Sri Senthil Mills, Udamalpet V. ITO, Pollachi

ITA 2150/CHNY/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8807 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 26-11-2012
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: T BANUSEKAR
• Keywords: Unexplained cash credit; Unexplained investment; Depreciation
• Section: 40A(3); 133A; 68; 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , . ! , ' !# $ [ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ] ./ I.T.A.NOS.2149 & 2150/MDS/2012 / ASSESSMENT YEARS : 2006-07 & 2005-06 M/S SRI SENTHIL MILLS GANAPATHYPALAYAM PULANKINAR UDUMALPET VS. THE INCOME TAX OFFICER WARD I(1) POLLACHI [PAN AAMFS 2251 H] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI T. BANUSEKAR, CA /RESPONDENT BY : SHRI A.V. SREEKANTH, JCIT / DATE OF HEARING : 12 - 07 - 2016 / DATE OF PRONOUNCEMENT : 05 - 08 - 2016 ) / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE TWO APPEALS OF THE ASSESSEE ARE AGAINST T HE DIFFERENT ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I I, COIMBATORE, DATED 29.9.2012 FOR ASSESSMENT YEARS 2005-06 AND 20 06-07 WHEREIN THE CIT(A) CONFIRMED THE PENALTY LEVIED BY THE ASSE SSING OFFICER U/S 271(1)(C) OF THE ACT. SINCE THE ISSUE INVOLVED I N THESE APPEALS ARE COMMON IN NATURE, THESE WERE CLUBBED TOGETHER, HEAR D TOGETHER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE. ITA NO.2149 & 2150/12 :- 2 -: 2. IN I.T.A.NO.2150/MDS/2012 FOR ASSESSMENT YEAR 2005- 06, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 2. THE FIRST APPELLATE AUTHORITY ERRED IN SUSTAIN ING A PENALTY OF 100% OF THE TAX ON THE ADDITIONS SUSTAINED IN APPEL LATE PROCEEDINGS. 3. YOUR APPELLANT STATES THAT THE ADDITIONS MADE AN D REDUCED IN THE APPELLATE PROCEEDINGS ARE NOT BASED ON ANY ACTU AL CONCEALMENT BUT ON COMPUTATION INVOLVING ESTIMATES AND FLUCTUATING PARAMETERS. THE ORIGINAL ADDITION MADE IN THE ASSESSMENT ORDER WAS REDUCED IN APPEAL PROCEEDINGS. UNDER THE CIRCUMSTANCES SUCH ADDITIONS CANNOT BE CONSIDERED A S CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS WARRANTING LEVY OF PENALTY. 4. YOUR APPELLANT FURTHER STATES THAT STATUTORY DIS ALLOWANCE UNDER SECTION 40A(3) IN RESPECT OF PAYMENTS MADE IN A VIL LAGE WITHOUT BANKING FACILITIES CANNOT JUSTIFY LEVY OF PENALTY P ARTICULARLY IN VIEW OF PROVISIONS OF RULE 6DD. 5. YOUR APPELLANT FURTHER STATES THAT ADDITIONS MAD E UNDER SECTION 68 IN RESPECT OF PAYMENTS RECEIVED BY CHEQUES AS CO NFIRMED IN THE ASSESSMENT ORDER AND FROM AN IDENTIFIABLE CORPO RATE ENTITY CANNOT ATTRACT LEVY OF PENALTY WITHOUT THE TRANSACT IONS BEING PROVED TO BE FALSE, PARTICULARLY WHEN THE OTHER SIM ILAR RECEIPTS BY CHEQUES WERE ACCEPTED. 6. YOUR APPELLANT FURTHER STATES THAT IN THE ABSEN CE OF SATISFACTION REGARDING CONCEALMENT OF INCOME DISCERNIBLE FROM TH E ASSESSMENT ORDER THE PENALTY PROCEEDINGS INITIATED AND THE LEV Y OF PENALTY ARE BAD IN LAW. 3. FACTS OF THE ISSUE ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 ON 27.10.2005 AD MITTING LOSS OF ` 1,15,634/-. A SURVEY U/S 133A OF THE ACT WAS COND UCTED IN THE CASE OF THE ASSESSEE ON 16.2.2007. SUBSEQUENTLY, THE C ASE WAS SUBJECTED TO SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE ASSESSING OFFICER MADE THE FOLLOWING ADDITIONS: ITA NO.2149 & 2150/12 :- 3 -: (I) ADDITION U/S 68 OF THE ACT ` 74,75,000 (II) SUPPRESSED SALE OF YARN ` 38,18,131 (III) DISALLOWANCE U/S 40A(3) ` 9,56,300 4. AGGRIEVED BY THE ABOVE ORDER, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) WHO SUSTAINED THE FOLLOWING ADDIT IONS VIDE HIS ORDER DATED 30.4.2010: (I) ADDITION U/S 68 OF THE ACT ` 4,77,609/- (II) SUPPRESSED SALE OF YARN ` 22,23,566 TOTAL ` 27,01,175 5. IT IS ALSO NOTED THAT THE ASSESSEE HAS NOT CHALLEN GED THE DISALLOWANCE U/S 40A(3) OF ` 9,56,300/-. SUBSEQUENTLY, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271(1)( C) OF THE ACT AND LEVIED PENALTY AT ` 25,92,094/- BEING 200% OF TAX SOUGHT TO BE EVADED AS AGAINST THE MAXIMUM PENALTY OF ` 38,88,141/-. AGAINST THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A). THE CIT(A) CONFIRMED THE LEVY OF PENALTY. HOWEVER, HE REDUCED THE PENAL TY AT 100% OF TAX SOUGHT TO BE EVADED INSTEAD OF 200% LEVIED BY THE A SSESSING OFFICER. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. AR SUBMITTED THAT THE ADDITION TOWARDS SUPP RESSED SALE, THE ASSESSING OFFICER ESTIMATED THE SUPPRESSE D SALE AT ` 22,23,566/-. HOWEVER, THE SAME WAS REDUCED TO ` 11,47,500/- VIDE ORDER OF THE CIT(A) DATED 23.2.2015 WHICH WAS CONSE QUENT TO THE PETITION FILED BY THE ASSESSEE U/S 154 OF THE ACT . AS SUCH, HE ITA NO.2149 & 2150/12 :- 4 -: SUBMITTED THAT THERE IS NO CONCLUSIVE BASIS FOR EST IMATION OF SUPPRESSED STOCK. THE LD. AR FURTHER SUBMITTED THA T THE SUPPRESSED SALE OF YARN WAS BASED ON GROSS PROFIT RATE. ACCO RDING THE LD. AR, THE GROSS PROFIT RATE WAS 2.57% FOR ASSESSMENT YEAR 2005-06 AND 7.52% FOR ASSESSMENT YEAR 2006-07 AND THERE IS NO C ONSTANT IN GROSS PROFIT RATE WHICH IS FLUCTUATING. IT WOULD DEPEND UPON MARKET CONDITIONS. IN THIS ASSESSMENT YEAR, THE MACHINERY WAS KEPT IDLE AND ALSO THERE IS RATE DIFFERENCE OF RAW MATERIAL. BEC AUSE THE ADDITION WAS SUSTAINED BY THE TRIBUNAL FOR THIS ASSESSMENT YEAR, IT CANNOT BE REASON FOR SUSTAINING PENALTY U/S 271(1)(C) OF THE ACT I N THE PENALTY PROCEEDINGS. 7. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTAT IVE SUBMITTED THAT THERE WAS AN INSPECTION CARRIED OUT BY THE SALES TAX AUTHORITIES AND ALSO CENTRAL EXCISE AUTHORITIES, WH O CONFIRMED THE SALE SUPPRESSION AND ALSO PRODUCTION SUPPRESSION BY THE ASSESSEE. THE GROSS PROFIT RATE FOR THE ASSESSMENT YEAR 2005-06 W AS 2.57% AND IT WAS 11.52% FOR ASSESSMENT YEAR 2006-07, THEREFORE, THE ASSESSING OFFICER HAD TAKEN THE AVERAGE GROSS PROFIT RTE AT 5 % FOR WHICH THE ASSESSEE ALSO ACCEPTED VIDE LETTER DATED 20.10.2009 AND INCOME FROM SUPPRESSED SALE WAS REWORKED ORIGINALLY AT ` 22,23,566/-. HOWEVER CONSEQUENT TO PETITION U/S 154 BY THE ASSESSEE, T HE CIT(A) REDUCED ITA NO.2149 & 2150/12 :- 5 -: THE SUPPRESSED SALES TO ` 11,47,500/- ON ACCOUNT OF TYPOGRAPHICAL ERROR IN MENTIONING 30,000 KGS AS 3 LAKHS OF YARN B ECAUSE OF WHICH THE ASSESSEE CANNOT TAKE ADVANTAGE THAT ADDITION WAS O NLY ESTIMATE BASIS, PENALTY CANNOT BE LEVIED. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ORIGINALLY, THE ASSESSING OFFICER LEVIED PENALTY TOWARDS ADDITION OF SUPPRESSED SALE OF YARN AT ` 22,23,566/-. HOWEVER, THIS ADDITION WAS REDUCED TO ` 11,47,500/- BY THE CIT(A). NOW THE CONTENTION OF THE LD. AR IS TH AT THIS ADDITION SUSTAINED BY THE CIT(A) IS ONLY ON ESTIMATE BASIS A ND THERE IS NO CONCLUSIVE EVIDENCE TO SUGGEST THE CONCEALMENT OF S UPPRESSED SALE OF YARN. THE ASSESSEE HAS GIVEN EXPLANATION THAT BEC AUSE OF MACHINERY REMAINED IDLE AND ALSO THERE IS A RATE DIFFERENCE, THE RATE OF GROSS PROFIT HAS BEEN REDUCED AND GROSS PROFIT RATE CANNO T BE REMAINED CONSTANT IN EVERY YEAR. FOR THIS PURPOSE, HE RELIE D ON THE JUDGMENT OF HIGH COURT IN HARIGOPAL SINGH VS CIT, 258 ITR 85 (P &H) WHEREIN HELD THAT WHEN INCOME IS ESTIMATED AND ADDITION SUSTAINE D ON THAT BASIS, PENALTY U/S 271(1)(C) OF THE ACT CANNOT BE ATTRA CTED. FOR THE SAME PROPOSITION, HE ALSO RELIED ON THE JUDGMENT OF CIT VS MODI INDUSTRIAL CORPORATION 195 TAXMAN 68 (P&H), CIT VS SANGRUR V ANASPATI MILLS LTD, 303 ITR 53 (P&H), CIT VS SURESH KUMAR BANSAL, 254 ITR 130 (P&H), AND DR. HAKEEM S.A. SYED SATHAR VS ACIT, 120 ITD ITA NO.2149 & 2150/12 :- 6 -: 1(CHENNAI). IN OUR OPINION, IT IS NOT IN DISPUTE T HAT UNDER EXPLANATION 1 TO SEC. 271(1)(C) OF THE ACT, THE INITIAL BURDEN IS CAST ON THE ASSESSEE TO PROVE THAT THE ADDITION MADE BY THE AS SESSING OFFICER IS NOT CONCEALED INCOME OF THE ASSESSEE. IN OTHER WO RDS, THE ASSESSEE HAS TO PROVE THAT IT WAS NOT ON ACCOUNT OF FURNISHI NG INACCURATE PARTICULARS OF INCOME; THE EXPLANATION OF THE ASSE SSEE SHOULD BE SUPPORTED BY PROPER REASONING. IN THE PRESENT CASE , THE ASSESSEE HAS TAKEN A PLEA AS STATED ABOVE THAT ADDITION WAS MADE ON ESTIMATE BASIS. THE ASSESSING OFFICER PLACED RELIANCE ON TH E SURVEY REPORT COLLECTED DURING THE COURSE OF SURVEY AND ALSO INSP ECTION REPORT OF SALES TAX AUTHORITIES AND CENTRAL EXCISE AUTHORITIE S. HOWEVER, THE MATERIAL BROUGHT ON RECORD THAT THE GROSS PROFIT RA TE OF EVERY YEAR IS NOT CONSTANT, IT DEPENDS UPON VARIOUS FACTORS LIKE DEMAND AND SUPPLY, INFLATION SITUATION AND PRODUCTION CAPACITY, VARIAB LE FACTORS LIKE CHANGE IN DIRECT LABOUR COST AND MATERIAL COST. THE LOWER AUTHORITIES WENT ON THE PREMISE THAT THESE FACTS WHICH DETERMINE THE GR OSS PROFIT IS CONSTANT. BEING SO, VARIOUS HIGH COURTS, HELD T HAT WHENEVER THE ADDITION IS SUSTAINED ON ACCOUNT OF ESTIMATION BASI S, PENALTY CANNOT BE LEVIED. THE JUDGMENTS RELIED UPON BY THE LD. AR LA ID DOWN THE SAME PRINCIPLES. IN OUR OPINION, SINCE THERE IS NO CONC RETE EVIDENCE OF CONCEALMENT OF SALE OF YARN, LEVYING PENALTY IN THI S CASE CANNOT BE SUSTAINED. ACCORDINGLY, THIS IS NOT A FIT CASE FOR LEVY OF PENALTY U/S ITA NO.2149 & 2150/12 :- 7 -: 271(1)(C) OF THE ACT. WE ARE INCLINED TO DELETE TH E PENALTY IN RESPECT OF ESTIMATE INCOME ON SALE OF YARN. 9. THE NEXT ISSUE IS WITH REGARD TO LEVYING PENALTY IN RESPECT OF ADDITION SUSTAINED U/S 68 OF THE ACT. 10. THE ASSESSEE SAID TO HAVE RECEIVED A SUM OF ` 4,77,609/- FROM M/S KALAVATHY FINANCE LTD. SINCE M/S KALAVATH Y FINANCE LTD DID NOT CONFIRM THE ABOVE TRANSACTION, ADDITION WAS SUS TAINED BY THE CIT(A). ACCORDING TO THE ASSESSING OFFICER, THE A SSESSEE HAS NOT DISCHARGED THE BURDEN CAST UPON IT. CONSEQUENTLY, PENALTY WAS LEVIED U/S 271(1)(C) OF THE ACT. ON APPEAL, THE CIT(A), WITHOUT DISCUSSING MUCH IN HIS ORDER, CONFIRMED THE PENALTY ON THIS IS SUE ALSO. 11. THE LD. AR SUBMITTED THAT THE TOTAL RECEIPT FROM M/ S KALAVATHY FINANCE LTD. WAS OF ` 75 LAKHS. OUT OF THIS, THE ASSESSEE WAS ABLE TO EXPLAIN AN AMOUNT OF ` 69,97,391/- AND THE BALANCE WAS NOT EXPLAINED TO THE TUNE OF ` 4,77,609/-. THE SAID AMOUNT OF ` 75 LAKHS WAS ROUTED THROUGH THE ASSESSEES BANK ACCOU NT. THE SAID AMOUNT WAS BEING ARRANGED BY VIJAY DAIMA, WHO WAS L OCATED AT BHURHANPUR AS SECURITY ADVANCE. OUT OF THE SAID AM OUNT, ` 40 LAKHS WAS TRANSFERRED TO M/S GURUSIKH TRADING CO. AND ` 35 LAKHS TO M/S RISHAB TRADING CO. AS PER VIJAY DAIMAS INSTRUCTI ON. THE OTHER TWO RECEIPTS OF ` 3 LAKHS AND ` 3.5 LAKHS ARE RECORDED IN THE BOOKS OF ITA NO.2149 & 2150/12 :- 8 -: ACCOUNT AND LEDGER OF M/S KALAVATHY FINANCE LTD. HOWEVER, NO CONFIRMATION BY IT. THE ASSESSEE DID NOT GIVE ANY DETAILS IN THIS REGARD DURING THE COURSE OF FIRST APPELLATE PROCE EDINGS DUE TO CIRCUMSTANCES BEYOND THE ASSESSEES CONTROL AND M/ S KALAVATHY FINANCE LTD. HAS ONLY ` 69,97,391/- AS PER THEIR BOOKS OF ACCOUNT. ACCORDING TO THE LD. AR, NON-CONFIRMATION BY M/S KA LAVATHY FINANCE LTD IS DUE TO RECONCILIATION OF ACCOUNTS OF THE AS SESSEE WITH M/S KALAVATHY FINANCE LTD AND IF THE TRANSACTION IS NOT DISPROVED BY THE DEPARTMENT, HENCE LEVY OF PENALTY IS PREMATURE. 12. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT INSPIT E OF MULTIPLE OPPORTUNITIES TO EXPLAIN THE CREDITS, THE ASSESSEE FAILED TO EXPLAIN THE SAME, HENCE, PENALTY LEVIED U/S 271(1 )(C) OF THE ACT IS TO BE CONFIRMED. 13. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE MAIN CONTENTION OF THE ASSESSEE IS TH AT THE TRANSACTION BETWEEN M/S KALAVATHY FINANCE LTD AND THE ASSESSEE IS NOT DISPUTED. HOWEVER, THERE WAS A DIFFERENCE OF ` 4,77,609/- DUE TO NON- RECONCILIATION BETWEEN THE ACCOUNTS OF THESE PARTIE S. AFTER GOING THROUGH THE EXPLANATION OF THE ASSESSEE, WE ARE OF THE OPINION THAT THE EXPLANATION GIVEN BY THE ASSESSEE WAS A POSSIB LE ONE THOUGH IT WAS NOT SATISFACTORY. THE TRIBUNAL HAS NOTICED THE SE FACTS IN THE ITA NO.2149 & 2150/12 :- 9 -: QUANTUM APPEAL AND CONFIRMED THE ADDITION TO THAT E XTENT ON ACCOUNT OF UNSATISFACTORY EXPLANATION GIVEN BY THE ASSESSE E IN RESPECT OF THE CREDITS OUTSTANDING IN THE BOOKS OF ACCOUNT. BUT I T IS NOT GOOD ENOUGH FOR IMPOSITION OF PENALTY BECAUSE IT RELATES TO LAC K OF TENDERING EXPLANATION TO THE SATISFACTION OF THE ASSESSING OF FICER AND NOT DISPROVING THE CONTENTION OF THE ASSESSEE ABOUT TH E GENUINENESS OF THE RECEIPTS. ACCORDINGLY, IN OUR OPINION, THIS IS SUE IS NOT A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. PLACIN G RELIANCE ON THE ORDER OF THE CO-ORDINATE BENCH IN THE CASE OF SUPREME STE EL AND GENERAL MILLS VS DCIT 45 CCH 61, (DELHI TRIBUNAL), WE DELET E THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 14. THE NEXT ISSUE IS WITH REGARD TO PENALTY ON DISALLO WANCE OF ` 9,56,300/- U/S 40A(3) OF THE ACT. 15. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SEC TION 40A(3) OF THE ACT ON ACCOUNT OF CASH PAYMENT EXCEED ING ` 20,000/- ON THE SAME SAY TO THE SAME PARTY FOR AN EXPENDITURE R ELATING TO A SINGLE INVOICE. THE ASSESSEE HAS ADOPTED THE PRACTICE OF ENTERING THE PAYMENTS IN ITS BOOKS AFTER SPLITTING THE SAME INTO ` 19,500/- AND LESSER AMOUNT THAN THAT. CONSEQUENT TO THE DISALLO WANCE U/S 40A(3), PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED. ITA NO.2149 & 2150/12 :- 10 -: 16. THE LD. DR SUPPORTED THE ORDER OF THE CIT(A) CONFIR MING THE PENALTY. 17. WE HEARD THE RIVAL SUBMISSIONS ON THIS ISSUE. THER E IS A JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS VATIKA CONSTRUCTION PVT. LTD. 229 TAXMAN 562 WHEREIN HELD THAT WHEN THERE IS ADDITION U/S 40A(3) OF THE ACT LEVY OF PENALTY ON THIS DISALLOWANCE U/S 271(1)(C) OF THE ACT IS NOT JUSTIFIED. FURTHER, IN OUR OPINION, DISALLOWANCE U/S 40A(3) CANNOT BE CONSTRUED AS CON CEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INC OME. IN VIEW OF THE JUDGMENT OF THE DELI HIGH COURT, WE ARE INCLINED TO DELETE THE PENALTY. 18. IN THE RESULT, ASSESSEES APPEAL IN I.T.A.NO.2150/ MDS/2012 IS ALLOWED. 19. COMING TO I.T.A.NO.2149/MDS/2012 FOR ASSESSMENT YEA R 2006-07, THE ASSESSEE HAS RAISED THE FOLLOWING GRO UNDS: 2. THE FIRST APPELLATE AUTHORITY ERRED IN SUSTAIN ING A PENALTY OF 100% OF THE TAX ON THE ADDITIONS SUSTAINED IN APPEL LATE PROCEEDINGS. 3. YOUR APPELLANT STATES THAT: A) ADDITION TOWARDS UNEXPLAINED CASH CREDIT WITHOUT AN Y REFERENCE TO ANY SPECIFIC CREDIT IN THE ACCOUNT OF THE PARTNE RS. B) PROFIT ON SALE OF MACHINERY REWORKED ON THE BASIS O F INCOME TAX RECORDS. C) DIFFERENCE NOTICED AT THE TIME OF SURVEY ON 16.2.20 07 WHICH DATE FALLS IN THE SUBSEQUENT YEAR ITA NO.2149 & 2150/12 :- 11 -: D) ADDITION MADE FOR WANT OF COPY OF INVOICE IN RESPEC T OF PURCHASE WHICH HAS NOT BEEN PROVED TO BE FALSE WHER E PAYMENT WAS MADE BY CHEQUE. E) ADDITION MADE ADOPTING FLUCTUATING CONVERSION FACTO R TOWARDS INVESTMENT IN STOCK, PARTICULARS WHEN THE SALE ACCO UNTED ARE MORE THAN THE YIELD AS WORKED OUT ON THE BASIS OF S UCH CONVERSION FACTOR. F) STATUTORY DISALLOWANCE UNDER SECTION 40A(3) IN RESP ECT OF PAYMENTS MADE IN A VILLAGE WITHOUT BANKING FACILITI ES COVERED BY RULE 6DD CANNOT AMOUNT TO CONCEALMENT OF INCOME WARRANTING P ENALTY UNDER SECTION 271(1)(C). 4. YOUR APPELLANT FURTHER STATES THAT IN THE ABSEN CE OF SATISFACTION REGARDING CONCEALMENT OF INCOME DISCERNIBLE FROM TH E ASSESSMENT ORDER, THE PENALTY PROCEEDINGS INITIATED AND THE LE VY OF PENALTY ARE BAD IN LAW. 20. FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 31.1.2005 ADMITTING INCOME OF ` 6,82,530/-. A SURVEY U/S 133A OF THE ACT WAS C ONDUCTED IN THE CASE OF THE ASSESSEE ON 16.2.2007. SUBSEQU ENTLY, THE CASE WAS SUBJECTED TO SCRUTINY. DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE ASSESSING OFFICER MADE THE FOLLOWING ADDITIONS: (I) UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT ` 1,19,199 (II) SHORT TERM CAPITAL GAINS ` 6,26,718 (III) ADDITION U/S 68 ` 15,30,680 (IV) STOCK IN PROCESS NOT CONSIDERED IN CLOSING STOCK ` 5,36,355 (V) UNDISCLOSED SALE OF YARN ` 43,800 (VI) UNDISCLOSED INVESTMENT IN STOCK ` 38,73,353 (VII) DISALLOWANCE U/S 40A(3) ` 16,07,397 ITA NO.2149 & 2150/12 :- 12 -: 21. AGGRIEVED BY THE ABOVE ORDER, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) WHO SUSTAINED THE FOLLOWING ADDIT IONS VIDE HIS ORDER DATED 30.4.2010: (I) ADDITION U/S 68 OF THE ACT ` 7,81,447 (II) UNACCOUNTED INVESTMENT IN STOCK ` 16,30,178 (III) DISALLOWANCE U/S 40A(3) ` 4,91,599 TOTAL ` 29,03,224 22. IT IS ALSO NOTED THAT THE ASSESSEE HAS NOT CHALLEN GED THE DISALLOWANCE TOWARDS UNEXPLAINED CASH CREDIT U/S 68 OF ` 1,19,999/-, SHORT TERM CAPITAL GAINS OF ` 6,26,718/-, STOCK IN PROCESS OF ` 5,36,355/- AND UNDISCLOSED SALE OF YARN OF ` 43,800/-. SUBSEQUENTLY, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT AND LEVIED PENALTY AT ` 27,07,062/- BEING 200% OF TAX SOUGHT TO BE EVADED AS AGAINST THE MAXIMUM PENALTY OF ` 40,60,593/-. AGAINST THIS, THE ASSESSEE CARRIED THE MATTER BEFO RE THE CIT(A). THE CIT(A) CONFIRMED THE LEVY OF PENALTY. HOWEVER, HE REDUCED THE PENALTY AT 100% OF TAX SOUGHT TO BE EVADED INSTEAD OF 200% LEVIED BY THE ASSESSING OFFICER. AGAINST THIS THE ASSESSEE IS IN APPEAL BEFORE US. 23. REGARDING THE PENALTY LEVIED FOR DISALLOWANCE MADE U/S 68 BY THE ASSESSING OFFICER OF ` 1,19,999/-, THE FACTS ARE SIMILAR AS IN ITA NO.2149 & 2150/12 :- 13 -: I.T.A.NO.2150/MDS/2012. AS DISCUSSED IN PARA 13 IN THE FORMER PART OF THIS ORDER, WE DELETE THE PENALTY. 24. THE NEXT ADDITION FOR LEVYING PENALTY IS STOCK IN P ROCESS NOT CONSIDERED IN CLOSING STOCK TO THE EXTENT OF ` 5,36,355/-. THE ADDITION IS MADE ONLY ON ESTIMATE BASIS. AS DISCUSSED IN PA RA 8 OF THIS ORDER, WE DELETE THE PENALTY. 25. THE LAST ISSUE IS WITH REGARD TO PENALTY LEVIED UND ER WRONG COMPUTATION O SHORT TERM CAPITAL GAINS DISALLOWANCE TO THE EXTENT OF ` 6,26,718/-. 26. THE LD. AR SUBMITTED THAT IT IS AN INADVERTENT ERRO R WHILE COMPUTING THE CAPITAL GAINS. THE ASSESSEE CONSIDE RED THE BOOK VALUE IN RESPECT OF THE COST AFTER WRITTEN DOWN VALUE AS PER IT DEPRECIATION STATEMENT. THE ASSESSING OFFICER HAS RECOMPUTED TH E SHORT TERM CAPITAL GAINS AT ` 13,75,734/- AND BROUGHT TO TAX THE DIFFERENCE OF ` 6,26,718/-. ACCORDING TO THE LD. AR, THERE IS NO I NTENTION OF EVADING THE TAX. IT IS ONLY A HUMAN ERROR, THEREFORE, PENA LTY IS NOT LEVIABLE. 27. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE A SSESSEE TRIED TO EVADE TAX BY CLAIMING WRONG SHORT TERM CAP ITAL GAIN AND THE DIFFERENCE WAS ` 6,26,700/- WHICH WAS BROUGHT TO TAX. THE UNDERSTATEMENT OF SHORT TERM CAPITAL GAINS IS A CLE AR CUT CASE OF ITA NO.2149 & 2150/12 :- 14 -: FURNISHING INACCURATE PARTICULARS OF INCOME AND IT IS TO BE CONSIDERED FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 28. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, THE ASSESSEE, WHILE PREPARING THE INCOME TAX RETURN, ADOPTED THE COST OF ASSETS AS PE R THE BOOK VALUE INSTEAD OF COST AFTER WDV AS PER IT DEPRECIATION ST ATEMENT. THIS IS AN ERROR COMMITTED BY THE ASSESSEE AND THIS CANNOT BE A REASON FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT AS HELD BY TH E SUPREME COURT IN THE CASE OF PRICE WATER COOPERS PVT. LTD VS CIT, 34 8 ITR 306, WHEREIN HELD THAT IMPOSITION OF PENALTY WOULD BE UNWARRANTE D IN CASE THE ASSESSEE HAS COMMITTED AN INADVERTENT AND BONA FIDE ERROR AND HAD NOT INTENDED TO OR ATTEMPTED TO EITHER CONCEAL ITS INCOME OR FURNISH INACCURATE PARTICULARS OF INCOME. THE SAME VIEW WA S TAKEN BY THE SUPREME COURT IN THE CASE OF CIT VS RELIANCE PETROP RODUCTS PVT. LTD, 322 ITR 158. IN THIS CASE THE SUPREME COURT HELD TH AT MERELY BECAUSE THE ASSESSEE CLAIMED DEDUCTION OF INTEREST EXPENDI TURE WHICH HAD NOT BEEN ACCEPTED BY THE ASSESSING OFFICER, PENALTY U/ S 271(1)(C) OF THE ACT IS NOT ATTRACTED, MERELY MAKING A CLAIM WHICH I S NOT SUSTAINABLE IN LAW BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCU RATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. IN OUR OPIN ION, THE ABOVE RATION LAID DOWN BY THE SUPREME COURT IS SQUARELY A PPLICABLE TO THE ITA NO.2149 & 2150/12 :- 15 -: FACTS OF THE PRESENT CASE. BEING SO, IN OUR OPINIO N, THIS ISSUE IS NOT A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 29. IN THE RESULT, ASSESSEES APPEAL I.T.A.NO.2149/MDS /2012 IS ALLOWED. 30. TO SUMMARIZE, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH AUGUST, 2016, AT CHENNAI. SD/- SD/- ( . ! ) (G. PAVAN KUMAR) ' / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER !' / CHENNAI #$ / DATED: 5 TH AUGUST, 2016 RD $%&& '(&)( / COPY TO: & 1 . / APPELLANT 4. & * / CIT 2. / RESPONDENT 5. (+,& - / DR 3. & *&./ / CIT(A) 6. ,0&1 / GF