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TMI Blog2012 (8) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... 25,11,325/- on account of difference between Rs.68,80,250/- and Rs.43,68,925/- being the mistake in sales for 2 months. In view of the facts and submissions filed, the learned CIT(A) ought to have directed the A.O. to rectify the order giving effect to the ITAT's order to the extent of Rs.25,11,625/- as claimed by the appellant and reduced the revised total income by the said amount." 2.2.1 Brief facts of the case are that in the course of first round, some relief was allowed by the Tribunal and appeal effect order was passed by the A.O. and against this appeal effect order passed by the A.O., the assessee moved an application dated 27.09.2006 pointing out certain mistakes in the appeal effect order passed by the A.O. Against 4 mistakes pointed out by the assessee, one mistake was rectified by the A.O. and regarding other three mistakes pointed out by the assessee, in such application u/s 154, it was held by the A.O. that there is no such mistake in the appeal effect order passed by him. Against this order of the A.O. u/s 154, rejecting his request of rectification of three alleged mistakes, the assessee moved an appeal before Ld. CIT(A) but without success and now, the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se figures of sale from Dec.1999 to 26.02.2000, the sale of Dec 1999 should be reduced and it will give the figure of sale from 01.01.2000 to 26.02.2000 and on the basis of such sales, the sale for last three days of Feb. 2000 can be estimated. 2.2.4 Ld. D.R. supported the orders of authorities below. 2.2.5 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that as per the Tribunal order in the first round, it was directed by the Tribunal that the sales of two months i.e. 01.01.2000 to 29.02.2000 should be estimated but there is no such direction by the tribunal that the same has to be estimated on the basis of sale for six months i.e. from 01.07.1999 to 31.12.1999. Therefore, in our considered opinion, such estimation has to be made as close as possible to the actual figure. When the A.O. himself noted the sale figure from 01.12.1999 to 26.02.2000 on page 6 of the assessment order and the sale figure for Dec 1999 is separately available on page 11 of the paper book which was also considered by the A.O., thee is no requirement to estimate the sale from 01.01.2000 to 26.02.2000 because the actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . with regard to excess expenditure debited in the receipt and payment account as compared to the expenses debited in the P & L account was short allowed by the A.O. to the extent of Rs.1,21,51,680/-. On this issue, it was held by the tribunal that the assessee has given a chart pointing out the less deduction having been allowed by the A.O. but it requires verification and the tribunal directed the A.O. to verify the assessee's chart and allow the deducing of expenditure which is debited in Annexure A-15 which is in excess of the expenditure debited in the P & L account. In the order passed by the A.O. u/s 154, it is noted by the A.O. that it was claimed by the assessee before him in his application u/s 154 that there is a mistake in the amount of expenditure allowed at Rs.47,87,106 as against Rs.1,21,51,680/- i.e. short allowed by Rs.73,64,574/-. The A.O. has held that this contention of the assessee is not correct because in the original assessment order at page 23, the assessee has confirmed that this payment to the financial institution, bank, Gujarat Electricity Board, GAIL and PF payments have been recorded in the books of account and the same have been claimed in the retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upported the orders of authorities below. 2.3.4 We have considered the rival submissions, perused the material on record and have gone through the order of authorities below. We find that the tribunal in the first round noted that chart submitted by the assessee as per which it was claimed by the assessee that the A.O. has not allowed in full the deduction of Rs.1,21,51,680/- being the difference of expenditure claimed in the receipt and payment account and in the P & L account. The tribunal has restored back the matter to the file of the A.O. for examination of this contention of the assessee and to decide the matter afresh. The A.O. has allowed deduction of Rs.47,87,106/- but he has not given any basis for working out of this amount as against claim of the assessee of Rs.1,21,51,680/-. We feel that in the interest of justice, this matter should go back to the file of the A.O. for a fresh decision. The A.O. should examine the receipt and payment a/c of the assessee and even if he is not satisfied about the claim of the assessee, he has to give reasoning and basis for rejection of any part of this claim of the assessee, by way of passing speaking and reasoned order. Needless to sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.1996 of Rs.10,11,306/- as per the details of unpaid copy of balance sheet available on page 131 of the paper book. He further submitted that the loss as per P & L account for this year was Rs.24,96,906/- but as per the return of income filed by the assessee for this year available on page 200 of the paper book, the loss claimed by the assessee was only Rs.1,35,570/- which was accepted for this year available on page 201 of the paper book. He further submitted that loss as per intimation books was reduced by this amount of unpaid sales tax by way of making disallowance u/s 43B and, therefore, for the purpose of computation of book sales, the sales tax collection during that year has to be added to the sale as per books and, therefore, unaccounted sale worked out by the A.O. will go down. He further submitted that the assessment for the assessment year 1997-98 was completed by the A.O. u/s 143(3), copy of which is available on page 205 -208 of the paper book. He submitted that as per this assessment order, A.O. has allowed benefit to the assessee of Rs.7,24,521/- because the assessee has been allowed the benefit of sales tax deferment and, therefore, no disallowance is called for u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out from the assessment order for the assessment year 1997-98 that the assessee has been found eligible for sales tax deferment and, therefore, no addition is called for in respect of unpaid sales tax and the A.O. himself allowed deduction on this basis in that year in the scrutiny assessment. Hence, we feel that on this aspect also, the A.O. should examine the records afresh to find out as to how much sales tax was collected during the block period and credited to the liability account without crediting to the sales account as per the books of account. He should also find the deferment of sales tax as permitted by the State Government. To the extent of sales tax collected during the block period without crediting the sales account, the amount should be added back in the sales as per books for working out unaccounted sales as has been directed by the Tribunal in the original round. Similarly, to the extent sales tax deferment has been allowed by the State Government, no addition is called for u/s 43B also on account of unpaid sales tax. The A.O. should decide this issue by way of reasoned and speaking order as per above discussion after providing adequate opportunity of being heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d income of Rs.5.11 crores. The appeal against the assessment order was decided by the then CIT(A)-I, in his order dtd. 26/5/2003 in which addition(s) of Rs.3.21 crores were deleted and the revised undisclosed income determined after CIT(A) order was Rs.1,89,85,035/-. In further appeal, the Hon'ble ITAT\_Ahmedabad, jn ITA NO. IT(SS)/296/Md/20037~in~7ts order dtd. 3/3/2005 made certain observations and directed the A.O. to verify the deduction for expenditure/sales tax and excise duty. The A.O. accordingly provided opportunity to the appellant in respect of the proposed appeal effect order, vide letters dtd. 23/8/2005 and 12/9/2005 and thereafter in the appeal effect order, revised the total undisclosed income at Rs. 3,45,11,318/- and also served penalty notice dtd. 19/9/2005. 4. In the penalty order ii/s. I58BFA(2), the A.O. noted that the search had resulted into seizure of documentary evidence, relating to the suppression of production and sales turnover, (b) discrepancies in stock and (c) under reporting of income. The appellant has not complied with and /or filed submissions in respect of the penalty notice/show cause The A.O., therefore, levied the penalty of Rs.2,42,26,944/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebatable issue and hence, penalty is not justified. 3.2.3 As against this, Ld. D.R. supported the order of Ld. CIT(A). He also submitted that now, this issue is covered against the assessee by the judgment of Hon'ble Gujarat High Court rendered in the case of CIT Vs Becharbhai P. Parmar as reported in 341 ITR 499 (Guj.) and also in the case of Kandoi Bhogilal Mulchand Vs DCIT as reported in 341 ITR 271 (Guj.). He submitted that as per these two judgments, it was held by Hon'ble Gujarat High Court that the principle that onus is on the revenue to prove concealment of income cannot be imported while considering the question of penalty under sub-section (2) of Section 158BFA of the Income tax Act, 1961. It is submitted that as per these two judgments of the Hon'ble Gujarat high Court, it was held that where the addition is confirmed by the tribunal, penalty is liable to be imposed although it is discretionary. He also placed reliance on the following two Tribunal decisions: (a) JRD Stock Brokers Pvt. Ltd. Vs ACIT 124 TTJ 566 (Del.) (b) Smt. Madhuben R Barot Vs ACIT 12 ITR (T) 465 3.2.4 In the rejoinder, it was submitted by the Ld. A.R. that even Hon'ble Gujarat high Court has deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mention of Section 158BFA(2) in the section 273B but still it does not mean that the penalty u/s 158BFA(2) is mandatory. Hence, as per these two judgements of Hon'ble Gujarat High Court also, the penalty is not mandatory and in a given case, it may be that penalty is not justified although quantum addition is sustained. Now, the question is, what can be those circumstances when penalty u/s 158BFA(2) is not justified although the quantum addition had attained finality. In the present case, the quantum addition is also not yet reached its finality because against the tribunal order in the quantum proceedings, assessee has filed an appeal before Hon'ble Gujarat High Court and the same has been admitted by Hon'ble Gujarat High Court as per tax appeal No.1211/2006 dated 26.12.2006 and the following substantial question of law were admitted by Hon'ble Gujarat High Court: (i) Whether, in the facts and circumstances of the case the ITAT was right in law in holding that debit under the head 'debtors' in Annexure A- 15 is not an allowable expenditure? (ii) Whether in the facts and circumstances of the case the ITAT was right in law in not accepting debit side of the seized Annexure A-15 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t against the sale proceeds becomes irrecoverable. Therefore, the question of bad debt being debited in the payment side of receipt and payment account does not arise. Coming to the assessee's contention that the debit under the head 'debtors' reflects the discount and commission is also not acceptable because in the payment side for several periods there is a debit separately under the head 'discount and commission' as under: 1.4.1996 to 30th Sep. 1996 Rs. 81,500 1.10.1996 to 31.3.1997 Rs.1,95,000 1.4.1997 to 31.10.1997 Rs.2,27,720 1.11.1997 to 31.3.1998 Rs.1,62,250 1.4.1998 to 30th June 1998 Rs.1,14,526 1.7.1998 to 31.12.1998 Rs.2,15,815 1.1.1999 to 30.6.1999 Rs.1,85,760 1.7.1999 to 31.12.1999 Rs.1,98,261 Once the assessee is maintaining separate head for debiting 'discount and commission' the question of debiting the same under the head 'debtors' does not arise. Whatever discount and commission is paid by the assessee would be debited under the head 'discount and commission'. It was vehemently contended by the Ld. Counsel that there is a general practice in this line of trade to allow 30 to 40% discount to the traders. However, if the contention of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scount and commission by the assessee on the sales. We may also mention that every outgoing is not an expenditure and burden is upon the assessee to establish that any outgoing is in the nature of an expenditure incurred for the purpose of business. The assessee except making a claim that debit under the head 'debtors' is in the nature of discount and commission has not brought on record any evidence to support this claim. On the other hand, the other material on record clearly establishes that the debit under the head 'debtors' is not in the nature of discounts and commission. In view of above, we reverse the order of the CIT(A) on this point and restore that of the A.O. and hold that the debit under the head 'debtors' ion Annexure A-15 is not an allowable expenditure." 3.2.7 From the above paras of the tribunal order, it is seen that it is held by the tribunal that the amount debited in the receipt and payment account is payment to debtors but it is not an allowable expenditure. Now, the relevant question is that if the penalty u/s 158BFA(2) is not mandatory then in the what circumstances, it can be said that even after confirmation of addition by the Tribunal, penalty under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of which has been computed total sale as per the seized material and from this, the sale accounted for in the assessee's books was reduced and undisclosed sale was worked out and similarly deduction was allowed on account of expenses which were more in such seized material as compared to the expenses accounted for in the books of account. In connection with computation of unaccounted sale it was the claim of the assessee that the amount debited in the receipt & payment account under the head 'debtors' should be allowed as expenditure because such payment was actually made to the debtors against the discount commission paid to debtors. This claim of the assessee was rejected by the A.O. in full but when assessee carried the matter in appeal before Ld. CIT(A), he directed the A.O. to allow 70% of the amount written under the head 'debtors'. When both the parties carried the matter before the tribunal, the Tribunal decided the issue against the assessee and confirmed the total disallowance made by the A.O. Against such order of the Tribunal in quantum proceedings, the assessee filed appeal before Hon'ble Gujarat High Court and the Hon'ble Gujarat High Court has already admitted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable cause due to which the assessee was under bona fide belief that there is no undisclosed income arising to the assessee in the block period as per the seized material because as per the assessee, he is eligible for deduction in respect of the amount debited in the seized receipt and payment account under the head 'debtors'. Although this contention of the assessee is not accepted by the authorities below and by the Tribunal in the quantum proceedings but still we have noted that this very fact that Hon'ble Gujarat High Court has admitted the appeal of the assessee in quantum proceedings by holding that there are two substantial questions of law arising out of the Tribunal order in quantum proceedings in respect of the assessee's claim about allowability of deduction in respect of the amount debited under the head debtors, there can be a possible view of a man of reasonable prudence that there is no undisclosed income arising out of the seized material because if the deduction is allowed to the assessee in respect of the amount debited under the head debtors, then no undisclosed income remained to be taxed. Hon'ble Gujarat High Court has already held that the penalty u/s 158BF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, this was not a case of the assessee that the person of reasonable prudence could have a possible view that this amount was not giving rise to an undisclosed income in the hands of the assessee whereas in the present case, we have seen that in the facts of the present case, a person of reasonable prudence can have a possible view that there is no undisclosed income arising as per seized material although the claim of the assessee was rejected by the authorities below and by the Tribunal also in the quantum proceedings giving rise to addition of income but against such tribunal order in quantum proceedings, appeal has been admitted by Hon'ble Gujarat High Court by holding that two substantial question of law arise in respect of this very issue and, therefore, this tribunal decision is also not applicable in the present case because the facts are different. 3.2.9 In view of the above discussion, we find that in the present case, penalty is not justified as per these two judgements of Hon'ble Gujarat High Court in which it was held by the Hon'ble Gujarat High Court that penalty u/s 158BFA(2) is not mandatory. We have discussed in detail as per above para that in the facts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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