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TMI Blog2013 (6) TMI 595X X X X Extracts X X X X X X X X Extracts X X X X ..... he period from 24-89- 2005 to 27-8-2005 appeal to be accommodative one by considering human probabilities." 3. As can be seen from the aforesaid grounds raised by the department, the only grievance is with regard to the CIT (A) not sustaining penalty u/s 271(1)(c ) on the addition of Rs.97,74,968/- confirmed by the Income-tax Appellate Tribunal. 4. Briefly the facts relating to the issue in dispute are, the assessee a partnership firm is engaged in the business of trading in gold jewellery. A search and seizure operation u/s 132 of the Act was conducted in case of the assessee and other group concerns on 30-8-2005. In response to the notice issued by the Assessing Officer, the assessee filed its return of income on 27-8-2007 declaring a total income of Rs.63,22,751/-. The Assessing Officer however completed the assessment u/s 143(3) of the Act on 28-2-2007 determining the total income at Rs.28,75,42,130/- by making the following additions:- i) Unexplained cash Rs.13,47,980 ii) Unexplained investment in stock Rs.1,34,47,756 iii) Unexplained investment in purchase of bullion Rs.26,61,20,004 iv) Disallowance of claim of deduction u/s 80 G Rs.3,10,641 5. Against the assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal against penalty order before the CIT (A), it was contended by the assessee that the assessee in course of assessment proceedings has put all the facts before the Assessing Officer with regard to purchase of jewellery and the same were confirmed by the third party M/s Kalpataru Jewellers after issuance of summons u/s 131 of the Act. It was contended that the Assessing Officer while completing the assessment has never said that the evidences were false but only observed that it is difficult to comprehend that the assessee had taken delivery at Mumbai, continuously on 4 days, when the entire consignment could have been taken in one day only. It was further contended that the confirmation of additions of Rs.97,74,968 by the Income-tax Appellate Tribunal would also not lead to the conclusion that the assessee had either concealed particulars of income or furnished inaccurate particulars of income as the Income-tax Appellate Tribunal has confirmed the addition only on considering human probabilities. The CIT (A) therefore deleted the imposition of penalty on the addition made of Rs.97,74,968 observing as under:- "7.8 As regards the addition of Rs. 1,34,40,756/- on account of unexp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the appellant as made from M/s. Kalpataru Jewellers, Mumbai vide bills Nos. 66 to 70 have been considered as genuine, the other 4 bills, being bill Nos. 74 to 77 in respect of purchases of Rs. 97,74,968/ -, have been considered as accommodative only on the ground of human probabilities and normal human behaviour, considering the totality of the facts and circumstances. 7.8.4 It can be seen that while the addition of Rs. 1,34,40,756/- on account of unexplained investment in stock was finally restricted to Rs. 97,74,968/- as discussed above, the Assessing Officer has considered the entire addition of Rs. 1,34,40,756/ - made in the assessment order as the basis for levy of penalty u/s. 271(I)(c). However, from the above discussion, it is amply clear that the reconciliation of stock, showing that in all 8 purchase bills, including 6 from M/ s. Kalpataru Jewellers, Mumbai, had not 'been entered into the stock register, has been partly accepted as correct. It is only the purchases to the extent of Rs. 97,74,968/-, vide bill No. 74 to 77 that have been considered as not conforming to normal human behaviour, resulting the upholding of the disallowance. 7.8.5 However, from records it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer or the CIT (A) or CIT to be false, or (ii) Such person offers an explanation, but cannot substantiate the same and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him; The Hori'ble ITAT have observed that in the above circumstances only the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of sec. 271(1), be deemed to represent the income of which particulars have been concealed. 7.8.8 Similarly, it is seen that the Hon'ble Ahmedabad ITAT, in the case of Gandhi Service Station Vs. ACIT (100 TTJ 1143), have opined that the quantum and the penalty proceedings are distinct and separate, and while deciding the issue of penalty, facts have to be reconsidered. They have opined that the factum of concealment needs to be proved. They observed that the explanation of the assessee in the said case had been rejected on assumptions, drawing adverse inference based on probabilities. However, in the light of the decision of the Hon'ble Apex Court in the case of CIT Vs. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Appellate Tribunal having confirmed the fact that the assessee has made unexplained investment in stock, imposition of penalty u/s 271(1)(c ) is fully justified on the addition made on account of such unexplained investment in stock. 12. The learned authorised representative for the assessee, on the other hand, strongly supported the order of the CIT (A) deleting penalty. The learned authorised representative for the assessee reiterating the stand taken before the CIT (A) submitted that the Assessing Officer in the order passed imposing penalty has merely relied upon the observation made at the time of making addition in the assessment order which cannot be a ground for imposition of penalty as the assessment proceedings and penalty proceedings are two different and distinct proceedings. In support of his contention, the learned authorised representative for the assessee relied upon the decision of Hon'ble Supreme Court in the case of CIT vs. Khoday Eswarsa & Sons (83 ITR 369). He further submitted that while imposing penalty, the Assessing Officer must give a conclusive finding that there is either concealment of income or furnishing of inaccurate particulars of income. In sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding six purchase bills from M/s Kalpataru Jewellers, Bombay were not entered in the stock register which was taken into account in the stock reconciliation statement. It was observed by the Assessing Officer that four of the bills of M/s Kalpataru Jewellers, Bombay i.e. bill Nos. 74 to 77 are continuous numbers which according to the Assessing Officer shows that only the assessee has purchased jewellery from Kalpataru Jewellers, Bombay from 24th to 27th August, 2005. These four bills amounted to purchase of stock of Rs.97,74,968/-. The Assessing Officer therefore came to a conclusion that these bills were accommodative in nature and accordingly he made the addition of entire amount of purchases made from Kalpataru Jewellers under eight purchase bills amounting to Rs.1,34,40,756/-. 14. The CIT (A) after considering the submissions of the assessee held that the transactions covering bill Nos. 74 to 77 were quite unusual and abnormal and appears to be collusive. He therefore held that the purchases in respect of the said four bills did not conform to the normal human behaviour and therefore what was apparent was not real. Accordingly, the CIT (A) restricted the addition to Rs.97,74 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curate particulars of his income. As can be gathered from the discussions made by the CIT (A) in his order while deleting the penalty, the assessee did prove the fact that he had entered into the transactions with M/s Kalpataru Jewellers and in course of assessment proceedings, the Assessing Officer also had examined the books of accounts, bills and vouchers of M/s Kalpataru Jewellers. Wherein the transaction under those right bills were found to be duly recorded It is another fact that the purchases made under Bill Nos. 74 to 77 were not accepted on the ground of human probabilities but that itself would not lead to the conclusion that the assessee has concealed his income when it is not disputed that when assessee's business transaction with M/s Kalpataru Jewellers is not disputed and it is also fact that all the transactions in the said bills were recorded in the books of accounts of M/s Kalpataru Jewellers. As has been held in the decisions relied upon by the learned authorised representative for the assessee unless there is a conclusive finding by the Assessing Officer that there is conscious attempt on the part of the assessee to conceal his income or furnish inaccurate parti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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