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TMI Blog2021 (4) TMI 497X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee had to approach the Company Law Board with a petition to extend the date for adoption of audited accounts. This petition was accepted by the Company Law Board and the offence was compounded. Therefore, in our considered opinion, the assessee had a reasonable explanation for the discrepancy found in stock and due credence should have been given to this explanation. Therefore, it cannot be said that the assessee had no explanation to offer regarding the difference in stock. Further, the amount on which the penalty has been imposed is only an ad-hoc addition based on average gross profit rate and does not relate directly to any undisclosed income unearthed during the course of search. In such a situation, it is our considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence in stock as per the books of accounts and the stock as per the physical inventory taken. Subsequently, penalty of ₹ 1,15,230/- was imposed u/s 271AAA of the Act being 10% of the alleged undisclosed income. The assessee s appeal against the imposition of this penalty was dismissed by the Ld. CIT(A) and now the assessee has approached this Tribunal challenging the confirmation of the penalty by raising the following grounds of appeal: 1. That on facts and in law imposition of penalty under section 271AAA for ₹ 1,15,230/- is without any basis, totally wrong, unjustified, illegal and unwarranted. The appellant is not liable to penalty u/s 271AAA on the following grounds: i) That the Ld. CIT(A) has not considered th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the penalty imposed u/s 271AAA of the Act would not apply. It was submitted that there was no undisclosed income of the assessee in this year and, therefore, the penalty was wrongly imposed. It was further submitted that there was no addition by the Assessing Officer on account of any undisclosed sale, although, the physical stock was found to be less than the book stock. It was also submitted that the assessee manufactured hydraulic cranes which could not be sold without payment of excise duty and, therefore, on this account also the sales figures of the assessee were duly corroborated. He also drew our attention to a petition filed by the assessee before the Company Law Board seeking extension of date for adopting the annual accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and he agreed to the above mentioned figure. The Assessing Officer concluded that since there was difference in stock as per the physical inventory taken and the books of account prepared by the assessee, sales had been made out of books. The assessee was asked to explain its position vide questionnaire dated 04.10. 2011 and the assessee was also asked to show cause as to why an addition of ₹ 15,53,119/- for the year under consideration by taking the gross profit rate of 4.6% on the difference of stock of ₹ 3,13,12,889/- may not be made. The assessee, vide reply dated 19.10.2011, stated that the discrepancy in stock was only due to failure of the accounting software. However, the Assessing Officer did not accept the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot been disclosed to the Chief Commissioner or Commissioner before the date of the search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted. 5.2 In the present appeal, the only addition made in the income was of ₹ 11,52,300/- on account of estimation of Gross Profit @ 3.68%. It is the contention of the assessee that the discrepancy in stock was due to malfunction in the ERP software. Though, this explanation was not accepted by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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