TMI Blog2012 (3) TMI 648X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 BC of the Act, the assessee filed return showing undisclosed income at nil. In the course of block assessment proceedings, the assessing officer while verifying the books of accounts with the seized material found huge differences between the number of bottles issued and number of bottles sold. The assessee claimed the difference was on account of breakage of bottles and percentage of breakage varies for different sizes of bottles. The percentage of breakage recorded in the books of accounts was found to be ranging from 6.92% to 54% depending upon sizes of the bottles. While comparing these figures with the cost sheet seized during the search and seizure operations, the assessing officer found that breakage of bottles has been shown at 6% in the cost sheet. Therefore, by adopting the breakage at 6%, he made an addition of ₹ 4,35,60,320/-. While examining the cost of purchases of bottles by the assessee, the assessing officer has observed that the assessee has inflated the cost of purchases. The assessing officer found that the assessee had purchased bottles from the concerns connected with the assessee as well as from other concerns. The purchase cost of the bottles from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the search. It is true that the Assessing Officer has not doubted the quantitative records of empty bottles. However, it cannot be denied that the breakage shown by the assessee is phenomenally on the higher side. If not fully, the Assessing Officer is somewhat justified in disbelieving the breakage claimed by the assessee. However, the job well begun by him was allowed to be withered away by not conducting full and necessary enquiries and hence the addition made by him does not seem to be fully justifiable. Purchasing the bottles through sister concerns may raise a doubt about the intentions of the assessee. However, without bringing full and proper facts on record, the conclusion drawn by the assessing officer is reduced to an inference only. Moreover, the connected concerns are not held to be either fictitious or benami concerns of the assessee. Thus, when the sales of these concerns are not doubted, there hardly remains any room to doubt the purchases of the assessee. The fact that certain papers relating to the connected concerns were found at the premises of the assessee does not have any bearing on the conclusion drawn by the Assessing Officer. After all, they are connected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - - 750 16% 15% 1999-2000 180 19% 15% 375 27% 15% 750 7% 7% 2000-01 180 18% 15% 375 15% 15% 750 50% 15% 2001-02 180 14% 14% 375 30% 15% 750 54% 15% 2002-03 180 12% 12% The percentage claimed by the assessee as mentioned in the above table, have been computed on the basis of the figures provided by the CIT (A) in para -18 of his order. Thus, we allow breakage up to 15% where the breakage is more than 15% and have retained the same breakage where it is less than 15%. We hold accordingly and direct t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has concealed its income and hence no penalty can be imposed. The assessing officer however rejected the explanation of the assessee and passed an order under section 158BFA(2) of the Act imposing penalty of ₹ 1,27,84,457/-. Having failed before the CIT (A), the assessee is now in appeal before us. 6. The learned authorized representative of the assessee invited our attention to page-86 of the paper book and submitted that the entire assessment has been made and undisclosed income has been determined solely on the basis of the cost sheet seized during the course of search operation. The learned AR of the assessee submitted that the cost sheet which is undated and unsigned at best can be an estimate of the cost of one case of 180 ml IMFL only. It has neither any relevance nor nexus to the actual cost of bottles or percentage of breakage. He submitted that right from the assessment stage, additions have been made on purely estimate basis. In case of breakage of bottles while the assessee shown at 19%, the assessing officer by relying upon the cost sheet, adopted the same at 6 per cent. The ITAT in its order passed in quantum appeal estimated the breakage at 15%. Simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases of bottles by paying higher rates to its connected concerns, the ITAT in para-22 of its order has given a categorical finding that the assessing officer has not brought any concrete evidence to prove that the purchases have been inflated. The ITAT has further given a finding that the assessing officer has not found any fault with the books of accounts or purchase vouchers. Therefore, neither books of accounts nor the book results have been rejected by the assessing officer. Considering these factors, the ITAT directed the assessing officer to adopt ₹ 1.80 per bottle and calculate the disallowance accordingly. From the aforesaid facts arrived at by the ITAT in the quantum appeal proceedings, one inescapable conclusion which arises is that neither the assessing officer nor the CIT (A) or the ITAT could with any degree of certainty come to a finding about the actual percentage or the cost of the bottles. Therefore, estimation was made to arrive at a reasonable figure. In the aforesaid factual situation, we find force in the contentions of the learned authorized representative of the assessee that penalty cannot be imposed under section 158BFA(2) of the Act when undisclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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