TMI Blog2011 (9) TMI 1015X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. CIT (Appeals) has erred in deleting the penalty imposed in respect of addition made in respect of cash amounting to ₹ 7,48,510/- by holding the same to be surrendered by the assessee during the course of search; 4. On the facts and in the circumstances of the case, the ld. CIT (Appeals) has erred in admitting the additional submission regarding cash surrendered during search in contravention to Rule 46-A of the I. T. Rules. 3.1 The only issue for our consideration relates to imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961 [hereinafter referred to as the Act]. The Revenue is in appeal against deleting the penalty imposed in respect of addition on account of profit from undisclosed sales, addition on account of unexplained investment, surrender of cash amounting to ₹ 7,48,510/- and the assessee is in cross objection in confirming the penalty u/s 271(1)(c) on the amount of concealment of ₹ 15,16,360/- on account of unaccounted sales. The facts of the case stated in brief are that search and seizure operation was conducted on 9.2.2005 in the group cases of KVM along with its directors and associates. During the search op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which was not disclosed in the books and the same was declared as per provisions of section 132(4) as undisclosed income of the current year. He referred to answer to question No. 5 to support his contention. It was, therefore, pleaded that the assessee was neither found to be the owner of the unaccounted cash in question nor he had claimed that cash had been acquired by him from the undisclosed income, which was surrendered for taxation. Therefore the assessing officer was not correct in applying the Explanation 5 to unaccounted cash found. It was also submitted that the AO himself had stated that the entire unexplained cash of ₹ 1,54,64,870/- had been shown in the return of income submitted by the assessee on 30th March, 2006 and there had been no addition as a result of assessment completed under section 143(3) of the Act. 5. The ld. CIT (Appeals) on consideration of facts of the case and submissions made by the assessee observed that certain facts have not been appreciated by the assessing officer while imposing penalty under section 271(1)(c) of the Act. No penalty under section 271(1)(c) was imposable in respect of estimated additions. As regards the imposition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted additions made to the income surrendered by the assessee himself under the heads by applying higher GP rates on disclosed sales and ad-hoc estimation as in the case of unexplained investment. As regards additions of ₹ 2,54,490/- and ₹ 32,394/- the ld. CIT (Appeals) deleted the penalty relying on the decision of the ITAT in assessee s own case for assessment years 2001-02, 2002-03 and 2004-05 in I. T. Appeal Nos. 1529, 1530 and 1531 (Del) of 2008 dated 06th February, 2009. 6. Before us the ld. Sr. DR supported the order of the assessing officer. On the other hand, the ld. AR of the assessee submitted that the AO had imposed penalty on five additions. The addition of ₹ 1,60,150/- was made on estimated profits. The assessee declared income from unaccounted sales at ₹ 63,64,345/- and the AO had estimated the income at higher amount of ₹ 65,24,475/- by adopting higher GP rate. The gross profit rate was estimated by the assessee at 4.5 per cent on mustard oil sales, but the AO adopted GP rate of 6.78 per cent. The GP rates adopted by the assessee as well as the AO are based on estimate basis. When addition is made on estimate basis penalty under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee and, therefore, interest income could not be considered as concealed income of the assessee. In view of these facts it has been pleaded that penalty under section 271(1)(c) of the Act was not imposable in respect of interest on FDRs. 7. As regards the unaccounted cash of ₹ 22,64,870/- the ld. AR of the assessee submitted that at the time of search total cash found at various premises from possession of different persons was at ₹ 1,86,99,045/- out of which explained cash was ₹ 31,34,175/-. Out of balance amount of ₹ 1,55,64,870/- the assessee had surrendered ₹ 1,33,00,000/- under section 132(4) on 10/2/2004 which has been accepted by the AO giving benefit of exception provided in Explanation 5 of section 271(1)(c). The AO omitted the surrender of cash under section 132(4) at ₹ 7,48,510/- made on 9/2/2005. Hence the concealed income stands inflated by ₹ 7,48,510/-. The remaining amount of ₹ 15,16,360/-(22,64,870 -7,48,510) is owned by various occupants of the premises and, therefore, as per Explanation 5 the amount of ₹ 15,16,360/- could not be considered as concealed income. He, therefore, pleaded that penalty under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation 5 the assessee should be found to be in possession of such money, bullion, jewellery or other valuable article or thing or under his control. In the instant case, the balance amount of ₹ 15,16,360/- as discussed above has not been found from the possession of the assessee nor he was in control of such cash. The cash was either owned by the companies or other assessees. Therefore, no penalty can be imposed by invoking provisions of Explanation 5 of section 271(1)(c) of the Act. We, therefore cancel the penalty confirmed by the ld. CIT (Appeals) in respect of addition of ₹ 15,16,360/-. 9. As regards deleting the penalty in respect of addition on account of estimation of GP at ₹ 1,60,150/-, no proof of concealed income has been found. Similar is the position with regard to estimation of investment of ₹ 21,48,396/- in unaccounted business. Our view is supported by the decision of Hon ble Chhatishgarh High Court in the case of CIT Vs. Vijay Kumar Jain (supra) wherein it has been held that the income determined on estimate basis could not be held to be concealed income. In CIT Vs. Escorts Finance Ltd. 328 ITR 44 (Del.) it has been held that while the cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
