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TMI Blog2011 (8) TMI 1341X X X X Extracts X X X X X X X X Extracts X X X X ..... re an order of assessment or reassessment on the basis of which penalty has been levied on the assessee, has itself been finally set aside or cancelled by the Tribunal or otherwise, the penalty cannot stand by itself and the same is liable to be cancelled. Hon'ble Delhi HC, in the case of R DALMIA AND OTHERS (A. OP) VERSUS COMMISSIONER OF INCOME-TAX [ 1991 (10) TMI 35 - DELHI HIGH COURT] , held that no penalty survives after deletion of additions, forming the basis for the levy of penalty. Since the very basis upon which the penalty has been imposed on the amount relating to excess stock added u/s 69B and consequently, denial of deduction on account of remuneration to partners in terms of provisions of section 40(b) of the Act, does not exist in view of the aforesaid order, we are of the opinion that penalty levied in relation to the said amount has to be cancelled. As regards penalty levied in relation to amount added u/s 68, since matter is restored to the file of the AO, penalty does not survive at this stage. However, the AO is free to initiate the penalty proceedings in accordance with law while completing the assessment in pursuance to the aforesaid directions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. In this case, a survey u/s 133A the Act was conducted in the business premises of the assessee on 20-01-2004, when excess stock of gold ornaments and silver ornaments to the extent of ₹ 35,70,518/- was found as detailed hereunder:- Gold Ornaments: Unaccounted stock: 5404.060 x 565 =30,53,293 Silver Ornaments: Unaccounted stock: 95782.510 x 54 = 5,17,225 2.1 Shri Kamlesh Maganlal Soni, working partner of the firm, who was present during the survey agreed in his statement to surrender the excess stock and to pay the tax thereon. During the course of assessment proceedings, relying upon the findings of the ITAT in their order dated 28-02-2005 in ITA No.2623/Ahd/2004 in the case of Krishnamegh Yarn Industries, Ahmedabad for AY 2001-02 and the decision of the Hon ble Jurisdictional High Court in the case of Fakir Mohmed Haji Hasan vs. CIT [2002] 120 Taxman 11,17, the Assessing Officer [ AO for short] brought the aforesaid amount of ₹ 35,70,518/- to tax as deemed income u/s 69B of the Act and denied deduction of higher remuneration to partners in relation to the aforesaid amount in terms of provisions of section 40(b) of the Act. Besides, an amount of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the books. The Id. Counsel of the appellant was specifically requested to clarify the same. In such facts and circumstances, none of the judicial pronouncements relied upon by the Id. Counsel are applicable to the present facts of the case and are not helpful to the appellant. Thus, it is established that the appellant has concealed his income and has knowingly filed the inaccurate particulars in the return of income. The Hon'ble Gujarat High Court in the case of A.M. Shah Co. vs. CIT 238 ITR 415 has held that any concealment or inaccuracy in the particulars of income in the return occurring at any stage upto and inclusive of the ultimate stage of working out of total income would attract the penalty provisions of section 271(1)(c). Words 'inaccurate particulars' would cover falsity in final figures as also the consistent elements certain items not shown in the closing stock, profit, therefore, suppressed to that extent income not shown by this process obviously was concealment of particulars of income and hence, the penalty imposed on this very basis is justified. Thus, this decision is squarely applicable to the present facts of the case. Hence, in view of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). In this case the Tribunal has observed as under: 11. But this does not mean that loss computed under any of the five heads mentioned in section 14 - (i) 'salary', (ii) 'income from house property', (iii) 'profits and gains from business or profession', (iv). 'capital gains' and (v) 'income from other sources' - cannot at all be adjusted, against, unexplained investment or expenditure. What is necessary as per Hon. Gujarat High Court is that source of acquisition of asset or expenditure should, be clearly identifiable. In the case before Hon. Gujarat High Court the source of gold confiscated was not identifiable and hence adjustment was not permitted. 12. Thus the important aspect that emerges from the entire discussion is that for invoking deeming provisions under sections 69, 69A, 69B 69C there should be clearly identifiable asset or expenditure. In. the present, case we find, that entire physical stock of'₹ 25,14.306/- was part of the same business. Both kind of stock i.e. what is recorded in the books and what was found over and above the stock, recorded in the books, were held and dealt uniformly by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69, 69A, 69B 69C as the case may be. It is because when assessee fails to explain satisfactorily the source of such investment then it should be taxed under section 69, 69A, 69B 69C as the case may be. It should not 'be done at the first instance without giving opportunity' to the assessee to establish nexus. Therefore, there is no conflict with the decision of Hon. Gujarat High Court in the case of Fakir Mohmed Haji Hasan (supra) where investment, in an' asset or expenditure is not identifiable and no nexus was established then with any head of income and thus was not available for set off against any loss under any other head. Therefore, we hold that where asset in which undeclared investment is sought to be taxed is not clearly identifiable or does not have independent identity but is integral, and inseparable (mixed) part of declared asset, falling under a particular head, then the difference should be treated as undeclared business income explaining the investment. 14. To conclude, sum of ₹ 8.10,011/- being difference in stock is represented by undeclared business income. It does not have a separate physical identity. It is to be only taxed under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directly not fall in any of the heads, mentioned in section. 14. 9. Since in the present case excess stock found during the survey is not separately and clearly identifiable but is part of mixed lots of stock found at the premises which included declared stock as per books and also the excess stock as computed by the survey officers, the provisions of section 69B cannot be made applicable as primary condition for invoking the provisions of section 69A, 69B is that the asset should be separately identifiable and it should have independent physical existence of its own. Since excess stock is a result of suppression of profit from business other the years and has not been kept identifiable separately but i.e. the part of overall physical stock found, the investment in the excess stock 'has to be treated as business income as per detailed reasons given in the case of Fashion World (supra). Once excess stock is treated as business income then assessee is entitled for higher remuneration to the partners as per section 40(b). As a result, this ground -of assessee is allowed. 12. We have heard the parties and carefully perused the materi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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