TMI Blog2013 (6) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings continued for three days and the Panchanama was written in presence of the Directors of the respective companies. If burning losses, etc. were not properly taken into consideration that issue could have been raised before the Central Excise Authorities at the time of preparing the Panchanama or immediately thereafter. No such efforts appear to have been made by the assessees herein. Even before us no material, whatsoever, was placed to indicate that the addition made and ultimately confirmed by the AO is not in accordance with law. Therefore, the assessees' explanation is not substantiated with any material and hence there is no infirmity in the orders passed by the learned CIT(A). - Levy of penalty confirmed - Decided against the assessee. - ITA No. 508/Mum/2012, ITA No. 509/Mum/2012 - - - Dated:- 13-2-2013 - Shri D. Manmohan And Shri Sanjay Arora,JJ. For the Appellant : Shri Shyam C. Agrawal For the Respondent : Shri Mohit Jain ORDER Per D. Manmohan, V. P. These two appeals involve an identical issue and they arise out of the orders passed by the CIT(A)-8, Mumbai wherein penalty levied by the AO having been affirmed by the learned CIT(A), assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excise Authority estimated value of finished stock and raw materials based upon "eye sight basis calculation" which was labelled as physical stock taking. In fact it is a case of miscalculation since they have not considered the burning losses that take place in the process of manufacturing of finished products. The Excise Department has also not taken into consideration certain dispatches and receipt of material of the assessee. In short the case of the assessee was that excess or shortage of stock was not found by proper verification of stock. It was thus contended that there is no excess stock, if burning losses, which is in the range of 10%, and also generation of scrap, etc. are taken into consideration. 4. The AO observed that during the long duration of stock taking process the assessee could not properly reconcile the stock. If there is any objection with regard to the methodology adopted by the Central Excise Authority the assessee should have raised such objection before them. It is also stated that the excess/shortage reflected in the Annexure to the Panchanama made by the Excise Authority shows that they have maintained distinction between raw material and finishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h works out to Rs. 3,72,320/- and the AO was accordingly directed to modify the order by treating the differential sum of Rs. 3,72,320/- as undisclosed stock. In the case of M/s. Mardia Tubes Ltd. the addition sustained was to the tune of Rs. 6,779,560/-. 8. It is necessary to notice here that the assessees herein approached the designated authorities under the Central Excise Act, under Kar Vivad Samadhan Scheme (KVSS), wherein the duty leviable on account of excess stock and shortage of stock was offered to tax to purchase peace with the Department and it was accordingly accepted. 9. Consequent to the additions made and confirmed by the CIT(A) as well as the ITAT the AO initiated proceedings under section 271(1)(c) of the Act. In response thereto the assessees have requested the AO to drop the penalty proceedings by contending that there was no wilful default and there is no conscious breach of law on the part of the assessees herein. In the case of Mardia Extrusions Ltd. it was submitted that the assessee company suffered heavy loss in business and was declared as sick industrial company. Under the circumstances it has offered the disputed amount under the Central Excise Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the addition of Rs. 4,86,788/Rs. 6,79,560/- respectively was accepted by the assessees herein before the Central Excise Authorities under KVSS merely to buy peace and to avoid litigation. The very fact that the additions made by the AO was reduced substantially in further appeals highlights that the addition was made merely on estimate basis and mere addition does not in itself prove that it amounts to concealment of income. It was also contended that the learned CIT(A) wrongly relied upon the decision of the Apex Court in the case of Dharmendra Textile Processors (supra) overlooking the fact that the principles laid down in the case of Reliance Petropoducts Pvt. Ltd. 322 ITR 158 (SC) is applicable to the cases in hand. The learned counsel for the assessees submitted that the assessees have tendered explanation to highlight that there was no basis for estimating the excess stock as well as shortage of stock for the purpose of making addition under section 69A of the Act. In fact the first appellate authority, in the quantum proceedings, admitted that the estimates made by the AO are without any basis. Assessees have also tendered an explanation that burning losses, etc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds once the addition is confirmed Explanation 1 to section 271(1)(c) comes into play and it is for the assessees to prove that the addition is not maintainable or at least they should give an explanation which can be substantiated. In the instant case it could not be shown that discrepancy in stock found by the Excise Department is on eye sight basis only; in fact the stock taking process was done in the presence of the Directors of the respective companies. He thus strongly relied upon the orders passed by the learned CIT(A). 15. We have carefully considered the rival submissions and perused the record. It is not in dispute that under Explanation 1 to section 271(1)(c) of the Act the initial burden is placed upon the assessees to prove that the addition confirmed by the AO is not the concealed income of the assessees. In other words the assessees have to prove that it was not on account of furnishing inaccurate particulars of income; the explanation of the assessees should be supported by proper reasoning. The AO as well as the CIT(A) relied upon the decision of the Hon'ble Apex Court in the case of Dharmendra Textile Processors; It is well settled principle of law that the ini ..... X X X X Extracts X X X X X X X X Extracts X X X X
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