TMI Blog2018 (10) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... essee cannot be benefited by showing less amount of closing stock as it will become opening stock of the subsequent year. Therefore we are of the view that the act of the assessee for showing less closing stock cannot be said as deliberate. Closing stock for the year under consideration was shown less as pointed out by the AO. Thus, the assessee has to bear more burden of tax in the year under consideration. If the assessee has not made any adjustment, then it will bear more burden of the tax. It is because the assessee in the year under consideration has declared the higher amount of closing stock, but in the subsequent year, the assessee has shown less amount of opening stock which will lead in the enhancement of the profit of the assessee. Thus, we can conclude that there cannot be a deliberate act on the part of the assessee in declaring less amount of closing stock. - Decided in favour of assessee. - ITA No.3137/Ahd/2014 - - - Dated:- 26-9-2018 - SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SMT MADHUMITA ROY, JUDICIAL MEMBER For The Appellant : Smt. Urvashi Sodhan, A.R. For The Respondent : Shri Prasoon Kabra, Sr. D.R. ORDER PER WASEEM AHMED, ACCOU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Purchase/Production 7000 kg 44103 Consumption/sales 10638 kg 45100 Stock as on 31.03.2007 409 kg 4009 4.2 Accordingly, the AO worked out the valuation of the closing stock on account of less stock, which is detailed as under: Cobalt Sulphate (RM) 384 Kg @580 = 222720 + Itenogen blue CB (FP) 906 Kg @507 = 459342 4.3 On a question by the AO about the less reporting of closing stock, the assessee accepted the undervaluation of closing stock. Accordingly, the AO made the addition of ₹ 6,82,062/- and added to the total income of the assessee. 4.4 The AO in the assessment order framed u/s 143(3) r.w.s. 147 of the Act vide order dated 30-11-2012 initiated the penalty proceedings u/s 271(1)(c) of the Act on account of concealment of income and furnishing inaccurate particulars of income. 4.5 Subsequently, the AO issued the notice for the penalty u/s 274 r.w.s. 271(1)(c) of the Act. The assessee in compliance to it submitted that there was no m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . vs. CIT Civil Appeal No.9772 of 2013 5.2 In view of the above, the ld CIT(A) confirmed the order of AO by levying the penalty u/s 271(1)(c) of the Act. 5.3 Being aggrieved by the order of ld CIT(A) assessee is in the second appeal before us. 6. The Ld AR before us submitted as under: It is respectfully submitted that the appellant in response to penalty notice submitted that there was no difference in closing stock as worked out bv AO as below- Cobalt Sulphate (RM) Itenogen BlueCB (FP) Stock as on 31.03.2006 4047 kg 5006 kg Purchase / Production 7000 kg 44103 kg Consumption/ Sales 10638 kg 45100 kg Stock as on 31.03.2007 409kg 4009 kg Working submitted by the appellant as per the audited accounts: Cobalt Sulphate (RM) Itenogen BlueCB(FP) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that there was under-reporting of closing stock by the assessee. Therefore, the penalty was rightly levied by the AO. The ld DR vehemently supported the order of authorities below. 8. We have heard the rival contentions and perused the materials available on record. In the instant case, the AO alleges that assessee has undervalued its closing stock. Therefore, the same was added to the total income of the assessee. Accordingly, the penalty was levied u/s 271(1) of the Act, which was subsequently confirmed by the ld CIT(A). 8.1 From the preceding discussion, we note that the assessee during the assessment proceedings has duly explained the difference in the quantity of closing stock as discussed above but the AO has not pointed out any defect/infirmity in the submission of the assessee. It is a fact that the penalty proceedings are different with the assessment proceedings. To levy the penalty, there has to be some deliberate act on the part of the assessee either for concealing of the income or furnishing the inaccurate particulars of income. It is an undisputed fact that the closing stock of one year becomes the opening stock of the subsequent year. Thus, it can be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does. If an assessee gives an explanation which is unproved but not disproved, i.e., it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee s case is false, the Explanation cannot help the department because there will be no material to show that the amount in question was the income of the assessee. 8.3 The case law i.e. A.M. Shah Co. relied on by the ld CIT(A) cannot be applied to the instant facts of the case. It is because in that case there was not the only undervaluation of closing stock but also underreporting of sales. In the instant case on hand, there was no allegation of underreporting of sales. Therefore, we are reluctant to take the guidance from the judgment of Hon ble Gujarat High Court in the case of A.M. Shah Co. (supra) . 8.4 Similarly, we note that the case law, i.e. Zoom Communication P. Ltd.(supra) relied on by ld CIT(A) is not applicable to the case on hand. It is because in that case, the issue involved was about the expenses cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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