2001 (5) TMI 816

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..... is of purchases and sales accounted for in the books upto the date of survey and closing stock calculated by assuming a normal g.p. rate shown by the assessee should have been Rs. 17,37,407. Thus apparently there was a shortfall in stock of Rs. 10,51,051. On a query, Sh. Barjinder Kumar Dhir, one of the partners, said that certain wooltops were sent to two different concerns for dying which accounted for the difference. After making adjustment on account of such goods sent, there was still a discrepancy of about 340 kg. of wooltops about which the assessee could not give any satisfactory explanation at the time of survey. Subsequently, however, the assessee explained during the course of asstt. proceedings that the goods worth Rs. 9,56,500 .....

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..... the departmental authorities. It was submitted that the addition was made to the declared income by rejecting the books of account by applying a flat rate and in such a situation there was no question of any concealment of income or of furnishing of any inaccurate particulars of such income. Ld. first appellate authority considered the explanation and deleted the penalty by observing as under in para 3 of the impugned order : ". . . In the course of appellate proceedings, more or less the same arguments were advanced before me by Assessing Officer and the appellant s counsel. On consideration of the matter, I am of the opinion that there was definitely a lapse on the part of the appellant in not being able to give a proper explanation r .....

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..... ffered for taxation at the time of filing return. There could be no further profit on sales of such goods. It had also been stated before me that the explanation given by the appellant was at a much later date during the course of asstt. proceedings. The appellant s counsel stated that such an explanation could not be given earlier as there was no occasion to do so. It was offered after the survey operation on the first opportunity which was in response to ITO s letter asking for an explanation reg. variation in stocks. Hence, in my opinion, there could be no penalty levied on account of the fact that the appellant had affected sales outside the books of account. There is no concrete evidence to this effect as all sales are reflected in the .....

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