Nagnath Hanmantappa Jalkote, Pune V. Assistant Commissioner of Income-tax,

ITA 1297/PUN/2015

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 4685 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-04-2018
• Assessment Year: misc
• Appeal Filed On: 24-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Keywords: Unexplained investment; Unexplained expenditure; Gift; Business expenditure; Search and seizure; Loose papers; Valuation report; Onus to prove; Documents seized; Set aside
• Section: 201; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 12 97 /P U N/201 5 BLOCK PERIOD : 01 - 04 - 1995 TO 21 - 11 - 2001 SHRI NAGNATH HANMANTAPPA JALKOTE, C/O R.J. BUILDCON SERVICES (P) LTD., SHOP NO. F 9, AND F 10, SADHU VASWANI CHOWK, CAMP, PUNE AND MUKTESH, 6, OSMANPURA, DISTT. - AURANGABAD PAN : ACRPJ9402A ....... / APPELLANT / V/S. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, AURANGABAD / RESPONDENT ASSESSEE BY : S HRI NIKHIL PATHAK REVENUE BY : DR. VIVEK AGGARWAL / DATE OF HEARING : 25 - 07 - 201 8 / DATE OF PRONOUNCEMENT : 18 - 10 - 201 8 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS) - 1 , AURANGABAD DATED 31 - 08 - 2015 FOR THE BLOCK PERIOD 01 - 04 - 1995 TO 21 - 11 - 2001 CONFIRMING LEVY OF PENALTY U/S. 158BFA(2) O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). 2 ITA NO . 1297/PUN/2015 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE : A SEARCH AND SEIZURE ACTION U/S. 132 OF THE ACT WAS CARRIED OUT AT THE RESIDENTIAL PREMISES OF ASSESSEE ON 21 - 11 - 2001. THE ASSESSEE HAD PURCHASED A RESIDENTIAL HOUSE AT OSMANPURA, AURANGABAD FROM HIS BROTHER - IN - LAW SHRI ANDURE FOR A CONSIDERATION OF RS.12 ,50,000/ - ON 27 - 07 - 2001. DURING THE COURSE OF SEARCH THE DEPARTMENT HAD SEIZED VARIOUS PAPERS BELONGING TO SHRI ANDURE AND ONE SET OF THE LOOSE PAPERS SEIZED REFLECTED CERTAIN AMOUNT S PURPORTEDLY REFLECTING PAYMENT OF LABOUR , MATERIAL AND OTHER ITEMS. TH E ASSESSING OFFICER HELD THAT THE SAID PAPER CONTAINS THE TOTAL EXPENDITURE INCURRED ON THE BUNGALOW PURCHASED BY THE ASSESSEE FROM SHRI ANDURE. AS PER CONTENTS OF THE SAID PAPER S THE TOTAL EXPENDITURE WAS RS.52,02,829/ - . THE ASSESSING OFFICER ADDED THE ENTIRE AMOUNT OF RS.52,02,829/ - AS UNEXPLAINED INVESTMENT ON BUNGALOW. THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE ABOVE ADDITION. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL ESTIMATED THE ADDITION AT RS.39,50,000 / - . APART FROM THE ABOVE ADDITION , THE ASSESSING OFFICER MADE TWO MORE ADDITIONS I.E. ON ACCOUNT OF NSS WITHDRAWALS OF RS.47,010/ - AND EXPENDITURE OF RS.52,000/ - ON TOUR TO NEPAL WITH FAMILY. THE ASSESSING OFFICER INITI ATED PENALTY PROCEEDINGS U/S. 158BFA(2) IN RESPECT OF ALL THE ABOVE ADDITIONS AND VIDE ORDER DATED 30 - 12 - 2014 LEVIED PENALTY OF RS.24,49,224/ - . THE ASSESSEE ASSAILED LEVY OF PENALTY BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE FIRST APPELLATE AUT HORITY VIDE IMPUGNED ORDER CONFIRMED LEVY OF PENALTY. HENCE, THE PRESENT APPEAL BY THE ASSESSEE. 3. SHRI NIKHIL PATHAK APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD PURCHASED RESIDENTIAL HOUSE FROM SHRI ANDURE VIDE SALE DEED DATED 27 - 07 - 2001 FOR A CONSIDERATION OF RS.12,50,000/ - . SHRI ANDURE HAD CONSTRUCTED THE RESIDENTIAL HOUSE OVER THE PERIOD OF TIME FROM 3 ITA NO . 1297/PUN/2015 1997 TO 2000. THE ASSESSEE FURNISHED REGISTERED VALUER S REPORT WHO VALUED THE PROPERTY AT RS. 16,85,000/ - . THE VALUERS REP ORT IS AT PAGES 223 TO 230 OF THE PAPER BOOK. THE ASSESSING OFFICER ON THE BASIS OF SEIZED PAPER S MARKED AS A - 73 AT PAGES 112 AND 113 OF THE PAPER BOOK DETERMINED THE VALUE OF BUNGALOW AT RS.52,58,000/ - . THE ASSESSING OFFICER HELD THAT THE EXPENDITURE GI VEN ON LOOSE SHEETS FOUND DURING SEARCH GIVE COMPLETE DETAILS OF EXPENDITURE INCURRED ON THE HOUSE UNDER QUESTION. THE LD. AR SUBMITTED THAT THE LOOSE SHEETS SEIZED DURING SURVEY HAD NO CONNECTION WITH THE EXPENDITURE ON RESIDENTIAL HOUSE PURCHASED BY THE ASSESSEE FROM SHRI ANDURE. THE LOOSE SHEETS (AT PAGES 112 AND 113 OF THE PAPER BOOK) BELONG TO SHRI ANDURE . THEY WERE FOUND FROM THE PREMISES OF THE ASSESSEE AS SHRI ANDURE WAS STILL USING OUTHOUSE OF THE HOUSE IN QUESTION FOR HIS BUSINESS PURPOSE AND T HE LOOSE SHEETS WAS FOUND FROM THE OUTHOUSE. SHRI ANDURE IN HIS STATEMENT RECORDED U/S. 132(4) ON 12 - 12 - 2001 EXPLAINED THAT HE WAS HAVING THE OFFICE AT OSMANPURA HOUSE AND THE DOCUMENTS SEIZED INCLUDING LOOSE PAPERS USED FOR MAKING ADDITION REFLECT MR. AN DURES EXPENDITURE ON VARIOUS SITES . SHRI ANDURE IN HIS STATEMENT ADMITTED THAT THE RESIDENTIAL HOUSE WAS SOLD TO THE ASSESSEE FOR RS.12,50,000/ - . THE ASSESSING OFFICER DISBELIEVED THE STATEMENT OF SHRI ANDURE AS WELL AS THE ASSESSEE AND MADE ADDITION OF RS.52,58,000/ - IN THE HANDS OF SHRI ANDURE ON PROTECTIVE BASIS. THE LD. AR FILED WRITTEN SUBMISSIONS STATING THAT THE PENALTY LEVIED ON SUCH ADDITION IS LIABLE TO BE DELETED FOR THE FOLLOWING REASONS : A. THE REASON WHY, THE PAPER WAS FOUND IN THE ASSESSEE'S RESIDENCE WAS EXPLAINED. SHRI ANDURE WAS HAVING AN OFFICE IN THE OUT HOUSE AND HE OWNED UP THE PAPER AS CONTAINING THE SITE EXPENSES. THE HAND WRITING ON THE PAPER WAS THAT OF THE SUPERVISOR OF SHRI AND URE. THE BUSINESS OF SHRI ANDURE WAS THAT OF A GOVT. CONTRACTOR AND HENCE, THE ASSESSEE HAD DISCHARGED THE BURDEN U/S 132(4A) REGARDING THE PAPER FOUND. ITAT IN THE ASSESSEE'S CASE HAS ITSELF DELETED NUMBER OF ADDITIONS ON THE BASIS OF VARIOUS PAPERS FOUND AT THE ABOVE RESIDENCE OF THE ASSESSEE AS THEY WERE BELONGING TO SHRI ANDURE, SHRI.: M. B. 4 ITA NO . 1297/PUN/2015 PATIL CONTRACTOR, ETC. ETC. WHICH ITSELF SHOWS THAT THE PAPERS FOUND IN THE RESIDENCE WERE NOT OF THE APPELLANT. THUS, SIMPLY BECAUSE THE PAPER IS FOUND WITH THE AS SESSEE, ADDITION WAS NOT JUSTIFIED. B. THE ASSESSEE SUBMITTED THE VALUATION REPORT ALSO OF THE REGISTERED VALUER WHO VALUED THE PROPERTY AROUND RS.16 LAKHS. THUS, IT WAS WAY BELOW THE FIGURE OF RS.52,58,000 / - ADOPTED BY THE A.O. FOR THE ADDITION. THE A.O. DID NOT MAKE A REFERENCE TO THE DEPTL VALUER. HENCE, THE DEPT. HAS NOT DISCHARGED THE BURDEN TO PROVE THAT THE VALUE OF THE PROPERTY WAS RS.52,58,000 / - . ON THE OTHER HAND, THE ASSESSEE HAS DISCHARGED THE BURDEN BY SUBMITTING THIS VALUATION REPORT WH ICH IS NOT CONTRADICTED BY THE A.O. HENCE, THE LEVY OF PENALTY IS NOT JUSTIFIED. C. THE ADDITION OF RS.52,58,000 / - WAS MADE IN THE HANDS OF SHRI ANDURE ALSO. IT MEANS THAT THE A.O. WAS NOT SURE AS TO THE PERSON IN WHOSE HANDS THE ABOVE ADDITION SHOULD B E MADE. IN THE LEGAL COMPILATION THE ASSESSEE HAS GIVEN VARIOUS CASE LAWS AT SR. NO. 3 TO 6 WHEREIN IT IS HELD THAT WHEN THE ADDITIONS ARE MADE IN TWO HANDS ON PROTECTIVE AND SUBSTANTIVE BASIS, THE A.O. IS NOT SURE AS TO WHOM THE INCOME BELONGS AND ACCORDI NGLY, THE PENALTY IS NOT JUSTIFIED. HENCE, THE LEVY OF PENALTY IN THE HANDS OF THE ASSESSEE IS NOT JUSTIFIED. D. THE EXPENDITURE WAS MADE ON THE CONSTRUCTION OF THE BUNGALOW OVER A PERIOD OF 4 YEARS I.E. 1997 TO 2000 BY SHRI ANDURE. THE ASSESSEE BECAME THE OWNER OF THE PROPERTY ONLY IN THE YEAR 2001 AND THEREFORE, THE QUESTION OF ASSESSEE INCURRING THIS EXPENDITURE PRIOR TO 2001 DID NOT ARISE. THERE IS NO PAPER FOUND DURING THE SEARCH INDICATING THAT THE ASSESSEE HAS INCURRED THE EXPENDITURE FROM 199 7 TO 2001 AND ON THE OTHER HAND, SHRI ANDURE HAS OWNED UP THE PAPER AND HAS ALSO CLARIFIED THAT THE PAPER CONTAINS HIS BUSINESS EXPENSES AT VARIOUS SITES AND THUS, THIS PROVES THAT THE ASSESSEE HAS NOT INCURRED THE ABOVE EXPENDITURE. E. THERE IS NO EVIDENCE FOUND DURING THE SEARCH THAT THE ASSESSEE HAS PAID THE DIFFERENTIAL AMOUNT IN CASH TO SHRI ANDURE ON PURCHASE OF THE BUNGALOW. SECONDLY, SHRI ANDURE SOLD ONLY THE BUNGALOW TO THE ASSESSEE AND NOT THE FURNITURE THEREIN WHILE THE SEIZ ED PAPER CONTAINED THE EXPENDITURE ALSO ON THE FURNITURE, ETC. THEREFORE, THE QUESTION OF THE ASSESSEE HAVING PAID A HIGHER AMOUNT TO SHRI ANDURE DID NOT ARISE. F. JUST BECAUSE, ITA T SUSTAINED THE ADDITION, IT DID NOT IMPLY THAT THIS IS AN INVESTMENT M A DE BY THE ASSESSEE. ITA T HAS NOT CONSIDERED THE ABOVE FACTS IN DETAILS AND THEREFORE, SUSTAINED THE ADDITION. IN FACT, ITA T HAS DELETED THE ADDITION ON ACCOUNT OF VARIOUS SEIZED PAPERS FOUND AT THE RESIDENCE DURING THE SEARCH ON THE GROUND THAT THEY BE LONGED TO SHRI M. B. PATIL, CONTRACTOR OR SHRI ANDURE, ETC. HENCE, IF THOSE ADDITIONS ARE DELETED BY ITA T, THERE WAS NO REASON TO SUSTAIN THE ADDITION ON ACCOUNT OF THE BUNGALOW IN THE HANDS OF THE ASSESSEE. SECONDLY, ITAT ITSELF HAS DELETED CERTAIN EX PENSES LIKE MOBILE EXPENSES, CLOTH EXPENSES, ETC. NOTED ON THE SEIZED PAPER ON THE GROUND THAT THEY DO NOT PERTAINED TO THE BUNGALOW CONSTRUCTION. THIS IMPLIED THAT THE PAPER CONTAINED VARIOUS EXPENSES OF SHRI ANDURE AND 5 ITA NO . 1297/PUN/2015 IT WAS NOT RELATING ONLY TO THE CO NSTRUCTION OF THE HOUSE. IN FACT, THE SEIZED PAPER ON PAGE 112 MENTIONS SO MANY EXPENSES AS 'GENERAL' AND THE DEPT. HAS NOT PROVED THAT THEY PERTAINED TO THE BUNGALOW CONSTRUCTION ONLY. HENCE, SIMPLY ON PRESUMPTION, PENALTY CANNOT BE LEVIED. ITAT IN THE CA SE OF DR. HAKIM S.A. SAYED SATHAR HAS HELD THAT THE DEGREE OF PROOF REQUIRED FOR SUSTAINING PENALTY U/S 158BFA(2) IS OF A MUCH HIGHER ORDER THAN THAT REQUIRED FOR MAKING AN ADDITION. THUS, SIMPLY BECAUSE, T HE ADDITION IS SUSTAINED BY ITA T, PENALTY CANNOT B E JUSTIFIED. G. THE ASSESSEE WAS SUPERINTENDING ENGINEER WITH PWD. HE ULTIMATELY RETIRED AS CHIEF ENGINEER IN THE YEAR 2013. AFTER THE SEARCH, THE DEPT. INFORMED THE ACB ABOUT THE DOCUMENTS FOUND DURING THE SEARCH BUT ON VERIFICATION, THE ACB DROPPED THE PROCEEDINGS. NO UNACCOUNTED ASSETS WERE FOUND WITH THE ASSESSEE DURING THE SEARCH. THIS IS NOTED BY ITA T ON PAGE 49 OF PAPER BOOK. THUS, IF THE ASSESSEE HAS MADE SO MUCH INVESTMENT IN THE BUNGALOW, THE ACB WOULD NOT HAVE DROPPED THE PROCEEDINGS. S .C. IN THE CASE OF K. INBASAGARAN [282 ITR 435] HAS HELD THAT THE DECISION OF THE OTHER AUTHORITY SHOULD BE FOLLOWED. IN THAT CASE, THE ISSUE WAS UNDER PREVENTION OF CORRUPTION ACT AND THE ASSESSEE HAD SHOWN THAT ITO HAD ACCEPTED THE INVESTMENT AS THAT MADE BY HIS WIFE AND ACCORDINGLY, SC HELD THAT THE ASSESSEE COULD NOT BE PUNISHED UNDER THE PREVENTION OF CORRUPTION ACT. THIS ITSELF INDICATES THAT THE CHARGE OF THE DEPT. THAT THE ASSESSEE INVESTED IN THE HOUSE IS FALSE AND THEREFORE, THE PENALTY IS N OT JUSTIFIED. H. THE ASSESSEE HAS DISCHARGED THE BURDEN U/ S 132( 4A) AS SHRI ANDURE HAS OWNED UP THE PAPER AND THUS, THIS PRESUMPTION ALSO CANNOT BE USED AGAINST THE ASSESSEE. SECONDLY, THE A.O. HAS NOT PROVED THAT THE ASSESSEE'S EXPLANATION IS FALSE A ND HENCE, PENALTY CANNOT BE LEVIED. I. WITHOUT PREJUDICE, IT IS SUBMITTED THAT AT THE MOST IF IT IS HELD THAT ANDURE CONSTRUCTED THE BUNGALOW FOR RS. 52 LAKHS AND SOLD IT TO THE ASSESSEE FOR RS.12. 5 LAKHS, IT MAY CONSTITUTE A GIFT TO THE ASSESSEE AND U/S 56(2), IT WOULD STILL BE EXEMPT FROM TAX AS SHRI ANDURE IS THE BROTHER IN LAW OF THE ASSESSEE. J. LASTLY, WITHOUT PREJUDICE, THERE IS NO DOUBT THAT THE ISSUE WAS A DEBATABLE ONE. THUS, THE LEVY OF PENALTY IS NOT JUSTIFIED IN VIEW OF SE IN THE CASE OF VEGETABLE PRODUCTS [88 ITR 192]. 3.1 THE LD. AR SUBMITTED THAT PROTECTIVE ASSESSMENT MADE IN THE HANDS OF SHRI ANDURE ITSELF SHOWS THAT THE ASSESSING OFFICER IS NOT CLEAR AS TO IN WHOSE HAND, ADDITION IS TO BE MADE. WHEN THE ADDITION IS DOUBTFUL N O PENALTY IS LEVIABLE ON SUCH ADDITION. THE ASSESSEE TO FURTHER SUPPORT HIS SUBMISSIONS THAT NO PENALTY IS LEVIABLE WHERE PROTECTIVE ASSESSMENT HAS 6 ITA NO . 1297/PUN/2015 BEEN MADE IN RESPECT OF SOME ADDITION PLACED RELIANCE ON FOLLOWING DECISIONS : I . ITO VS. MISS VASUDHA BAJORI A, 43 TTJ 373; II . DCIT VS. RAJAN H. SHINDE, 93 ITD 1 (TM); III . MOHD. KHASIM AND OTHERS VS. ACIT, 36 ITR 471 (BANG. TRIB.); IV . CIT VS. SARAF AGENCIES LTD., 394 ITR 444 (CAL.). 3.2 IN RESPECT OF ADDITION ON ACCOUNT OF NSS WITHDRAWALS AND FAMILY TRIP TO NEPAL , THE LD. AR SUBMITTED THAT THE ASSESSEE INADVERTENTLY FAILED TO DECLARE THE WITHDRAWAL AMOUNT FROM NSS ACCOUNT IN HIS REGULAR RETURN OF INCOME. HOWEVER, AFTER SEARCH WHEN THE ASSESSEE REALIZED HIS MISTAKE THE ASSESSEE OFFERED THE AMOUNT TO TAX IN THE BLOC K RETURN. THE MISTAKE IN NOT DECLARING AMOUNT WAS BONAFIDE AND NOT OUT OF MALAFIDE INTENTION TO SUPPRESS THE INCOME. THE LD. AR FURTHER SUBMITTED THAT AS PER SECOND PROVISO TO SECTION 158BFA(2), ANY INCOME OFFERED IN BLOCK RETURN NO PENALTY IS TO BE LEVI ED. THUS, AS PER PROVISO, THE PENALTY IS LEVIABLE ON THE INCOME ASSESSED MINUS INCOME DECLARED IN THE BLOCK RETURN. AS REGARDS TRAVEL EXPENSES TO NEPAL THE LD. AR SUBMITTED THAT THE ASSESSEE HAD INCURRED THE EXPENDITURE FROM HIS SAVING S OVER THE PERIOD OF TIME. THE ASSESSEE WAS A SALARIED EMPLOYEE OF STATE OF MAHARASHTRA AND HENCE WAS NOT REQUIRED TO MAINTAIN BOOKS OF ACCOUNT. CONSIDERING THE FACT THAT THE ASSESSEE WAS SUPERINTENDENT ENGINEER AND HAD ALREADY RENDERED SERVICE OVER 20 YE ARS , T HE EXPENDITURE INCURRED ON TRAVEL IS NOMINAL AMOUNT AND HENCE , NO PENALTY IS JUSTIFIED ON SUCH ADDITION. 4. ON THE OTHER HAND DR. VIVEK AGGARWAL REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE ORDER OF COMMISSIONER OF INCOME TAX IN CONFIRMING LEVY OF PENALTY. 7 ITA NO . 1297/PUN/2015 5. W E HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW . THE PENALTY U/S. 158BFA(2) HAS BEEN LEVIED IN RESPECT OF THREE ADDITIONS : I . UNDISCLOSED INVESTMENT ON HOUSE. II . WITHDRAWAL OF AMOUNT FROM NSS ACCOUNT. III . EXPENDITURE ON VISIT TO NEPAL WITH FAMILY. 6. THE ASSESSING OFFICER IN ASSESSMENT PROCEEDINGS MADE ADDITION OF RS.52,58,000/ - IN RESPECT OF COST OF CONSTRUCTION OF HOUSE AT OSMANPURA. DURING THE COURSE OF SEARC H A LOOSE SHEET WAS FOUND AND SEIZED WHEREIN CERTAIN EXPENDITURE W ERE RECORDED. AS PER THE REVENUE THE LOOSE SHEET REFLECTED THE EXPENDITURE INCURRED TOWARDS THE CONSTRUCTION OF HOUSE PURCHASED BY THE ASSESSEE FROM SHRI ANDURE FOR A CONSIDERATION OF RS.12 ,50,000/ - . AS PER THE LOOSE SHEET THE TOTAL EXPENDITURE ON CONSTRUCTION OF HOUSE WAS RS.52,58,000/ - . THE ASSESSING OFFICER MADE ADDITION OF ENTIRE AMOUNT AND INITIATED PENALTY IN RESPECT OF SAID ADDITION. IN FIRST APPELLATE PROCEEDINGS THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL IN ITA NO. 622/PN/2005 DECIDED ON 12 - 05 - 2014 . THE TRIBUNAL ESTIMATED THE COST OF CONSTRUCTION AS RS.39,50,000/ - AFTER REDUCING THE AMOUNT DECLAR ED BY THE ASSESSEE . 7. THE LOOSE SHEET MARKED A - 73 WHICH FORMS BASIS OF ADDITION WAS PURPORTEDLY FOUND FROM THE OUTHOUSE OF OSMANPURA HOUSE. THE CONTENTION OF THE ASSESSEE IS THAT SHRI ANDURE WAS USING THE OUTHOUSE AS HIS SITE OFFICE. THIS CONTENTION OF THE ASSESSEE HAS NOT BEEN REFUTED BY THE DEPARTMENT. SHRI ANDURE ADMITTED THE LOOSE PAPERS INCLUDING THE LOOSE SHEET ALLEGEDLY REFLECTING EXPENDITURE ON HOUSE AS HIS DOCUMENT RELATED TO HIS BUSINESS. SHRI ANDURE IN HIS STATEMENT EXPLAINED THAT THE EXP ENDITURE 8 ITA NO . 1297/PUN/2015 MENTIONED IN THE LOOSE SHEET IS WITH RESPECT TO HIS BUSINESS AT ITS VARIOUS SITES. 8. IT IS A WELL SETTLED LAW THAT ASSESSMENT AND PENALTY PROCEEDINGS ARE TWO INDEPENDENT AND DISTINCT PROCEEDINGS . E VERY ADDITION MADE IN ASSESSMENT PROCEEDINGS DOES NOT NECESSARILY LEAD TO LEVY OF PENALTY. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. DODSAL LTD. REPORTED AS 312 ITR 112 HAS HELD THAT LEVY OF PENALTY U/S. 158BFA(2) IS DIRECTORY AND NOT MANDATORY. MERELY FOR THE REAS ON ASSESSEES EX PLANATION WITH RESPECT TO LOOSE PAPERS WAS REJECTED IN ASSESSMENT PROCEEDINGS CANNOT IPSO FACTO BE A BASIS FOR LEVY OF PENALTY U/S. 158BFA(2) OF THE ACT. THE REVENUE HAS NOT BEEN ABLE TO CONCLUSIVELY PROVE THAT LOOSE SHEET BELONG TO THE AS SESSEE. SINCE, THE LOOSE PAPERS FOUND DURING SURVEY WERE OWNED BY SHRI ANDURE PROTECTIVE AND ADDITION WAS ALSO MADE IN THE HANDS OF SHRI ANDURE , T HIS ITSELF SHOWS THAT THE ASSESSING OFFICER WAS NOT COMPLETELY CONVINCED THAT THE ADDITION HAS TO BE MADE IN THE HANDS OF THE ASSESSEE ALONE . A PERUSAL OF STATEMENT OF SHRI ANDURE RECORDED U/S. 132(4) ON 21 - 11 - 2001 CLEARLY SHOWS THAT HE HAS ADMITTED LOOSE SHEET S AS PART OF HIS BUSINESS EXPENDITURE AND UNRELATED TO THE HOUSE. THUS, UNDER SUCH CIRCUMSTANCES WE AR E OF CONSIDERED VIEW THAT THE LOOSE SHEET MAY BE A GOOD PIECE OF EVIDENCE FOR QUANTUM ADDITION BUT CERTAINLY NOT FOR LEVY OF PENALTY U/S. 158BFA OF THE ACT. ACCORDINGLY, GROUND NOS. 2, 3A, 3B AND 3 C OF THE APPEAL ARE ALLOWED. 9. THE SECOND ADDITION WHICH HAS RESULTED IN LEVY OF PENALTY IS WITHDRAWAL FROM NSS ACCOUNT RS.47,010/ - . THE ASSESSEE HAS SUBMITTED THAT IN RETURN OF INCOME INADVERTENTLY THIS AMOUNT WAS NOT DECLARED . E XCEPT FOR THE INADVERTENCE NO REASON HAS BEEN GIVEN FOR NOT DISCLOSING THE AMOUN T IN THE RETURN OF INCOME. THE LD. AR OF ASSESSEE HAS ARGUED THAT AS 9 ITA NO . 1297/PUN/2015 PER PROVISO TO SECTION 158BFA(2) NO PENALTY IS TO BE LEVIED ON THE INCOME OFFERED IN THE BLOCK RETURN. A PERUSAL OF SECOND PROVISO TO SECTION 158BFA(2) SHOW THAT THE PROVISIONS OF FIRST PROVISO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN. IN SUCH CASE THE PENALTY SHALL BE IMPOSED ON THAT PORTION OF UNDISCLOSED INCOME DETERMINED WHICH IS IN EXCESS OF AMOU NT OF UNDISCLOSED INCOME SHOWN IN THE RETURN. IN THE PRESENT CASE WE FIND THAT THE ASSESSEE ON REALIZING THE MISTAKE HAS DISCLOSED THE AMOUNT RS.47,010/ - IN HIS RETURN OF INCOME POST SEARCH. SINCE, THE AMOUNT HAS BEEN DISCLOSED BY THE ASSESSEE AS PER THE PROVISIONS OF PROVISO TO SECTION 158BFA(2) NO PENALTY IS LEVIABLE ON THE SAID AMOUNT. 10. A NOTHER ADDITION ON WHICH PENALTY HAS BEEN LEVIED IS EXPENDITURE OF RS.52,170/ - BY THE ASSESSEE ON VISIT TO NEPAL WITH HIS FAMILY. A PERUSAL OF THE ORDER LEVYING PENALTY SHOWS THAT PENALTY U/S. 158BFA(2) HAS BEEN LEVIED MERELY FOR THE REASON ADDITION HAS BEEN CONFIRMED BY THE TRIBUNAL. IT IS A WELL SETTLED LAW THAT ADDITION SUSTAINED IN QUANTUM PROCEEDINGS CANNOT I PSO FACTO BE A BASIS FOR SUSTAINING PENALTY U/S. 158BFA(2). LEVY OF PENALTY U/S. 158BFA(2) IS NOT MANDATORY. THE COMMISSIONER OF INCOME TAX (APPEALS) IN THE IMPUGNED ORDER HAS OBSERVED THAT THE PAYMENT WAS NOT RECORDED BY THE ASSESSEE IN THE BOOKS, HENCE , THE SAME WAS TREATED AS UNEXPLAINED EXPENDITURE. UNDISPUTEDLY, THE ASSESSEE/APPELLANT WAS STATE GOVERNMENT SALARIED EMPLOYEE. HE WAS NOT REQUIRED TO MAINTAIN BOOKS. SINCE, THE ASSESSEE WAS NOT UNDER ANY OBLIGATION TO MAINTAIN BOOKS, THERE IS NO QUESTI ON OF RECORDING ANY EXPENDITURE IN THE BOOKS. IN QUANTUM APPELLATE PROCEEDINGS THE ASSESSEE HAS NOT ASSAILED THIS ADDITION. THE MANNER IN WHICH QUANTUM ADDITION IS MADE NO PENALTY ON SUCH ADDITION WAS WARRANTED. IT IS A FIT CASE FOR DELETING THE PENALTY . ACCORDINGLY, 10 ITA NO . 1297/PUN/2015 GROUND NO. 3D RAISED IN THE APPEAL IS ALLOWED AND PENALTY LEVIED U/S. 158BFA(2) IS DIRECTED TO BE DELETED. 11. IN THE RESULT, THE IMPUGNED ORDER IS SET ASIDE AND THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 18 T H DAY OF OCTOBER, 201 8 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 18 TH OCTOBER, 2018 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 1 , AURANGABAD 4. THE PR. C IT - 1, AURANGABAD 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE