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TMI Blog2016 (1) TMI 799X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case and in law, the learned CIT(A) erred in holding that the penalty u/s 158BFA(2) is not leviable in assessable in assessee s case in respect of the assessed undisclosed income u/s 158Bc(b) confirmed in the quantum by the Ld. CIT(A). 2) On the facts and circumstances of the case and in law, the learned CIT(A) erred in not appreciating the position in I.T. Act, 1961 with regard to imposition of penalty u/s 158BFA(2) that the assessment of undisclosed income u/s 158BC(b) by way of estimation its an established method of computing the assessment [CIT vs Warasat Hussin 171 ITR 405, 402 (Patnal)] 3) On the facts and circumstances of the case and in law, the learned CIT(A) was not justified in carrying out an exercise of cobbling the unexplained payments (vide para 48 of his order ibid) to justify deletion of penalty by saying that such aggregate of discrepancies comes to ₹ 7,72,934/-, well within ₹ 30 lakh disclosed by the assessee, which disclosure is not entitled to immunity from penalty u/s 158BFA(2) as the conditions stated in proviso to Section 158BFA(2) were not satisfied. 4) On the facts and circumstances of the case and in law, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned block period was issued and in response, the assessee submitted his block return declaring income of ₹ 85,57,100/-, which included sum of ₹ 30,00,000/- disclosed by the assessee as undisclosed income on account of inflated labour expenses in the proprietary concern of M/s TPC Co. and M/s C Raja Co. 3. In the quantum proceedings, the AO gathered that assessee was inflating expenses on account of payment of salaries and labour charges. He estimated the inflation of labour charges and the salary payment, @ 5% as ad-hoc addition to work out the undisclosed income for the block period which was worked at ₹ 57,20,788/-. Such an estimate was on the basis of examination of various evidences including the statement of the assessee that he was resorting to inflation of labour payment. During the course of the search also, the assessee had declared in his statement that he was generating cash by inflating the payments and had also declared ₹ 30 lakhs as undisclosed income. In the first appeal the Ld. CIT(A), partly sustained the computation of undisclosed income at ₹ 43,19,050/-. While sustaining the said amount, the Ld. CIT(A) had worked out the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Unaccounted receipts ₹ 1,25,947 Unreconciled sales ₹ 32,988 Unexplained investment in land ₹ 75,000 ₹ 43,19,050 Since this amount on account of inflated payments worked out to 3.7% of the total labour payment of ₹ 11.44 crores, therefore, it was in this background the Ld. CIT(A) held that inflated labour expenses comes to 3.7%. Thus, the undisclosed income has been determined on a proper basis. It was not a case of an mere estimate as held by CIT(A) and this fact has been noted not only in the penalty order by the AO but also by the CIT(A) at page 23 of the impugned appellate order. Thus, the Ld. CIT(A) has wrongly restricted the penalty as undisclosed income at ₹ 30 lakhs. 7. On the other hand, Ld. Counsel strongly relied upon the order of the CIT(A) and submitted that CIT(A) has analysed each and every aspect dealt in the quantum proceedings and came to the conclusion that penalty cannot be levied only on amount determined at ₹ 43,19,050/-. 8. After considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee perhaps the purpose of a search action would only be redundant. Is a search conducted to get a confessional statement or to find evidences? 45. At the end of the day, the A.O. had to estimate a percentage (5%) of such expenses and he had to match it up against the items as per hi unexplained and unsubstantiated. Even that percentage did not remain final and unassailable. It was reduced to 3.7% by the CIT(A) who again tried to match his presumptive determination with the probable figure of concealment. 46. I am of the view that when the estimated figure of receipt at ₹ 14. 17 crore had been accepted, there was no positive detection of materials other than suspicions and surmises to presume that 5% of the claimed expenditure had been inflated. It was especially because at the subsequent stage of appeal, so much of allegedly inflated amount attributed to the expenditure to a firm had been only partly sustained which means that even the CIT(A) had considered the unconfirmed portion as genuine. Thus, only a presumption had been replaced by another presumption. I do not c such an amount partially confirmed merely by another estimated percentage would be held a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O. On the top of that, he has given absolutely no reason for adopting 200% as penalty. 51. Since, the undisclosed amount had been computed merely as an estimated rate which had subsequently been slashed down to again an estimated rate only to match the receipts or expenditure presumed to have been existing but unexplained, I hold that in the appellant's case no penalty was imposable beyond the disclosed amount let alone at an unreasoned percentage of 200. 52. There is no consideration by the A.O. in his penalty order, that the said declared undisclosed income of ₹ 30 lac had been covered by the conditions laid down-in the first proviso to section 158 BFA(2). The A.O. has to take that into account. Otherwise, I find that no additional undisclosed income had been actually determined as any positive detection beyond what had been disclosed in the return by the appellant. The aforesaid finding of the CIT(A) for deleting the penalty appears to be based on the proper appreciation of facts and material on record, thus we find no reason to deviate from such finding of the facts therefore CIT(A) s deleting the penalty is affirmed. 9. In the result, appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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