TMI Blog2011 (9) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... eal by the assessee is directed against the order of the learned CIT(A)-V, Baroda dated 08th September, 2008, for assessment year 2000-01, challenging the levy of penalty u/s 271 (1)(c) of the IT Act. 2. The facts as noted in the impugned order are that in this case, assessment u/s 143(3)/147 of the IT Act was finalized on 27-01-2005 and income was determined at Rs. 14,63,070/- by making addition of Rs. 9,00,000/- on account of unexplained investment in stock under section 69 of the IT Act. During the course of survey action conducted under section 133A of the IT Act, it had transpired on physical verification that the stock found was of Rs. 87,93,380/- whereas the stock as per books of account was worked out at Rs. 78,93,380/-. The assessee was asked to justify its claim. However, the assessee could not do so. Since the assessee failed to substantiate its claim, the AO made the addition amounting to Rs. 9,00,000/- as unexplained investment by invoking the provisions of section 69 of the Act. Before the learned CIT(A) it was argued that perusal of record of the inventories found during the course of survey and the inventory as per books of account tallied in respect of each and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 9,00,000/-. The appellant's closing stock for the (accounting period relevant to A.Y. 1999-00 was Rs. 74,25,000/-. Therefore, this should have been the opening stock for the A.Y. 2000-01. However, the appellant had increased the opening stock for the A.Y.2000-01 from Rs. 74,25,000/- to Rs. 83,25,000/-. Therefore it was held by the AO that the appellant had nullified the effect of excess stock found and admitted by it by increasing the opening stock by Rs. 9,00,000/-. It has been claimed by the appellants that although the appellant firm had increased the value of the opening stock by Rs. 9,00,000/-, it had also increased the value of closing stock at the rates taken at the time of survey. However, the appellant's representative failed to submit any evidence to justify the above claim. It has also been pointed out by the appellant's representative that the rates adopted by the learned AO during the course of survey were incorrect. However, in this regard also, no evidence has been brought to show as to how correct rates have not been adopted while valuing the stock at the time of survey. Further as mentioned above, the appellant had admitted the excess stock of Rs. 9,00,000/- foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to represent the income in respect of which particulars have been concealed. 4.2 A combined reading of Explanation 1 to section 271(1)(c) and the decision of the M. P. High Court cited above indicate that the addition of Rs. 9,00,000/- made by the AO and sustained by the CIT(A)-V, Baroda as per reference cited already reveal that the amount added or disallowed in computing the total income of the appellant for the purpose of clause (c) of section 271(1)(c) be deemed to represent the income in respect of which particulars have been concealed. In the circumstances, I reuse to intervene in the action of the AO. 5. In the result, the appeal is dismissed." 4. The learned Counsel for the assessee reiterated the submissions made before the authorities below and submitted that survey was conducted on 02-02-2000 and during the course of survey excess stock was found which was accounted for in the books of account of the assessee by mentioning the excess stock in the trading account in a sum of Rs. 9,00,000/-. PB-20 is copy of the trading account. The learned Counsel for the assessee also referred to PB-23 which is the original assessment order dated 30-03-2001 in which the original ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the assessee deliberately filed the trading account enhancing/increasing the opening stock for assessment year under appeal i.e. 2000-01 because the closing stock in the preceding assessment year 1999-2000 was Rs. 74,25,000/- but the opening stock in the assessment year under appeal i.e. 2000-01 was shown at Rs. 83,25,000/-. Thus, the assessee nullified the effect of excess stock found and admitted during the course of survey by increasing the opening stock valued at Rs. 9,00,000/- (PB-20). The learned DR submitted that the assessee did not cooperate with the AO at the penalty stage. No evidence or material is produced to support the claim made before the authorities below. No evidence has been filed as to how the correct rates have not been taken by the authorities below in valuing the stock. The assessee did not offer any proper explanation on the issue, therefore, Explanation (1) to section 271 (1) (c) of the IT Act is clearly attracted in the matter. The learned Counsel for the assessee in the rejoinder submitted that since the assessee filed explanation to the penalty notice, therefore, Explanation (1) to section 271 (1) (c) of the IT Act would not apply in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted from the original return of income. The imposition of penalty was valid." 6.3 The Hon'ble Allahabad High Court in the case of CIT v. Rakesh Suri [2011] 331 ITR 458 held as under: Held, allowing the appeal, that the assessee had concealed the material facts and given incorrect statement of facts in the application and also not provided information required by the Assessing Officer, after receipt of notice. Accordingly the action of the assessee was neither bona fide nor voluntary. The manner in which the assessee had tried to prolong the case before the Assessing Officer by not providing information immediately and by narrating incorrect facts in the letter dated December 6, 2006 showed that the assessee had concealed the income and disclosure was not voluntary but under compulsion being cornered by the Assessing Officer. Penalty had to be imposed." 6.4 The Hon'ble Punjab and Haryana High Court in the case of Smt. Ram Piari v. CIT [2010] 327 ITR 318 held as under: "Held, that mere disclosure of agreement to sell in the application for clearance certificate in Form 34-A could not be equated to disclosure in the income-tax return. The assessee failed to file a revised retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut on the basis thereof the claim which is made is ex facie bogus, it may still attract penalty provision. The Explanation appended to section 271 (1)(c) of the Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing return. The object behind enactment of section 271 (1)(c) read with the Explanations indicate that the section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Willful concealment is not an essential ingredient for attracting civil liability as is the case in the mater of prosecution under section 276C of the Act." 7. It is not in dispute that during the course of survey excess stock of Rs. 9,00,000/- was found in the premises of the assessee. The assessee admitted the excess stock and admitted to pay the tax thereon but the assessee did not do so. It was found by the AO that the assessee had increased the opening stock of assessment year under appeal 2000-01 by Rs.9,00,000/-. Therefore, the assessee had nullified the effect of excess stock found and admitted by the assessee. PB-20 is the trading account of the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come at Rs. 5,63,070/- which was determined in the original assessment order dated 30-03-2001. The assessee deliberately despite knowing that assessee is cornered by the AO, did not disclose additional income of Rs. 9,00,000/- even in the return of income filed in response to notice u/s 148 of the IT Act. The assessee thus concealed the income as well as concealed the particulars of income not only in the original return of income but also in the return of income filed in response to notice u/s 148 of the IT Act. The assessee did not produce any evidence of rates of the stock either before the AO or before the learned CIT(A). The learned CIT(A) in his order dated 08-09-2005 (PB-117) noted that the assessee failed to submit any evidence to justify the claim of increasing the value of the opening stock as well as rates taken at the time of survey. Even at the penalty stage, the assessee has not produced any evidence or material to show as to how correct rates have not been applied by the survey party while valuing the stock at the time of survey. Since, it is admitted fact that excess stock was found during the survey it was also admitted by the assessee and also admitted to pay tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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