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TMI Blog2016 (9) TMI 695X X X X Extracts X X X X X X X X Extracts X X X X ..... ade and reduced in the appellate proceedings are not based on any actual concealment but on computation involving estimates and fluctuating parameters. The original addition made in the assessment order was reduced in appeal proceedings. Under the circumstances such additions cannot be considered as concealment of income or furnishing of inaccurate particulars warranting levy of penalty. 4. Your appellant further states that statutory disallowance under section 40A(3) in respect of payments made in a village without banking facilities cannot justify levy of penalty particularly in view of provisions of Rule 6DD. 5. Your appellant further states that additions made under section 68 in respect of payments received by cheques as confirmed in the assessment order and from an identifiable corporate entity cannot attract levy of penalty without the transactions being proved to be false, particularly when the other similar receipts by cheques were accepted. 6. Your appellant further states that in the absence of satisfaction regarding concealment of income discernible from the assessment order the penalty proceedings initiated and the levy of penalty are bad in law." 3. Facts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other hand, the ld. Departmental Representative submitted that there was an inspection carried out by the sales tax authorities and also central excise authorities, who confirmed the sale suppression and also production suppression by the assessee. The gross profit rate for the assessment year 2005-06 was 2.57% and it was 11.52% for assessment year 2006-07, therefore, the Assessing Officer had taken the average gross profit rte at 5% for which the assessee also accepted vide letter dated 20.10.2009 and income from suppressed sale was reworked originally at Rs. 22,23,566/-. However consequent to petition u/s 154 by the assessee, the CIT(A) reduced the suppressed sales to Rs. 11,47,500/- on account of typographical error in mentioning 30,000 kgs as 3 lakhs of yarn because of which the assessee cannot take advantage that addition was only estimate basis, penalty cannot be levied. 8. We have considered the rival submissions and also perused the material available on record. Originally, the Assessing Officer levied penalty towards addition of suppressed sale of yarn at Rs. 22,23,566/-. However, this addition was reduced to Rs. 11,47,500/- by the CIT(A). Now the contention of the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. We are inclined to delete the penalty in respect of estimate income on sale of yarn. 9. The next issue is with regard to levying penalty in respect of addition sustained u/s 68 of the Act. 10. The assessee said to have received a sum of Rs. 4,77,609/- from M/s Kalavathy Finance Ltd. Since M/s Kalavathy Finance Ltd did not confirm the above transaction, addition was sustained by the CIT(A). According to the Assessing Officer, the assessee has not discharged the burden cast upon it. Consequently, penalty was levied u/s 271(1)(c) of the Act. On appeal, the CIT(A), without discussing much in his order, confirmed the penalty on this issue also. 11. The ld. AR submitted that the total receipt from M/s Kalavathy Finance Ltd. was of Rs. 75 lakhs. Out of this, the assessee was able to explain an amount of Rs. 69,97,391/- and the balance was not explained to the tune of Rs. 4,77,609/-. The said amount of Rs. 75 lakhs was routed through the assessee's bank account. The said amount was being arranged by Vijay Daima, who was located at Bhurhanpur as security advance. Out of the said amount, Rs. 40 lakhs was transferred to M/s Gurusikh Trading Co. and Rs. 35 lakhs to M/s Rishab Trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame say to the same party for an expenditure relating to a single invoice. The assessee has adopted the practice of entering the payments in its books after splitting the same into Rs. 19,500/- and lesser amount than that. Consequent to the disallowance u/s 40A(3), penalty proceedings u/s 271(1)(c) of the Act were initiated. 16. The ld. DR supported the order of the CIT(A) confirming the penalty. 17. We heard the rival submissions on this issue. There is a judgment of the Delhi High Court in the case of CIT vs Vatika Construction Pvt. Ltd. 229 taxman 562 wherein held that when there is addition u/s 40A(3) of the Act levy of penalty on this disallowance u/s 271(1)(c) of the Act is not justified. Further, in our opinion, disallowance u/s 40A(3) cannot be construed as concealment of income and furnishing inaccurate particulars of income. In view of the judgment of the Deli High Court, we are inclined to delete the penalty. 18. In the result, assessee's appeal in I.T.A.No.2150/Mds/2012 is allowed. 19. Coming to I.T.A.No.2149/Mds/2012 for assessment year 2006-07, the assessee has raised the following grounds: "2. The first appellate authority erred in sustaining a penalty of 100% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 1,19,999/-, short term capital gains of Rs. 6,26,718/-, stock in process of Rs. 5,36,355/- and undisclosed sale of yarn of Rs. 43,800/-. Subsequently, the Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the Act and levied penalty at Rs. 27,07,062/- being 200% of tax sought to be evaded as against the maximum penalty of Rs. 40,60,593/-. Against this, the assessee carried the matter before the CIT(A). The CIT(A) confirmed the levy of penalty. However, he reduced the penalty at 100% of tax sought to be evaded instead of 200% levied by the Assessing Officer. Against this the assessee is in appeal before us. 23. Regarding the penalty levied for disallowance made u/s 68 by the Assessing Officer of Rs. 1,19,999/-, the facts are similar as in I.T.A.No.2150/Mds/2012. As discussed in para 13 in the former part of this order, we delete the penalty. 24. The next addition for levying penalty is stock in process not considered in closing stock to the extent of Rs. 5,36,355/-. The addition is made only on estimate basis. As discussed in para 8 of this order, we delete the penalty. 25. The last issue is with regard to penalty levied under wrong computation o short term ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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