Shri Yusuf Belim, JODHPUR V. ACIT, JODHPUR

ITA 19/JODH/2014

• Counselvise Citation: 1923314 RSA 2014
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 06-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DEEPAK SEHGAL
• Assessee Lawyers: U C JAIN; GAUTAM CHANDRA BAID
• Keywords: Bogus purchase; Rejection of books of accounts; Unexplained investment; Income from undisclosed sources; Search and seizure; Document seized; Documents seized
• Section: 143(3); 5(2); 153A; 68; 132

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 19/JODH/2014 (A.Y. 2005-06) SHRI YUSUF BELIM, VS. ACIT, CENTRAL CIRCLE-2, C/O SHRI U.C. JAIN, ADVOCATE, JODHPUR. SHATRUNJAY HARI SINGH NAGAR, PALI ROAD, JODHPUR. PAN NO. ADAPB 3924 D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI U.C. JAIN & SHRI GAUTAM CHANDRA BAID. DEPARTMENT BY : DR. DEEPAK SEHGAL - D.R. DATE OF HEARING : 18/02/2014. DATE OF PRONOUNCEMENT : 07/04/2014. O R D E R PER N.K. SAINI, A.M THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 16/12/2013 OF LD. CIT(A), CENTRAL, JAIPUR. THE ASS ESSEE HAS RAISED AS MANY AS 11 GROUNDS IN THIS APPEAL, BUT THE ONLY GRI EVANCE OF THE ASSESSEE RELATES TO SUSTENANCE OF A PART OF THE PENALTY LEVI ED BY THE ASSESSING 2 OFFICER UNDER SECTION 271(1)(C) OF THE I.T. ACT, 19 61 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT). 2 FACTS OF THE CASE, IN BRIEF, ARE THAT A SEARCH AND SEIZURE OPERATIONS WERE CARRIED OUT FROM 13/07/2005 TO 21/07/2005 AT T HE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEE GROUP. DURING THE COURSE OF SEARCH OPERATIONS, CERTAIN INCRIMINATING EVIDENCE WAS GATH ERED AND NOTICE UNDER SECTION 153A OF THE ACT WAS ISSUED ON 13/02/2006. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FURNISHED THE RETURN OF I NCOME DECLARING AN INCOME OF RS. 75,00,550/-. HOWEVER, THE ASSESSMENT WAS COMPLETED ON 20/12/2007 AT AN INCOME OF RS. 1,84,96,497/- AND TH E PROCEEDINGS WERE ALSO INITIATED FOR CONCEALMENT OF INCOME. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSER VED THAT THE ADDITION OF RS. 74,77,104/- ON ACCOUNT OF UNRECORDED SALES H AS BEEN CONFIRMED UP TO ITAT LEVEL AND THE ADDITION OF RS. 8,75,457/- WA S CONFIRMED BY THE ITAT OUT OF THE ADDITION OF RS. 15,80,030/- MADE BY THE THEN ASSESSING OFFICER AND CONFIRMED IN FIRST APPEAL BY THE CIT(A) ON ACCOUNT OF BOGUS CREDITORS AND THAT DISALLOWANCE OF RS. 7,04,573/- W AS SUSTAINED BY THE ITAT OUT OF RS. 29,35,719/- MADE BY THE THEN ASSESS ING OFFICER WHICH WAS SUSTAINED AT RS. 11,74,287/- BY THE LD. CIT(A). AC CORDINGLY, THE ASSESSING 3 OFFICER HELD THAT A PENALTY OF RS. 30,46,948/- WAS LEVIABLE UNDER SECTION 271(1)(C) OF THE ACT AND THE SAID PENALTY WAS LEVIE D. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER:- A] THE PERUSAL OF THE ORDER PASSED U/S 271(I)(C) R EVEALS THAT THE LD AO IMPOSED 'THE PENALTY IN RESPECT OF FOLLOWING 'ADDIT IONS MADE BY AO WHILE PASSING THE ASSESSMENT ORDER U/S L53A READ WITH SEC TION 143(3) OF THE ACT:- I. IN RESPECT OF SALES 74,72,104/- II. IN RESPECT OF ADDITION ON ACCOUNT OF CASH CREDI T [AFTER ORDER OF ITAT] 8,75,457/- III. ADDITION IN RESPECT OF APPLICATION OF G.P. RATE ON PURCHASES [AFTER ORDER OF ITAT] 7,04,573/ - 90,52,134/- B] THAT WHILE MAKING THE ADDITION ON ACCOUNT OF SAL ES AMOUNTING TO RS. 74,72,104/- THE ASSESSING OFFICER IN PARA 2 PAGE 2 OF THE ASSESSMENT ORDER DATED 20/12/2007 HELD AS UNDER: - 'THE ASSESSEE SHRI YUSUF BELIM HAS DEPOSED IN HIS S TATEMENTS RECORDED U/S 132(4) DATED 13.7.05 IN REPLY TO QUESTION NUMBER 10 THAT HE DEALS IN IRON SCRAP. IN THIS LINE OF TRADE PURCHASES ARE MADE FR OM SMALL PARTIES SITUATED IN INTERIOR VILLAGES AND THEY SALE GOODS ONLY AGAIN ST CASH. HE FURTHER CLARIFIED THAT IN THIS TRADE UNDER BILLING OF SALES , NON-BILLING AND BOGUS PURCHASES BILLS IS ALSO ADOPTED. ON EXAMINATION OF THE SEIZED PAPERS AS WELL AS THE AUDIT REPORT FURNISHED ALONG WITH THE R ETURN OF INCOME IT IS SEEN THAT SUBSTANTIAL AMOUNT OF INCOME HAS ACCRUED TO TH E ASSESSEE DURING THE CURRENT FINANCIAL YEAR. AS AGAINST THIS THE ASSESSE E HAS DISCLOSED INCOME AGAINST ASSETS FOUND DURING THE COURSE OF SEARCH IN A.Y. 2006-07. IT IS SETTLED PRINCIPLE THAT ASSESSMENT OF INCOME HAS TO BE MADE IN THE CORRECT YEAR AS PER PROVISIONS OF LAW. 4 AS PER AUDIT REPORT FURNISHED ALONGWITH THE RETURN OF INCOME SALES HAVE BEEN POSTED IN THE BOOK AT RS. 264712/- AS AGAINST THE TOTAL BILLED AMOUNT OF RS. 77,36,816/-. THE AUDITORS HAVE POINTED OUT T HAT SALES TO THE AMOUNT OF RS. 74,72,104/- HAVE NOT BEEN SHOWN IN THE BOOKS . THIS AMOUNT IS CONSIDERED AS INCOME IN THE HANDS OF THE ASSESSEE F OR THE YEAR UNDER CONSIDERATION. THE ASSESSEE MAY ALSO BE ALLOWED THE BENEFIT OF TEL ESCOPY OUT OF ABOVE INCOME IN INVESTMENT IN THE NEXT YEAR AS THE POSSIB ILITY OF THE SAME BEING AVAILABLE CANNOT BE REJECTED. ' C] THAT WHILE PASSING THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2006- 07 ON THE SAME DATE THE ASSESSING OFFICER REDUCED T HE INCOME DISCLOSED BY THE ASSESSEE IN FORM OF ASSETS ON THE BASIS OF SURR ENDER MADE IN THE STATEMENT RECORDED U/S 132(4) READ WITH EXPLANATION 5 TO SECTION 271(1)(C) FROM THE ADDITION MADE ON ACCOUNT OF SALES IN THE A SSESSMENT YEAR 2005- 06 BY HOLDING AT PAGE 9 OF THE ASSESSMENT ORDER AS UNDER: - 'FURTHER, SHRI YUSUF BELIM HAD STATED THAT OUT OF R S. 2,88,86,621/- INVESTMENT OF RS. 2,01,00,000/- WAS ACCOUNTED FOR W HERE AN INVESTMENT OF RS. 87,86,621/- IN EELIM STEEL (P) LTD WAS UNACCOUN TED FOR WHICH NO EXPLANATION / CLARIFICATION COULD BE GIVEN. THEREFO RE SHRI YUSUF BELIM FAILED TO VERIFY THE UNACCOUNTED INVESTMENT OF RS. 87,86,6 21/- IN BELIM STEEL (P) LTD FOR F.Y. 2005-06 AND ADMITTED THIS AMOUNT OF RS . 87,86,621/- AS HIS UNDISCLOSED INCOME FOR F.Y. 2005-06 AND AGREED TO P AY DUE TAX THEREON. IN THE IT RETURN FILED ON 15.10.07 THE ASSESSEE HAS DE CLARED THE SURRENDER AMOUNT AT RS.86,50,000/- AS AGAINST THE ACTUAL SURR ENDER OF RS.87,86,621/- HENCE, BY APPLYING THE THEORY OF TELESCOPY THE BENE FIT OF SET OFF IS GIVEN TO THE ASSESSEE ON ACCOUNT OF AVAILABILITY OF FUNDS IN ASSESSMENT YEAR 2005-06 AS UNDER: - 1. UNRECORDED SALES (AS PER AUDIT REPORT) RS. 74 ,72,104/- 2. BOGUS PURCHASES (0.25% OF RS. 1,17,42,877) RS. 29,35,719/- RS. 1,04,07,823/- LESS:- SET OFF GIVEN IN A.Y. 2005-06 RS. 10,25,000/- RS. 93,82,823/- LESS:- SET OFF GIVEN II PARA 3 RS. 4,82,049/- (RS.74,22,529 69,40,480) TOTAL RS. 89 ,00,774/- 5 D] THE FINAL COMPUTATION OF INCOME MADE BY THE AO F OR THE ASSESSMENT YEAR 2006-07 AT PAGE L0 IS AS UNDER: - 'SUBJECT TO ABOUT THE INCOME IS COMPUTED AS UNDER: - INCOME AS PER RETURN 94,84,920/- LESS: - INCOME CONSIDERED TO BELONG TO A.Y. 05-06 86,50,000/- BALANCE 4,34,918/- ADD: - EXPENSES DISALLOWED U/S 38(2) PARA 5 19,918/- TOTAL INCOME 4,54,836/- ASSESSED AT RS. 4,54,840/-. ISSUE DEMAND NOTICE AN D CHALLAN. CHARGE INTEREST AS PER RULES. E] FROM THE PERUSAL OF FINDING RECORDED BY THE LD A O FOR THE ASSESSMENT YEAR 2005-06 & 2006-07 IT IS CLEAR THAT THE ASSESSE E MADE A SURRENDER IN THE STATEMENT RECORDED U/S 132(4) READ WITH EXPLANA TION 5 OF SECTION 271(1)(C) AND DISCLOSED THE ASSETS ACQUIRED FROM TH E INCOME EARNED IN EARLIER YEARS, IN THE YEAR OF THE SEARCH I.E. ASSES SMENT YEAR 2006-07 WHEREAS THE ASSESSING OFFICER SHIFTED THE INCOME SO DISCLOSED IN THE ASSESSMENT YEAR 2006-07 ON THE BASIS OF ACCRUAL IN THE ASSESSMENT YEAR 2005-06 AND ALLOWED SET OFF OF THE SAME FROM THE IN COME DISCLOSED IN THE ASSESSMENT YEAR 2006-07 AND AS SUCH THE IMPOSITION OF PENALTY U/S 271(I)(C) IS ERRONEOUS AND CONTRARY TO THE PROVISIO NS OF SECTION 271(1)(C) READ WITH EXPLANATION 5 IN RESPECT OF ADDITION OF R S. 7472104/- AND THUS THE PENALTY ATTRIBUTABLE TO THIS ADDITION OF RS. 74 72104/- REQUIRES TO BE DELETED. F] THAT IMPOSITION OF PENALTY IN RESPECT OF TRADING ADDITION OF RS. 7,04,573/- ATTRIBUTABLE TO PURCHASES MADE FROM UNREGISTERED DE ALER IS ALSO ERRONEOUS AS THE SAME IS BASED ON ESTIMATION WITHOUT ANY EVID ENCE OF SUCH INCOME AND THE ESTIMATION WAS DIFFERED BY THE AO, BY THE CIT(A) AND BY THE TRIBUNAL. THE AO ON THIS ISSUE MADE AN ADDITION OF RS. 29,35,719/- WHICH WAS REDUCED TO RS. 11,74,287/- BY THE LD. CIT(A) AN D WAS FURTHER RESTRICTED TO 7,04,573/- BY THE HON'BLE ITAT. ALL THE THREE AU THORITIES ESTIMATED THE PROFIT AT DIFFERENT RATE WITHOUT THERE BEING ANY EV IDENCE OF SUCH INCOME AND AS SUCH NO PENALTY ON THIS ADDITION WHICH IS BA SED ON ESTIMATION IS WARRANTED. THIS SUBMISSION GETS SUPPORT FROM THE FO LLOWING DECISIONS: - 6 I) CIT V/S MAHENDRA SINGH KHEDLA, 7L DTR (RAJ) 189. II) CIT V/S MODI INDUSTRIAL CORPORATION, 34 DTR (PH) L5 8. III) SHIVLAL TAKV/S CIT, 251 ITR 373 (RAJ) IV) CIT V/S DR. GIRI RAJ AGARWAL GIRI, 346 ITR 152 (RAJ ) V) ACIT V/S SHANTI KUMAR CHABRA, 121 TTJ (JP), 985. VI) RADHEY SHYAM SAMDHANI @V/S ACIT, ITAT JODHPUR BENCH . VII) IT.O. V/S DAMODAR LAL LADHA, ITA NO. 101/JU/2009 DA TED 02/08/2009. G] THE THIRD ADDITION IN RESPECT OF WHICH PENALTY W AS IMPOSED IS THE ADDITION ON ACCOUNT OF CASH CREDIT OF RS. 8,75,457/ - IN RESPECT OF CREDIT IN THE ACCOUNT OF NITIN ALLOYS PVT. LTD.. THE CREDIT I N THE NAME OF NITIN ALLOYS PVT. LTD. IS IN RESPECT OF PURCHASES. FURTHER WHEN THE AO REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE INCOME NO PENALTY CAN BE IMPOSED IN RESPECT OF CREDIT WHICH WAS ON ACCOUNT OF PURCHASES PARTICULARLY WHEN THE ADDITION ITSELF IS UNJUSTIFIED IN LIGHT OF THE DECI SION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V/S G.K. CONTRACTORS REPORTED IN L9 DTR (RAJ) 305. THUS WHEN THE ADDITION ITSELF IS NOT JUSTIFIED HOW IT CAN BE A BASIS FOR IMPOSITION OF PENALTY. H] WITHOUT PREJUDICED TO THE ABOVE AND IN THE ALTER NATIVE: - I. MERE REJECTION OF EXPLANATION ABOUT ADDITION U/S 68 WILL NOT JUSTIFY THE PENALTY U/S 271(1)(C) AS HELD IN THE FOLLOWING CASE S: 1. BOMBAY MARBLE INDUSTRIES V/S ITO, ITAT JODHPUR B ENCH. [COPY ENCLOSED] FROM THE ABOVE SUBMISSION IT IS CLEAR THAT THE IMPO SITION OF PENALTY BY THE LD AO IS ERRONEOUS AND THE LD JCIT ERRED IN GRANTIN G APPROVAL TO SUCH ORDER IN MECHANICAL MANNER IS ALSO ERRONEOUS AND THE SAME IS REQUIRED TO BE DELETED. 2] AS REGARDS GROUND OF APPEAL NO. 3 TO 8 A] THAT EXPLANATION 5 TO SECTION 271(1)(C) READS AS UNDER: - 'EXPLANATION 5: WHERE IN THE COURSE OF A [SEARCH IN ITIATED UNDER SECTION 132 BEFORE THE 1 ST DAY OF JUNE, 2007], THE ASSESSEE IS FOUND TO BE TH E OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ART ICLE OR THING (HEREAFTER IN THIS EXPLANATION REFERRED TO AS ASSETS) AND THE ASS ESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILISING (WHOL LY OR IN PART) HIS INCOME,- 7 (A) FOR ANY PREVIOUS YEAR WHICH HAS ENDED BEFORE TH E DATE OF THE SEARCH, BUT THE RETURN OF INCOME FOR SUCH YEAR HAS NOT BEEN FURNISHED BEFORE THE SAID DATE, OR, WHERE SUCH RETURN HAS BEEN FURNISHED BEFORE THE SAID DATE, SUCH INCOME HAS NOT BEEN DECLARED THEREIN; OR (B) FOR ANY PREVIOUS YEAR WHICH IS TO END ON OR AFT ER THE DATE OF THE SEARCH; THEN, NOTWITHSTANDING THAT SUCH INCOME IS DECLARED BY HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER THE DATE OF THE SEARCH , HE SHALL, FOR THE PURPOSES OF IMPOSITION OF A PENALTY UNDER CLAUSE (C ) OF SUB-SECTION (L) OF THIS SECTION, BE DEEMED TO HAVE CONCEALED THE PARTICULAR S OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, [U NLESS,- (L) SUCH INCOME IS, OR THE TRANSACTIONS RESULTING I N SUCH INCOME ARE, RECORDED,- (I) IN A CASE FALLING UNDER CLAUSE (A), BEFORE THE DATE OF THE SEARCH; AND (II) IN A CASE FALLING UNDER CLAUSE (B), ON OR BEF ORE SUCH DATE, IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINED BY HIM FOR ANY SOURCE O F INCOME OR SUCH INCOME IS OTHERWISE DISCLOSED TO THE [CHIEF COMMISSIONER O R COMMISSIONER] BEFORE THE SAID DATE; OR (2) HE, IN THE COURSE OF THE SEARCH, MAKES A STATEM ENT UNDER SUB-SECTION (4) OF SECTION 132 THAT ANY MONEY, BULLION, JEWELLERY O R OTHER VALUABLE ARTICLE OR THING FOUND IN HIS POSSESSION OR UNDER HIS CONTR OL, HAS BEEN ACQUIRED OUT OF HIS INCOME WHICH HAS NOT BEEN DISCLOSED SO FAR I N HIS RETURN OF INCOME TO BE FURNISHED BEFORE THE EXPIRY OF TIME SPECIFIED IN [* * * *J SUB-SECTION (1) OF SECTION 139, AND ALSO SPECIFIES IN THE STATEMENT THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND PAYS THE TAX TOGET HER WITH INTEREST, IF ANY, IN RESPECT OF SUCH INCOME. B] THE ADMITTED FACTS IN THE INSTANCE CASE ARE THAT A SEARCH U/S 132 WAS CARRIED OUT ON 13/07/2005 TO 21/07/2005 AND DURING THE COURSE OF SEARCH THE ASSESSEE MADE A SURRENDER IN THE STATEMENT RECO RDED U/S 132(4) READ WITH EXPLANATION 5 TO SECTION 271(1)(C) AND MADE A DISCLOSURE OF ASSETS ACQUIRED IN THE ASSESSMENT YEAR 2006-07 ON THE BASI S OF INCOME EARNED IN THE PRECEDING YEAR AND DECLARED THE SAME IN THE RET URN OF INCOME AND PAID THE TAXES DUE ALONG WITH INTEREST. THE ASSESSEE FUL FILS ALL THE CONDITIONS LAID DOWN IN EXPLANATION 5 TO SECTION 271(1)(C) AND AS S UCH THE IMPOSITION OF PENALTY BY THE LD AO IS ERRONEOUS AND CONTRARY TO T HE MATERIAL ON RECORD AND REQUIRES TO BE DELETED AS ON THE FACTS THE DENI AL OF BENEFIT OF EXPLANATION 5 TO SECTION 271(1)(C) IS ERRONEOUS AS THE ASSESSEE SATISFIES ALL 8 THE CONDITIONS LAID DOWN IN THE ACT. THE CONTENTION OF THE LD AO IN THE PENALTY ORDER THAT BENEFIT OF EXPLANATION 5 TO SECT ION 271(1)(C) IS NOT AVAILABLE TO THE ASSESSEE IS APPARENTLY ERRONEOUS A ND CONTRARY TO THE MATERIAL ON RECORD AND THE FINDING RECORDED BY THE AO WHILE PASSING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2005-06 & 2006-0 7. IN LIGHT OF ABOVE THE IMPOSITION OF PENALTY IS REQU IRES TO BE DELETED BY YOUR GOOD SELF. 3] AS REGARDS GROUND OF APPEAL NO.10 FROM THE SUBMISSION MADE IN THE PRECEDING PARA IT I S CLEAR THAT THE INCOME RETURNED FOR THE A.Y 2005-06, 2006-07 IS CORRECT, A ND NO PENALTY IS CALLED FOR THE A.Y 2005-06. 4. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE, OBSERVED THAT A LIMITED QUESTION WHICH A ROSE FOR DETERMINATION WAS WHETHER THE ASSESSEE WAS ENTITLED TO IMMUNITY I N TERMS OF CLAUSE (2) OF EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT FO R THE A.Y 2005-06 OVER AND ABOVE RS. 63,85,450/- BEING RS. 90,52,134/-, TH E AMOUNT SURRENDERED BY HIM IN HIS RETURN ON THE ADDITIONS CONFIRMED BY THE ITAT IN THE QUANTUM OF APPEAL. HE FURTHER OBSERVED THAT WHOLE ARGUMENT OF THE ASSESSEE WAS THAT SINCE ASSETS DECLARED IN HIS RETU RN IN THE NEXT A.Y. 2006-07 WERE ACQUIRED FROM THE UNDISCLOSED INCOME E ARNED DURING THE A.Y. 2005-06. THE ADDITION SUSTAINED DURING THIS A SSESSMENT YEAR WOULD COME WITHIN THE IMMUNITY CLAUSE OF EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT. THE LD. CIT(A) WAS OF THE VIEW THAT A BAC KWARD TELESCOPING BENEFIT FOR THE PURPOSE OF THE DEEMING PROVISIONS O F EXPLANATION 5 COULD 9 NOT BE GIVEN WITH REFERENCE TO ITS IMMUNITY PROVISI ONS WHICH HAVE TO BE CONSTRUED STRICTLY AND THE PENALTY WAS TO BE IMPOSE D ON INCOME IN THE YEAR OF ACCRUAL WHEN IT WAS EARNED AND NOT DISCLOSE D FOR TAXATION AND NOT IN THE YEAR OF ITS APPLICATION BY WAY OF INVESTMENT IN ASSETS WHEN IT MAY BE DECLARED. THE LD. CIT(A) OBSERVED THAT EVIDENCE WAS UNEARTHED DURING THE COURSE OF SEARCH CLEARLY ESTABLISHING TH AT THE ASSESSEE HAD MADE UNDISCLOSED SALES AND THAT THE AUDITOR IN HIS AUDIT REPORT HAD MENTIONED THAT ON THE BASIS OF SEIZED DOCUMENTS THE UNACCOUNTED SALES DURING THIS ASSESSMENT YEAR WAS DETERMINED AT RS. 7 4,72,104/-. SO, THE LIABILITY TO GET THIS UNACCOUNTED INCOME TAXED ALSO AROSE IN THIS ASSESSMENT YEAR AND NOT IN THE SUBSEQUENT ASSESSMEN T YEAR WHEN IT WAS APPLIED BY WAY OF EXPENDITURE OR INVESTMENT BY THE ASSESSEE. THE LD. CIT(A) DID NOT ACCEPT THIS CONTENTION OF THE ASSESS EE THAT IMMUNITY PROVISIONS OF EXPLANATION 5(2) TO SECTION 271(1)(C) OF THE ACT FOR INCOME DISCLOSED FOR A.Y. 2006-07 BY WAY OF ASSETS WAS NOT ACCEPTABLE. THE LD. CIT(A) ALSO DID NOT ACCEPT THE CONTENTION OF THE AS SESSEE THAT THE ADDITIONS WERE MADE ON ESTIMATE BASIS AND NO PENALT Y WAS LEVIABLE. THE LD. CIT(A) ALSO MENTIONED THAT CASES RELIED ON BY T HE ASSESSEE WERE DISTINGUISHABLE ON FACTS. HE ACCORDINGLY HELD THAT THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT READ WITH EXPLANATION 5 WAS REQUIRED TO BE 10 IMPOSED ON THE INCOME CONFIRMED BY THE ITAT OF RS. 90,52,134/- OVER AND ABOVE WHAT WAS DECLARED BY THE ASSESSEE IN THE RETU RN FILED OF RS. 63,85,450/- AT THE RATE OF 100% OF THE TAX SOUG HT TO BE EVADED ON THIS CONCEALED INCOME. NOW THE ASSESSEE IS IN APPEAL. 5. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SU BMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SH IFTING OF INCOME IN THE A.Y. 2005-06 WHICH WAS DISCLOSED BY THE ASSESSE E IN THE A.Y. 2006-07 WHICH IS EVIDENT FROM THE ASSESSMENT ORDER PASSED F OR THE A.Y. 2006-07 AND AS SUCH NO CASE OF CONCEALMENT OF INCOME OR FUR NISHING OF INACCURATE PARTICULARS OF INCOME COULD HAVE BEEN MADE OUT. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER IMPOSED PENALT Y IN RESPECT OF THE FOLLOWING:- (1) ADDITION ON ACCOUNT OF SALES OF RS. 74,72,104/ - (2) ADDITION ON ACCOUNT OF CASH CREDIT OF RS. 8,75 ,457/- (3) ADDITION IN RESPECT OF APPLICATION OF GROSS P ROFIT RATE ON PURCHASES OF RS. 7,04,573/- TOTALING TO RS. 90,52,134/-. IT WAS FURTHER STATED THAT UNRECORDED SALES ADDED FOR THE YEAR UNDER CONSIDERATION WAS ALREADY SURRENDERED BY THE ASSESSEE IN THE A.Y. 2006-07 IN THE STATEMENT RECORDED UNDER SECTION 132 (4) OF THE ACT READ 11 WITH EXPLANATION 5 OF SECTION 271(1)(C) OF THE ACT AND THAT THE ASSESSEE DISCLOSED THE ASSETS ACQUIRED FROM THE INCOME EARNE D IN THE EARLIER YEARS IN THE YEAR OF SEARCH WHEREAS THE ASSESSING OFFICER ON THE BASIS OF ACCRUAL SHIFTED THIS INCOME TO THE A.Y. 2005-06 AND ALLOWED SET OFF OF THE SAME FROM THE INCOME DISCLOSED IN THE A.Y. 2006-07, AS S UCH THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS ERRO NEOUS AND CONTRARY TO THE PROVISIONS OF SECTION 271(1)(C) READ WITH EXPLA NATION 5 OF THE ACT IN RESPECT OF ADDITION OF RS. 74,72,104/-. AS REGARDS TO THE IMPOSITION OF PENALTY FOR THE ADDITION ON ACCOUNT OF CASH CREDIT OF RS. 8,75,457/- IN RESPECT OF CREDIT IN THE ACCOUNT OF M/S. NITIN ALLO YS PVT. LTD., IT WAS STATED THAT THE CREDIT IN THE NAME OF SAID FIRM WAS RELATING TO THE PURCHASES, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE INCOME, NO PENALTY COULD BE IMPOSED W HEN THE ADDITION ITSELF WAS UNJUSTIFIED. RELIANCE WAS PLACED ON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. G. K. CONTRACTORS REPORTED IN 19 DTR (RAJ) 305. AS REGARDS TO THE PENALTY IN RESPECT OF TRADING ADDITION OF RS. 7,04,573/- ATTRIBUTABLE TO THE PURC HASES MADE FROM UNREGISTERED DEALER, THE LEARNED COUNSEL FOR THE AS SESSEE STATED THAT THE SAME WAS ON ESTIMATE BASIS WITHOUT ANY EVIDENCE OF SUCH INCOME AND THE ESTIMATION WAS DIFFERED BY THE ASSESSING OFFICER, T HE LD. CIT(A) AND THE 12 ITAT. IT WAS EXPLAINED THAT THE ASSESSING OFFICER MADE THE ADDITION OF RS. 29,35,719/- WHICH WAS REDUCED TO RS. 11,74,287/ - BY THE LD. CIT(A) AND FURTHER RESTRICTED TO RS. 7,04,573/- BY THE ITA T. THEREFORE, PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS NOT LEVIABLE ON THE ESTIMATED ADDITION. RELIANCE WAS PLACED ON THE FOLLOWING CAS E LAWS:- 1) CIT VS. MAHENDRA SINGH KHEDLA, 71 DTR (RAJ) 189 2) CIT VS. MODI INDUSTRIAL CORPORATION, 34 DTR (PH ) 158 3) SHIVLAL TAK VS. CIT, 251 ITR 373 (RAJ) 4) CIT VS. DR. GIRI RAJ AGARWAL GIRI, 346 ITR 152 (RAJ) 5) ACIT VS. SHANTI KUMAR CHABRA 121 TTJ (JP) 985 6) RADHEY SHYAM SAMDHANI VS. ACIT, ITAT JODHPUR BE NCH. 7) ITO VS. DAMODAR LAL LADHA, ITA NO. 101/JU/2009 DATED 02/08/2009. ACCORDINGLY, IT WAS SUBMITTED THAT THE IMPUGNED PE NALTY LEVIED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C) OF TH E ACT AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. 6 . IN HIS RIVAL SUBMISSIONS, LEARNED D.R. SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND REITERATED THE OBSERVATIONS M ADE IN THE IMPUGNED ORDER. 7 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT 13 CASE, IT IS NOTICED THAT THE ASSESSING OFFICER LEVI ED THE PENALTY IN RESPECT OF ADDITION OF RS. 74,72,104/-, THE SAID ADDITION W AS MADE BY THE ASSESSING OFFICER IN THE YEAR UNDER CONSIDERATION O N ACCRUAL BASIS. HOWEVER, THIS INCOME WAS DISCLOSED BY THE ASSESSEE IN SUCCEEDING YEAR A.Y. 2006-07 I.E. THE YEAR RELEVANT TO THE YEAR OF SEARCH, IN HIS STATEMENT RECORDED UNDER SECTION 132(4) READ WITH EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT. THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT FOR THE A.Y. 2006-07 REDUCED AN INCOME OF RS. 86,50 ,000/- STATING THEREIN THAT THE SAID INCOME BELONGED TO A.Y. 2005-06. THE REFORE, IT CANNOT BE SAID THAT THE ASSESSEE FURNISHED INACCURATE PARTICU LARS OF INCOME OR CONCEALED THE INCOME FOR THE YEAR UNDER CONSIDERATI ON BECAUSE THE ASSESSING OFFICER CONSIDERED THIS INCOME FOR THE YE AR UNDER CONSIDERATION ON THE BASIS OF ACCRUAL AND ALLOWED THE SET OFF OF THE SAME INCOME FROM THE INCOME DISCLOSED IN THE A.Y. 2006-07 WHILE THE ASSESSEE DISCLOSED THE ASSETS ACQUIRED FROM THE INCOME EARNED IN THE EARLI ER YEARS IN THE YEAR OF SEARCH I.E. A.Y. 2006-07 BY MAKING THE SURRENDER IN THE STATEMENT RECORDED UNDER SECTION 132(4) READ WITH EXPLANATION 5 TO SECTION 271(1)(C) OF THE ACT. SO, IT CAN BE A GOOD CASE FO R MAKING THE ADDITION ON ACCRUAL BASIS, HOWEVER, THE SAID ADDITION IS NOT SU FFICIENT FOR LEVYING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 14 8 . ANOTHER ADDITION OF RS. 7,04,573/- RESTRICTED BY THE ITAT OUT OF TRADING ADDITION, WAS CONSIDERED BY THE ASSESSING O FFICER FOR IMPOSING PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE SA ID TRADING ADDITION WAS MADE BY THE ASSESSING OFFICER ON ESTIMATE BASIS AT RS. 29,35,719/- WHICH WAS REDUCED BY THE LD. CIT(A) TO RS. 11,74,287/- AN D RESTRICTED BY THE ITAT TO RS. 7,04,573/- ON ESTIMATE BASIS. IT IS WE LL SETTLED THAT WHEN THE ADDITION IS MADE ON ESTIMATE BASIS, PENALTY UNDER S ECTION 271(1)(C) OF THE ACT IS NOT WARRANTED. ONE MORE ADDITION OF RS. 8,7 5,457/- WAS CONSIDERED BY THE ASSESSING OFFICER FOR LEVYING PEN ALTY UNDER SECTION 271(1)(C) OF THE ACT. THE SAID ADDITION WAS MADE I N RESPECT OF CREDIT IN THE ACCOUNT OF M/S. NITIN ALLOYS PVT. LTD. WHICH WAS ON ACCOUNT OF PURCHASES. IN THE PRESENT CASE, THE ASSESSING OFFI CER REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE INCOME. THEREFORE, NO PENALTY CAN BE IMPOSED IN RESPECT OF CREDIT WHICH WAS ON ACCOUNT O F PURCHASES PARTICULARLY WHEN THE BOOKS OF ACCOUNTS WERE NOT AC CEPTED AND THE INCOME WAS ESTIMATED. IN THE PRESENT CASE, IT IS ALSO NOTICED THAT THE ASSESSING OFFICER FOR LEVYING THE PENALTY UNDER SEC TION 271(1)(C) OF THE ACT CONSIDERED WHOLE OF THE INCOME OF RS. 90,52,134 /- (RS. 74,72,104/- + RS. 8,75,457/- + RS. 7,04,573/-) AS CONCEALED INCOM E AND HAD IGNORED THE INCOME OF RS. 63,85,450/- DECLARED BY THE ASSESSEE IN THE RETURN OF 15 INCOME FILED BY HIM. THEREFORE, THE QUANTUM OF PEN ALTY DETERMINED BY THE ASSESSING OFFICER WAS ALSO WRONG. CONSIDERING THE TOTALITY OF THE FACTS AS DISCUSSED HEREINABOVE, WE ARE OF THE VIEW THAT THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS NOT LEVIABLE IN TH E PRESENT CASE. WE, THEREFORE, DELETE THE PENALTY LEVIED BY THE ASSESSI NG OFFICER AND SUSTAINED BY THE LD. CIT(A). 9 . IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE COURT ON 07 TH APRIL, 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 07 TH APRIL, 2014. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.