9911796707
TMI Blog2012 (3) TMI 648X X X X Extracts X X X X X X X X Extracts X X X X ..... he notice issued under section 158 BC of the Act, the assessee filed return showing undisclosed income at nil. In the course of block assessment proceedings, the assessing officer while verifying the books of accounts with the seized material found huge differences between the number of bottles issued and number of bottles sold. The assessee claimed the difference was on account of breakage of bottles and percentage of breakage varies for different sizes of bottles. The percentage of breakage recorded in the books of accounts was found to be ranging from 6.92% to 54% depending upon sizes of the bottles. While comparing these figures with the cost sheet seized during the search and seizure operations, the assessing officer found that breakage of bottles has been shown at 6% in the cost sheet. Therefore, by adopting the breakage at 6%, he made an addition of ₹ 4,35,60,320/-. While examining the cost of purchases of bottles by the assessee, the assessing officer has observed that the assessee has inflated the cost of purchases. The assessing officer found that the assessee had purchased bottles from the concerns connected with the assessee as well as from other concerns. The pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one cost sheet found during the search. It is true that the Assessing Officer has not doubted the quantitative records of empty bottles. However, it cannot be denied that the breakage shown by the assessee is phenomenally on the higher side. If not fully, the Assessing Officer is somewhat justified in disbelieving the breakage claimed by the assessee. However, the job well begun by him was allowed to be withered away by not conducting full and necessary enquiries and hence the addition made by him does not seem to be fully justifiable. Purchasing the bottles through sister concerns may raise a doubt about the intentions of the assessee. However, without bringing full and proper facts on record, the conclusion drawn by the assessing officer is reduced to an inference only. Moreover, the connected concerns are not held to be either fictitious or benami concerns of the assessee. Thus, when the sales of these concerns are not doubted, there hardly remains any room to doubt the purchases of the assessee. The fact that certain papers relating to the connected concerns were found at the premises of the assessee does not have any bearing on the conclusion drawn by the Assessing Officer. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7% 15% 750 7% 7% 2000-01 180 18% 15% 375 15% 15% 750 50% 15% 2001-02 180 14% 14% 375 30% 15% 750 54% 15% 2002-03 180 12% 12% The percentage claimed by the assessee as mentioned in the above table, have been computed on the basis of the figures provided by the CIT (A) in para -18 of his order. Thus, we allow breakage up to 15% where the breakage is more than 15% and have retained the same breakage where it is less than 15%. We hold accordingly and direct the Assessing Officer to work out the disallowance as mentioned above. 4. With regard to the addition made by applying the rate of ₹ 1.50 paise per bottle, the ITAT directed the assessing officer to work out the disallowance by adopting the rate of ₹ 1.80 per bottle. The relevant portion from the findings of the Tribunal appearing in para-22 of the said order, extracted hereunder for ready reference: "Thus, considering these data as also the fact that no concrete evidence has been found of purchases being inflated, in our view, there is hardly any case to sustain the addition made by the Assessing Officer. There is no concrete finding about the quality of bottles supplied by the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be an estimate of the cost of one case of 180 ml IMFL only. It has neither any relevance nor nexus to the actual cost of bottles or percentage of breakage. He submitted that right from the assessment stage, additions have been made on purely estimate basis. In case of breakage of bottles while the assessee shown at 19%, the assessing officer by relying upon the cost sheet, adopted the same at 6 per cent. The ITAT in its order passed in quantum appeal estimated the breakage at 15%. Similarly, regarding the cost of bottles, the assessee has shown at ₹ 1.90 per bottle. The assessing officer estimated the cost at ₹ 1.50 per bottle and the ITAT estimated the cost at ₹ 1.80 per bottle. The learned AR submitted when the seized materials do not conclusively prove of any undisclosed income or concealment of income, penalty cannot be imposed under section 158 BFA(2) of the Act. He further submitted that the undisclosed income having been determined purely on estimate basis, no penalty can be imposed. In this regard, he placed reliance upon the order passed by the ITAT, Jaipur Bench in the case of ACIT vs. Shanti Kumar Chabara reported in (2009) 121 TTJ (JP) 985. The lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one inescapable conclusion which arises is that neither the assessing officer nor the CIT (A) or the ITAT could with any degree of certainty come to a finding about the actual percentage or the cost of the bottles. Therefore, estimation was made to arrive at a reasonable figure. In the aforesaid factual situation, we find force in the contentions of the learned authorized representative of the assessee that penalty cannot be imposed under section 158BFA(2) of the Act when undisclosed income had been determined purely on estimate basis. This view is also supported by the order of the ITAT, Jaipur Bench, Jaipur in the case of ACIT vs. Shanti Kumar Chabara reported in 121 TTJ 985. 9. A reading of section 158BFA(2) makes it clear that imposition of penalty under this provision is not mandatory in each and every case where undisclosed income has been determined. This provision allows the assessing officer to use his discretion either to impose or not impose penalty after taking into consideration the explanation offered by the assessee. Determination of undisclosed income will not automatically result in imposition of penalty under section 158BFA (2) of the Act. The Hon'ble Rajasthan ..... 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