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TMI Blog2001 (1) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 8,00,000 representing difference in cost of purchase and market value as on 12th May, 1988, of certain old items brought forward from last year (as on 1st April, 1988), as opening balance as per order of learned CIT, Kanpur dt. 19th May, 1989, of which actual sales taking place after the date of search i.e., 12th May, 1988. (b) Rs. 6,567 Addition on the basis of seized weighment &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; time of search 8,00,000 (2) Sales outside books of account 6,567 (3) Unexplained cash found 3,81,371 (4) Unexplained investment in valuable articles 1,25,000 (5) Unexplained investment in jewellery 1,800 --------- & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ongs to his wife was not accepted by the AO. (h) The AO thus, imposed penalty of Rs. 6,83,772 on account of the additions mentioned above. 6.1. In appeal, the learned CIT(A) confirmed the penalty on item No. 1, which relates to surrender of sum of Rs. 8 lakhs on account of difference in valuation of stock. He also confirmed the penalty on item No. 2, which relates to sale outside the books. Likewise on item No. 3 also, he confirmed the penalty. So far as item No. 4 relating to unexplained investment of value of articles is concerned, the CIT(A) found that Maruti van purchased for Rs. 80,000 and scooter purchased for Rs. 12,500 were purchased in 1985 and, therefore, the same was not assessable in asst. yr. 1989-90. He, thus, cancelled the penalty in respect of addition of Rs. 80,000 being cost of Maruti van and Rs. 1,25,000 being cost of Vespa scooter. On the additions relating to remaining items, he confirmed the penalty. The CIT(A), cancelled the penalty imposed on account of addition of Rs. 1,800 under the head "Unexplained investment in jewellery". The assessee has challenged the findings of CIT(A) before us. 7. The learned counsel for the assessee, Shri S.K. Garg, FCA, appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ok. 11. The learned Senior Departmental Representative, on the other hand, supported the order of CIT(A). So far as the order under s. 154 passed by the CIT(A) for cancelling the penalty on the addition of Rs. 8 lakhs is concerned, the learned Senior Departmental Representative submitted that the Department has challenged the order of the CIT(A) in ITA No. 915/All/1992 and, therefore, the order of CIT(A) under s. 154 cannot be treated to be a final order. He further submitted that the Department has also challenged the cancellation of the penalty by the CIT(A) on the additions made on account of two items i.e. Maruti and Vespa scooter in ITA No. 281/All/1992 and also cancellation of penalty on the addition of Rs. 1,800. 12. The learned Senior Departmental Representative also contended that in order to avail immunity under Expln. 5, sub-s. (2) of s. 271(1)(c), it was incumbent upon the assessee to specify the manner in which such income was derived and in case he did not specify the "manner" of earning income in his statement under s. 132(4), he was not entitled to immunity claimed by him. 13. About the penalty imposed on account of difference in valuation of stock, the learned S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntext of huge stock to the tune of Rs. 50 lakhs minor variations in the stock or shortage is natural. In our view, no contumacious conduct or design of concealment can be inferred from the conduct of the assessee on the basis that scrap weighing 373.4 kgs. was found short and that there was shortage of asbestos powder of 3.9 kgs. So far as the 1,290 kgs. is concerned, although the same was found in the premises of the assessee, but it could be connected with his stock or dealings. In any case, we are unable to endorse the findings of the CIT(A) in this issue. 18. So far as the third addition relating to Rs. 3,81,371 is concerned, the submission of the learned counsel for the assessee that the assessee had disclosed in his statement under s. 132(4) deserves to be accepted. The view of the CIT(A) that the assessee had not specified the manner in which he had earned the income surrendered by him is concerned, we are unable to agree with him. In the case of Mahendra Chimanlal Shah vs. Asstt. CIT, ITAT, Ahmedabad 'A' Bench has held that immunity under Expln. 5 to s. 271(1)(c) of the Act can be availed of the assessee satisfied with the following conditions: (1) The assessee had made u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manner in which these disclosed income was earned, then it was his duty to narrate the manner in which the disclosed income was earned. 23. In view of the above facts and circumstances, we are unable to agree with the findings of the CIT(A) that the benefit of Expln. 5(b)(2) to s. 271(1)(c) of the Act cannot be given to the assessee, because he had failed to disclose the manner in which the surrendered income was earned by him. In our view, therefore, the assessee is entitled to the immunity available under cl. (2) of Expln. 5 (b) to s. 271(1)(c) of the Act on the remaining items including the cash of Rs. 3,85,371 and value of household goods at Rs. 32,500 found during the course of search. In our view, therefore, the CIT(A) was not justified in sustaining the penalty on the additions enumerated in ground No. 1. We, therefore, reverse the finding of CIT(A) and allow this ground in favour of the assessee. Ground No. 2 24. This ground is about the applicability of Expln. 5 to s. 271(1)(c) of the Act r/ws. 132(4) of IT Act, 1961. 25. While deciding ground No. 1, we have observed that the assessee shall be entitled to the immunity available under s. 271(1)(c) of the Act r/w Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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