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TMI Blog2024 (6) TMI 409X X X X Extracts X X X X X X X X Extracts X X X X ..... antum proceedings and confirmed by the CIT(A) has been corroborated by the orders of the AO and the ld.CIT(A) in quantum proceedings, which were placed before us. Other glaring aspect which comes out from the assessment order is that both the AO and the CIT(A) have not given any reasons as to how the mere addition on account of valuation of closing stock made to the income of the assessee tantamounted to furnishing inaccurate particulars/concealment of the income related to the same. On going through the order of both the AO and the CIT(A), we are unable to understand what the addition exactly pertained to in relation to the valuation of the closing stock. The penalty order passed by the AO makes no mention either of the facts or the basis for the addition made. Therefore, there is no method for understanding as to how he arrived at the conclusion that the addition made on account of valuation of closing stock tantamounted to furnishing inaccurate particulars of income for the levy of penalty under section 271(1)(c) of the Act. Thus basis for arriving at the finding that the addition on account of valuation of closing stock tantamounted to furnishing inaccurate particulars of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are as under: i) In the facts and in the circumstances ui me case, the Ld. CIT(A) has erred in rejecting the appellant's plea that the penalty order u/s. 271(1)(c) passed by the Assessing Officer was bad in law. ii) The Ld. CIT(A) has failed to appreciate that the Assessing Officer has to give a clear finding as to whether the case is that of concealment of income or that of furnishing inaccurate particulars of income. In the absence of such specific finding, the penalty order was bad in law. iii) In the facts and in the circumstances of the appellant's case, the Ld. CIT(A) has erred in upholding the levy of penalty of Rs. 10,69,141/-. 2.1 The Ld. CIT(A) ought to have appreciated that i) The appellant had provided all the necessary facts and working of closing stock of work-in-progress before the Assessing Officer and the Assessing Officer had taken a different working ii) The increase in the value of closing stock would result into increase in value of opening stock of next year and thus, it tax neutral addition, particularly when the appellant is being assessed at maximum marginal rate. iii) The appellant's contentions for increase of the value of the opening stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the order of the AO, the AO levies penalty on other addition made under section 36(1)(iii) of the Act also, which addition as per his own admission, was deleted by the ld.CIT(A). This fact emanates from para 1 to 4 of the penalty order passed under section 271(1)(c) of the Act, wherein at para-4, the AO clearly mentions that he has reasons to believe that the assessee has furnished inaccurate particulars of income pertaining to the valuation of closing stock amounting to Rs. 24,53,100/-. The same is reproduced hereunder: 4. As brought out in the assessment order, the assessee has not worked out valuation of closing stock accordingly, addition of Rs. 24,53,100/- was made on this ground to the total income of the assessee. The CIT(A) confirmed the addition of Rs. 24,53,1000/- I have therefore reason to believe that the assessee has furnished inaccurate particulars of income and thereby concealed the particulars of Its Income. Therefore, it clearly emerges that the particulars filed in the Return of Income by the Assessee is found to be inaccurate, erroneous or false and which has an impact on total income returned by the assessee and therefore, it attracts liability for penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is aspect except for reproducing the portion of the order of the ld.CIT(A) confirming the addition on accountof valuation of stock in quantum proceedings, which is evident from the order of the ld.CIT(A) at para 5.1 which is reproduced above. Therefore, the basis for arriving at the finding that the addition on account of valuation of closing stock tantamounted to furnishing inaccurate particulars of income for the levy of penalty under section 271(1)(c) of the Act, is completely absent both in the assessment order and even in the ld.CIT(A) s order. 14. It appears that both the authorities have proceeded on the assumption that the addition made to the income of the assessee automatically tantamount to concealment/furnishing of inaccurate particulars of income, which is contrary to the law, which has been settled by the Hon ble Apex Court in the case of CIT Vs. Reliance CIT Vs. Reliance Petro Products Pvt. Ltd. [322 ITR 158]. 15. To sum up there is, we find, total non-application mind both by the AO and the ld.CIT(A) while levying and confirming the levy of penalty, levying penalty partlyon addition to income which admittedly was deleted by Ld.CIT(A) and stating neither the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cated cost to the project completed on actual basis and the remaining cost incurred during the year had been added to the valuation of WIP, and hence the difference in the valuation adopted by the assessee and the department. This submission of the assessee finds mention at para 6.1 of the CIT(A) s order. The ld. CIT(A) however without finding any infirmity in the explanation of the assessee, confirmed the addition made by the AO and his finding is at para 6.2 of his order. 19. What transpires, therefore, is that the addition on account of valuation of closing stock is merely on account of difference in the basis of valuation of WIP adopted by the department and that adopted by the assessee. The assessee s justification for the method adopted by it, has not been countered or found fault in the same by the Revenue. We have noted that the assessee s explanation was that it had allocated actual cost, while the department s stand was that it ought to have allocated cost on estimate basis. The explanation of the assessee appears to be bona fide to us regarding the valuation of closing stock adopted by it. Therefore, in these facts and circumstances, merely because the addition on accoun ..... 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