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TMI Blog1999 (8) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... t was completed under s. 143(3) on 12th Dec, 1996, and the total income determined in the assessment comes to Rs. nil after setting off depreciation for the current year against the income computed. The following are the details of the computation appearing at the end of the assessment order. Rs. Rs. Net loss as per audited P L a/c 1,75,064 Add: Disallowances (1) Shortage in stock of colours chemicals (Para 5) 5,03,244 (2) Shortage in stock of cloth 3,31,360 (3) Depreciation (Para 10) 6,700 8,81,364 -------- -------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under s. 271(1)(c). The learned counsel relied on the decisions of the Hon'ble Supreme Court in CIT vs. Khoday Eswarsa Sons 1972 CTR (SC) 295 : (1972) 83 ITR 369 (SC), Anantharam Veersinghaiah Co. vs. CIT (1980) 16 CTR (SC) 189 : (1980) 173 ITR 457 (SC) and CIT vs. Anwar Ali (1970) 76 ITR 696 (SC). Further, it is pointed out by the learned counsel that when the resultant income is a loss, no penalty can he levied under s. 271(1)(c) as laid down in the following decisions: (1) Panchratna Hotels (P) Ltd. vs. Dy. CIT (1993) 47 TTJ (And) 282 ; (2) Zaveri Paper Board Mills vs. ITO (1993) 47 TTJ (Ahd) 170 ; (3) H.T. Power Structures (P) Ltd. vs. Asstt. CIT (1993) 47 TTJ (Ahd) 146; (4) CIT vs. Jaora Oil Mills (1981) 129 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee gave the following written submissions in the course of assessment proceedings with regard to the alleged shortage in stock of colours and chemicals: The difference in the stock value of colour and chemicals taken on the date of survey made by the IT Department and with the value as per books is because of the following reasons: (a) The stock on the date of survey was taken by the income-tax persons and the factory clerical staff was not taken by actual weight in all the cases. In most cases, actual weight was not made but approximate weight was noted. (b) That several bulk items and hazardous items which are kept in open space of the factory were also not taken in the list. Such as industrial salt which is used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss. 5. In the case of the assessee, a survey was conducted under s. 133A of the IT Act, 1961, and certain discrepancies were noticed in the stock-in-trade of silk cloth and colour and chemicals. The assessee have its explanation in respect of the discrepancy but this was not accepted by the AO. It is true that the assessee agreed to the addition made in the assessment order and no appeal was filed against the assessment order. The learned CIT(A) has merely relied on the observations given by the AO in the penalty order while confirming the penalty. 6. It is well settled in law that assessment proceedings and penalty proceedings are distinct and separate. The additions made in the assessment order may be relevant for penalty proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s below. 7. That apart, in a number of decisions of the Tribunal as cited in para 2 above, it has been held that penalty under s. 271(1)(c) cannot be levied where the result of computation is a loss on a negative figure. In Pancharatna Hotel vs. Dy. CIT in ITA Nos. 2509 2510/Ahd/1992, the Tribunal Ahmedabad A Bench considered the legal provision at length in which various High Court decisions have also been referred to. The Tribunal also considered the effect of Expln. 4 below s. 271(1)(c). As mentioned earlier, reference application filed by the Department against the decision of the Tribunal has been rejected by the Hon'ble Gujarat High Court and the SLP filed by the Department has also been rejected by the Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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