TMI Blog2019 (2) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... n is based on material found during the course of search. Undoubtedly, there was some material found during the course of search and additional income on that account was offered by the assessee and the same has been accepted by the Revenue Department but on that account, no penalty has been levied, since the conditions of section 158BFA(2) of the Act are not attracted. Further, on the estimated income, we find no merit in levying penalty under section 158BFA(2) - Hon’ble Bombay High Court in CIT Vs. Dodsal Ltd. (2008 (7) TMI 5 - HIGH COURT BOMBAY) has also laid down the proposition that levy of penalty under section 158BFA(2) of the Act is discretionary and not mandatory. In view thereof, we direct the Assessing Officer to delete penalty levied under section 158BFA(2) - Decided in favour of assessee. - ITA No.1215/PUN/2016 - - - Dated:- 24-1-2019 - MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM For The Appellant : Shri Nikhil Pathak For The Respondent : Shri Avadhesh Kumar and Pankaj Garg ORDER PER SUSHMA CHOWLA, JM: The appeal filed by assessee is against order of CIT(A)-2, Pune, dated 22.03.2016 relating to Block Period 1987-88 to 1997-98 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd GP rate being declared and vide para 13 of the order for the block assessment observed that profit declared by assessee @ 10.5% in the block return for assessment years 1994-95 to 1997-98 was not correct as the same was not in consonance with the statement given by Shri K.B.N. under section 132(4) of the Act. The partner in the said statement had stated that the profit was in the range of 15% - 20%; therefore, the Assessing Officer applied profit rate of 18% and computed the income at ₹ 51,66,000/-. The Assessing Officer further allowed undisclosed expenditure out of the said profit and worked out the same at ₹ 67,93,946/- on the basis of modus operandi adopted by assessee. The Assessing Officer was of the view that the assessee has concealed investment in stock to the extent of ₹ 25,93,946/- i.e. ₹ 67,93,946/- (-) ₹ 42,00,000/- shown by the assessee as undisclosed income and the difference of ₹ 25,93,946/- was added in the hands of assessee in assessment year 1997-98. The JCIT, because of variation in the undisclosed income determined and the undisclosed income shown in the block return, initiated penalty proceedings under section 158BFA(2) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed stock declared in block return and the Assessing Officer had made aforesaid addition of ₹ 25,93,946/- on account of undisclosed stock not disclosed in the block return treating the same as unexplained investment under section 69C of the Act. While making the aforesaid addition, the Assessing Officer further adopted GP rate of 10.5% in order to arrive at the value of closing stock on the date of search. However, the Tribunal had adopted the gross profit rate of 20% in order to arrive at the value of undisclosed stock on the date of search and confirmed the net addition of ₹ 15,79,136/- after reducing undisclosed stock of ₹ 42 / 47 lakhs admitted in block return. The contention of assessee before the JCIT was that the undisclosed income was determined on estimate basis and where undisclosed income was merely estimated in excess of undisclosed income admitted in the block return, the levy of penalty under section 158BFA(2) of the Act was not justified. However, on verification of case records, the JCIT observed that value of closing stock was determined on the date of search based on actual sales and GP rate declared / admitted by the assessee. The physical invent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in CIT Vs. Dodsal Ltd. (2009) 312 ITR 112 (Bom). He then, placed reliance on the decision of the Hon ble High Court of Rajasthan in CIT Vs. Dr. Giriraj Agarwal Giri (2012) 346 ITR 152 (Raj), which was case of block assessment, wherein the addition was made on the basis of estimation and the Hon ble High Court held that in such cases, no penalty is to be imposed under section 158BFA(2) of the Act. He further referred to the decision of Pune Bench of Tribunal in ACIT Vs. Shri Chandrakant Kashinath Kele in ITA No.804/PN/2013, relating to Block Period 1990-91 to 2000-01, order dated 13.03.2015, which was also case of block assessment, wherein the addition was made on account of unexplained investment in house property and unexplained marriage expenditure which was determined on the basis of estimation. The Tribunal had held that where the addition has been made on the basis of estimation and then it went on to say that no penalty is to be levied on such addition based on estimate basis. The learned Authorized Representative for the assessee pointed out that the CIT(A) had relied on the decision of Hon ble High Court of Gujarat in Kandoi Bhogilal Mulchand Vs. DCIT (supra), wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d stock by applying GP rate. 11. The question which arises before us is whether the aforesaid addition which has been made in the hands of assessee is exigible to levy of penalty under section 158BFA(2) of the Act. In respect of evidence found during the course of search in the hands of assessee the addition has been made being the value of undisclosed stock and no penalty on the said addition has been levied in the hands of assessee. However, the gross profit rate which has been applied on such stock is independent of evidence found during the course of search and though addition has been made in the hands of assessee on such account but the said addition is purely estimated addition, which is further strengthened by the fact that starting from Assessing Officer, CIT(A) and the Tribunal, various GP rates have been applied to estimate the aforesaid addition. In case, any evidence was found during the course of search, then where is the need to estimate the same? In such circumstances, we find no merit in the orders of authorities below that the addition is based on material found during the course of search. Undoubtedly, there was some material found during the course of search ..... X X X X Extracts X X X X X X X X Extracts X X X X
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