIT (1977) 107 ITR 542 (P H) (ii) CIT vs. Chiranji Lal Shanti Swarup (1981) 130 ITR 651 (All) (iii) Kedar Nath Sanwal Dass vs. CIT (1978) 111 ITR 440 (P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the AO having been upheld by the Tribunal. The explanation of the assessee regarding the defective stocks having lower value has neither been established to be wrong, nor is there any material on record from which an inference could be drawn that the assessee has consciously concealed the income. 10. Moreover, in this case, the AO has given directions in the assessment order in regard to the various additions including addition of Rs. 15,241. No specific satisfaction in regard to the amount of Rs. 2,64,570 has been recorded by the AO either for concealment of income or furnishing of inaccurate particulars of income. The notice issued to the assessee also does not indicate as to whether the penalty proceedings have been initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as arrived at in the absence of the same being spelt out by the order of the assessing authority". Before their Lordships, it was claimed that the satisfaction of the AO as contemplated in s. 271(1)(c) of the Act was inherent in the queries raised by him during the course of the assessment proceedings and that the AO had directed the issue of notice for levy of penalty under the section after being satisfied that the assessee had concealed the particulars of its income. Their Lordships of Delhi High Court held that it was not sufficient. Their Lordships relied upon their own decision in the case of CIT vs. Ram Commercial Enterprises Ltd. and also upon the decisions of the Supreme Court in the case of D.M. Manasvi vs. CIT 1972 CTR (SC) 437 : ..... X X X X Extracts X X X X X X X X Extracts X X X X
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