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TMI Blog2013 (10) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent : Smt. Veena Joshi, CIT,DR ORDER Per A. D. Jain, Judicial Member This is an appeal filed by the assessee for the block period from Assessment Year 1988-89 to 1998-99, against the order passed by the CIT (A)-XXII, New Delhi, dated 15.02.2011. The following grounds of appeal have been raised:- "1. In view of facts and under the circumstances of the case, whether the learned CIT (A) was justified in confirming the action of the Assessing Officer in levying the penalty of Rs.3.00 lacs under the provision of Sec.158BFA (2) of the Act. 2. Under the circumstances of the case and in view of the facts, the learned CIT (A) grossly erred in law and on facts in confirming the action of the A.O. in imposing penalty u/s 158BFA (2) of the Income-tax Act, without recording satisfaction to this effect, in the order u/s 158BC of the Act." 2. Regarding Ground No.2, no argument has been put forward. Accordingly, Ground No.2 is rejected as not pressed. 3. Apropos Ground No.1, the facts are that a search seizure operation u/s 132 of the IT Act was carried out on 3.9.1997, on the Goel group, including Mr. Pawan Kumar Garg, the Assessee. The Assessee derives income from the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e effect that any undisclosed income was introduced in the garb of creditors (page 92 93 of paper book). 5. The ITAT reversed the order of the CIT(A), inter alia, for the reasons that: (i) The Annexure A-25 was not maintained in the normal course. Only the purchases and sales giving quantities and rates were recorded in the seized stock register. There were no entries for payments or receipt of money on account of transactions of purchase and sale. Source of investment in purchases was also not recorded. Therefore, looking to surrounding circumstances, it cannot be said that the Assessee had intention to disclose the income (page 103 - 108 of the paper book). (ii) Though the confirmations/acknowledgment of return, PAN, copy of bank account etc. were filed, the Assessee neither produced the parties, nor expressed its inability to do so. In block assessment, undisclosed income has to be determined on the basis of the material found as a result of search. In the present case, material showing purchase of trading stock and investment in stock was found in search. No entry in respect of investment in the stock was recorded in the seized register. Therefore, benefit of section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in stock had no bearing to determine the income; that the addition of Rs.3,15,179/-, though labeled as peak investment, was actually an ad hoc addition, inasmuch as value of closing stock as on 31.3.1997 was taken as undisclosed investment; that it is not the case that the addition of Rs.3,15,179/- was made on the basis of the document found during the course of search; that in the search, only stock register (A-25) was found and seized and in A-25, no entry of cash loan was found; that the conclusion that the Assessee must have invested Rs.3,15,179/ in purchase of stock was only an inference; that no peak investment was worked out, rather, an ad hoc figure of the value of closing stock as on 31.3.1997 was taken as peak investment; that in respect of such adhoc addition, no penalty u/s 158BFA(2) was warranted; that in this regard, reliance is placed on 'Beena Rani v. Dy. CIT' (2011) 11 ITR (Trib) 106; that though that decision was rendered in respect of estimated addition, the principle is squarely applicable to adhoc addition; that in computing the undisclosed income, provisions of section 69 of the Act are applicable [Section 158BB(2)]; that the import of section 69 is that where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed, as in the case of 'International Audio Visual Co.', 288 ITR 570; that the additions, based on evidence found during search, of undisclosed transactions and of undisclosed investment in stock, are not at all comparable with cases of 'mere non-acceptance of explanation of assessee'; that the assessee's failure to maintain regular books of account like the cash book or ledger, and the maintenance of only a register giving a summary of transactions, with quantity and rates, indicate the intention of not disclosing the income; and that the investment in undisclosed purchases could also not be explained with reference to the entries in the books of account, or documents recorded in the normal course of business. 11. The Ld. DR sought to place reliance on 'CIT vs. Becharbhai P. Parmar', 341 ITR 499 (Guj), wherein, it was held that penalty imposable u/s 158BFA (2) of the IT Act is different from that leviable u/s 271(1)(c) thereof; and that addition in quantum proceedings that has attained finality cannot be reopened. Further, reliance has also been placed on 'JRD Stock Brokers (P) Ltd. vs. ACIT', 124 TTJ 566 (Del), wherein it was found that there was direct evidence of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 31.03.1997, which was taken as peak investment. Now, such ad hoc figure of closing stock cannot be deemed to be the value of investment which may be deemed to be the income of the assessee, in keeping with the provisions of Section 69 of the Act, which gets attracted when computing undisclosed income, as per Section 158BB (2) of the Act. True, it has been held by the Tribunal in the quantum appeal, that the confirmations, tax returns with acknowledgement, bank statements, assessment orders, PAN, etc., i.e., material comprising the source of the cash loans/investment, are not adequate to delete the addition made. However, what is being dealt with here is the issue of penalty u/s 158BFA (2) of the Act and qua that, since nothing has been shown to have been found in the search to incriminate the assessee of having introduced undisclosed income as cash loans, the said finding of the Tribunal is not detrimental to the assessee's claim of inculpability to the levy of penalty u/s 158BFA (2) of the Act. 16. In 'Beena Rani vs. DCIT', 11 ITR (Trib) 106 (Del), addition was made to the income of the assessee by estimating the profit at a higher rate, without any reference to any seized ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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