Ms. Tripta Kaur, New Delhi V. ACIT, New Delhi

ITA 2974/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0747 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 13-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S RAJPUROHIT
• Assessee Lawyers: VED JAIN CA SHRI ASHISH CHADHA
• Keywords: Search and seizure
• Section: 27; 54; 6; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.2974/DEL/2015 ASSESSMENT YEAR : 2012-13 TRIPTA KAUR, A-29, FRIENDS COLONY-EAST, NEW DELHI. VS. ACIT, CENTRAL CIRCLE- 14, NEW DELHI. PAN : AAAPK8020A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN, CA SHRI ASHISH CHADHA, CA DEPARTMENT BY : SHRI B. S. RAJPUROHIT, SR. DR DATE OF HEARING : 05-09-2018 DATE OF PRONOUNCEMENT : 12-09-2018 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 20.03.2014 OF THE CIT(A)- XXVI, NEW DELHI RELATING TO ASSESSMENT YEAR 2012-13. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND FILED HER RETURN OF INCOME ON 21.01.2014 DECLARING TOTAL INCOME OF RS.5,89,56,260/-. A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT ON S HRI PARAMINDER SING KALRA, CONSORTIUM SECURITIES PVT. LTD. AND OTHER ASSOCIATE D CONCERNS ON 28.07.2011. 2 ITA NO.2974/DEL/2015 THE SEARCH WAS CONDUCTED OSTENSIBLY ON THE BASIS OF PRIOR INFORMATION THAT SHRI PARAMINDER SINGH KALRA IS OWING FOREIGN ACCOUNTS AB ROAD CONTAINING SUBSTANTIAL AMOUNT OF UNDISCLOSED CASH. THE SEARCH AT ASSESSEE S PREMISE WAS ALSO COVERED AS THE ASSESSEE HAPPENED TO BE THE CEO OF M/S. CONS ORTIUM SECURITIES (P) LTD. AND WAS DERIVING INCOME FROM HOUSE PROPERTY, INCOME FROM BUSINESS OR PROFESSION, CAPITAL GAIN AND INCOME FROM OTHER SOUR CES. THE GROUP IS ALSO ENGAGED IN THE REAL ESTATE DEALINGS. BESIDES ABOVE , SMT. TRIPTA KAUR IS DOING THE BUSINESS OF PURCHASE/ SALE OF PAINTING/ ART WOR KS/ SCULPTURES ETC. IN THE NAME AND STYLE M/S GALLERIE NVYA. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT DETERMINING THE TOTAL INCOME AT RS.6,05, 52,484/-. SUBSEQUENTLY, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT, 1961. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE, THE ASSESSING OFFICER LEVIED PENALTY OF RS.96,54,003/- ON THE INC OME SOUGHT TO BE EVADED OF TAX AT RS.3,12,42,729/-. 3. BEFORE THE LD. CIT(A), THE ASSESSEE CHALLENGED T HE LEVY OF PENALTY U/S 271(1)(C) ON THE GROUND THAT THE ASSESSEE HAD DECLA RED AN AMOUNT OF RS.3 CRORES IN HER RETURN OF INCOME AS ADDITIONAL INCOME AND PE NALTY CANNOT BE LEVIED ON THE SAID AMOUNT IN VIEW OF THE PROVISIONS OF SECTION 27 1AAA OF THE I.T. ACT. IT WAS ARGUED THAT THE PENALTY, IF ANY, COULD BE LEVIED ON LY ON THE AMOUNT OF RS.12,42,729/- BEING THE DIFFERENCE BETWEEN THE RET URNED INCOME AND THE 3 ITA NO.2974/DEL/2015 ASSESSED INCOME ON ACCOUNT OF UNEXPLAINED STOCK. S O FAR AS LEVY OF PENALTY OF RS.12,42,729/- IS CONCERNED, IT WAS AGAIN ARGUED TH AT THE PENALTY IS NOT LEVIABLE ON THIS AMOUNT U/S 271(1)(C) SINCE THE PRESENT ASSE SSMENT YEAR 2012-13 IS THE SPECIFIED PERIOD AND THE ASSESSING OFFICER HAS MADE ADDITION TREATING THE UNEXPLAINED STOCK AS UNDISCLOSED INCOME OF THE ASSE SSEE. THEREFORE, THE PROVISIONS OF SECTION 271AAA ARE ONLY APPLICABLE AN D PENALTY CANNOT BE LEVIED U/S 271(1)(C) OF THE I.T. ACT. EVEN ON MERIT, IT W AS ARGUED THAT THE VALUATION OF INVENTORY WAS ON ESTIMATE BASIS ON WHICH GP HAD BEE N ADOPTED. THEREFORE, THE PENALTY CANNOT BE LEVIED ON SUCH ESTIMATED DIFFEREN CE IN THE VALUATION OF INVENTORY WHICH IS LESS THAN 10% OF THE TOTAL VALUE OF INVENTORY IN THE INSTANT CASE. 4. HOWEVER, THE LD. CIT(A) WAS NOT FULLY SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND SUSTAINED PENALTY OF RS.3 ,84,003/- ON THE ADDITION OF RS.12,42,729/- ON ACCOUNT OF UNEXPLAINED STOCK. HE , HOWEVER, HELD THAT THE PENALTY CANNOT BE LEVIED ON THE AMOUNT OF RS.3 CROR ES WHICH WAS SURRENDERED BY THE ASSESSEE DURING THE COURSE OF SEARCH AND THE ASSESSEE HAS DECLARED THE SAME IN THE RETURN OF INCOME AND PAID THE TAX THERE ON. 5. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A) GIVI NG PART RELIEF, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISIN G THE FOLLOWING GROUNDS :- 4 ITA NO.2974/DEL/2015 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] IS BA D, BOTH IN THE EYE OF LAW AND ON THE FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE PENALTY OF R S. 3,84,003/- ON INCOME OF . RS.12,42,729/- LEVIED BY THE AO UNDER SECTION 271(1 )(C) OF THE ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND LAW IN IGNORING THE PROVISIONS OF SECT ION 271AAA READ WITH SECTION 271(1)(C) EXPLANATION 5A WHEREBY NO PENALTY IS LEVI ABLE UNDER SECTION 271(1)(C) IN RESPECT OF THE UNDISCLOSED INCOME OF THE PREVIOUS Y EAR IN WHICH SEARCH IS CARRIED ON. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN IGNORING THE CONTENTION OF T HE ASSESSEE THAT THE COMPUTATION OF UNDISCLOSED INCOME OF RS. 3,12,42,729/- IS NOT FACT UALLY CORRECT. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN IGNORING THE CONTENTION OF T HE ASSESSEE THAT THIS UNDISCLOSED INCOME OF RS. 3,12,42,729/- HAS BEEN COMPUTED ON TH E BASIS OF ESTIMATION AND WITHOUT THERE BEING ANY MATERIAL OF SUCH INCOME ACTUALLY BE EN EARNED BY THE ASSESSEE. 6. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN HOLDING THAT THE APPELL ANT HAS CONCEDED IN THE WRITTEN SUBMISSION THAT PENALTY OF RS.12,42,729/- COULD BE IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. 6. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN NOT READING THE WRITTEN SUBMISSION IN ITS ENTIRETY AND CONFIRMING THE PENALTY. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE PENALTY UNDER SECTION 271(1)(C) REJECTING THE CONTENTION OF THE ASSESSEE THAT THERE IS NEITHER CO NCEALMENT NOR FURNISHING OF INACCURATE PARTICULARS. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE PENALTY DESPI TE THE FACT THAT THE PENALTY PROCEEDINGS ARE INDEPENDENT PROCEEDINGS, AS SUCH ME RELY ON THE BASIS OF DISALLOWANCES AND ADDITIONS MADE BY THE AO, PENALTY CANNOT BE LEVIED. 9. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE GROUNDS OF APPEAL. 6. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLE NGED THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE PENALTY LEVIED ON THE ADDI TION OF RS.12,42,729/-. HE SUBMITTED THAT SINCE THE PRESENT ASSESSMENT YEAR IS THE SPECIFIED PREVIOUS YEAR AND THE ADDITION IS MADE BY THE ASSESSING OFFICER T REATING THE UNEXPLAINED STOCK 5 ITA NO.2974/DEL/2015 AS UNDISCLOSED INCOME OF THE ASSESSEE, THEREFORE, T HE PROVISIONS OF SECTION 271AAA ARE ONLY APPLICABLE TO THE CASE OF THE ASSES SEE, SINCE THE PROVISIONS OF SECTION 271AAA AND PROVISIONS OF SECTION 271(1)(C) ARE MUTUALLY EXCLUSIVE IN VIEW OF SUB-SECTION (3) OF SECTION 271AAA. THEREFO RE, PENALTY CANNOT BE LEVIED ON THAT INCOME U/S 271(1)(C) OF THE I.T. ACT SINCE IN THE INSTANT CASE THE SEARCH TOOK PLACE ON 28.07.2011 AND THE NATURE OF A DDITION MADE BY THE ASSESSING OFFICER IS ON ACCOUNT OF UNEXPLAINED STOC K OF RS.12,42,729/-. RELYING ON VARIOUS DECISIONS, HE SUBMITTED THAT SIN CE THE PROVISIONS OF SECTION 271AAA ARE ONLY APPLICABLE, THEREFORE, INITIATION O F PENALTY PROCEEDINGS AGAINST THE ASSESSEE U/S 271(1)(C) ARE VITIATED. FOR THE A BOVE PROPOSITION, HE RELIED ON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ASHWANI KUMAR ARORA VS. ACIT REPORTED IN 50 ITR 37, DECISION OF T HE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. M/S. TRISHUL ENTERP RISES REPORTED IN 2018 (1) TMI 1140 ITAT- MUMABI, DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF DR. NAMAN A. SHASTRI VS. ACIT REPORT ED IN 2015 (11) TMI 109 ITAT AHMEDABAD AND VARIOUS OTHER DECISIONS. 7. SO FAR AS MERIT OF THE CASE IS CONCERNED, HE SUB MITTED THAT THE PENALTY HAS BEEN LEVIED MERELY ON THE ADDITION MADE ON ESTIMATI ON BASIS. IN THE INSTANT CASE, THERE IS NO CONCEALMENT OF ANY PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME BY THE ASSESS EE. THEREFORE, PENALTY U/S 6 ITA NO.2974/DEL/2015 271(1)(C) CANNOT BE LEVIED ON ACCOUNT OF ESTIMATED ADDITION TO THE CLOSING STOCK. FOR THE ABOVE PROPOSITION, HE RELIED ON THE DECISIO N OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SANGRUR V ANASPATI MILLS LTD. REPORTED IN 303 ITR 53, IN THE CASE OF HARIGOPAL SI NGH VS. CIT REPORTED IN 258 ITR 85 AND VARIOUS OTHER DECISIONS. 8. IN ANOTHER PLANK OF ARGUMENT, LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT WHILE PASSING THE ASSESSMENT ORDER THE ASSESSING OF FICER HAS NOT STATED THE LIMB UNDER WHICH THE PENALTY PROCEEDINGS ARE BEING INITI ATED. HE HAS SIMPLY MENTIONED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT,1961 ARE BEING INITIATED SEPARATELY. REFERRING TO THE NOTICE ISSU ED U/S 274 R.W.S. 271, COPY OF WHICH IS PLACED AT PAGE 21 OF THE PAPER BOOK, HE SU BMITTED THAT INAPPROPRIATE WORDS IN THE SAID NOTICE HAVE NOT BEEN STRUCK OFF. RELYING ON VARIOUS DECISIONS, HE SUBMITTED THAT WHEN THE INAPPROPRIATE WORDS ARE NOT STRUCK OF IT IS NOT UNDERSTOOD AS TO UNDER WHICH LIMB OF ACT, THE ASSES SING OFFICER HAS LEVIED PENALTY AND UNDER SUCH CIRCUMSTANCES THE PENALTY PR OCEEDINGS STAND VITIATED. FOR THE ABOVE PROPOSITION, HE RELIED ON THE DECISIO N OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M/S SSAS EMERALD MEADOWS VIDE ITA NO.380 OF 2015 ORDER DATED 23.11.2015. HE SUBMITTE D THAT THE HON'BLE HIGH COURT IN THE ABOVE DECISION, FOLLOWING THE DECISION OF THE HON'BLE HIGH COURT IN THE CASE OF MANJUNATH COTTON AND GINNING FACTORY RE PORTED IN 359 ITR 565, 7 ITA NO.2974/DEL/2015 HAD UPHELD THE DECISION OF THE TRIBUNAL CANCELLING THE PENALTY AND DISMISSED THE APPEAL FILED BY THE REVENUE ON THE GROUND THAT THE NOTICE ISSUED BY THE ASSESSING OFFICER U/S 274 R.W.S. 271 IS BAD IN LAW SINCE IT DID NOT SPECIFY UNDER WHICH LIMB OF SECTION 271(1)(C) PENALTY PROCEEDINGS HAVE BEEN INITIATED. HE SUBMITTED THAT THE SLP FILED BY THE REVENUE HAS BEE N DISMISSED BY THE HONBLE SUPREME COURT. 9. IN YET ANOTHER ALTERNATE ARGUMENT, THE LD. COUNS EL FOR THE ASSESSEE SUBMITTED THAT THE DIFFERENCE ESTIMATED BY THE ASSE SSING OFFICER IS JUST 4% OF THE TOTAL VALUE ESTIMATED BY THE ASSESSING OFFICER AND IT CANNOT BE IGNORED THAT SUCH ADDITION HAS BEEN MADE WITH GP RATE 39.20% WHI CH IS ALSO TAKEN ON ARBITRARY MANNER. REFERRING TO THE DECISION OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF SHRI ANIL TALWAR VS. DCIT V IDE ITA NO.357 TO 361/CHD/2018 DATED 07.08.2018, HE SUBMITTED THAT UN DER SOMEWHAT SIMILAR CIRCUMSTANCES, THE TRIBUNAL DELETED THE PENALTY LEV IED U/S 271(1)(C) BY THE ASSESSING OFFICER AND UPHELD BY THE LD. CIT(A) HOLD ING THAT MERELY BECAUSE THE ADDITIONS HAVE BEEN SUSTAINED IN THE QUANTUM PROCEE DINGS SAME IS NOT GOOD ENOUGH REASONS TO INITIATE THE PENALTY. HE ACCORDI NGLY SUBMITTED THAT THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S 271(1)( C) WHICH HAS BEEN SUSTAINED BY THE LD. CIT(A) IS NOT SUSTAINABLE. 8 ITA NO.2974/DEL/2015 10. THE LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE LD. CIT(A). HE SUBMITTED THAT IN THE YEAR OF SEARCH PE NALTY CAN BE LEVIED UNDER BOTH THE SECTIONS I.E. U/S 271AAA AND UNDER SECTION 271(1)(C) OF THE I.T. ACT. HE SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 271AAA PENALTY CAN BE LEVIED ON THE UNDISCLOSED INCOME DETECTED DURING TH E COURSE OF SEARCH WHEREAS PENALTY CAN BE LEVIED U/S 271(1)(C) IF ANY OTHER AD DITION HAS BEEN MADE. HE ACCORDINGLY SUBMITTED THAT THE PENALTY LEVIED BY TH E ASSESSING OFFICER U/S 271(1)(C) WHICH HAS BEEN SUSTAINED BY THE LD. CIT(A ) IS JUSTIFIED. 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THE ASSESSING OFFICER IN THE ASSESSMENT ORDER MADE ADDITION OF RS.15,96,224/- ON ACCOUNT OF DIFFERENCE ON ACCOUNT OF UNEXPLAINED STOCK FOUND DURING THE COURS E OF SEARCH. SUBSEQUENTLY, THE ASSESSING OFFICER IN 154 PROCEEDINGS RESTRICTED SUCH ADDITION TO RS.12,42,729/-. WE FIND, IN APPEAL, THE LD. CIT(A) DELETED THE PENALTY LEVIED BY THE ASSESSING OFFICER ON THE AMOUNT OF RS.3 CRORES SURRENDERED IN THE RETURN ON THE GROUND THAT THE PROVISIONS OF SECTION 271(1)(C) ARE NOT APPLICABLE SINCE IT IS THE SPECIFIED PREVIOUS YEAR AND IS WITHIN THE AMBIT OF PENALTY U/S 271AAA OF THE I.T. ACT. THE REVENUE IS NOT IN APPEAL ON THIS ISSUE. THEREFORE, WE ARE NOT CONCERNED WITH THE SAME. HOWEVER, WE FIND THE LD. CIT(A) CONFIRMED THE PENALTY ON THE ADDITION OF RS.12,42,729/- LEVIED BY THE ASSESSING OFFICER U/S 9 ITA NO.2974/DEL/2015 271(1)(C) WHICH WAS THE ADDITION MADE BY HIM ON EST IMATION BASIS AND APPLYING GP RATE. IT IS THE SUBMISSION OF THE LD. COUNSEL F OR THE ASSESSEE THAT SINCE THIS IS THE SPECIFIED YEAR, THEREFORE, ONLY PROVISIONS OF S ECTION 271AAA ARE APPLICABLE AND PENALTY CANNOT BE LEVIED U/S 271(1)(C) OF THE I .T. ACT. IT IS HIS ALTERNATE ARGUMENT THAT THE ADDITION HAS BEEN MADE BY THE ASS ESSING OFFICER ON THE BASIS OF ESTIMATION BY APPLYING THE GP RATE OF 39.20% AND , THEREFORE, PENALTY IS NOT LEVIABLE ON SUCH ESTIMATED ADDITION TO THE VALUATIO N OF CLOSING STOCK. 12. WE FIND MERIT IN THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. IT IS AN ADMITTED FACT THAT THE SEARCH IN THE INSTA NT CASE TOOK PLACE ON 28.07.2011 AND, THEREFORE, THE PRESENT ASSESSMENT YEAR I.E. A. Y. 2012-13 RELATES TO THE SPECIFIED PREVIOUS YEAR. THEREFORE, WHEN THE ADDIT ION HAS BEEN MADE BY THE ASSESSING OFFICER TREATING THE UNEXPLAINED STOCK AS UNDISCLOSED INCOME OF THE ASSESSEE, THE PROVISIONS OF SECTION 271AAA ARE APPL ICABLE AND PROVISIONS OF SECTION 271(1)(C) CANNOT BE APPLIED IN THE PRESENT CASE. FOR READY REFERENCE, PROVISIONS OF SECTION 271AAA ARE REPRODUCED AS UNDE R :- PENALTY WHERE SEARCH HAS BEEN INITIATED. 271AAA. (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYT HING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CAS E WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JUNE, 2007 BUT BEFORE THE 1ST DAY OF JULY, 2012, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM COMPUTED AT THE RATE OF TEN PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR. (2) NOTHING CONTAINED IN SUB-SECTION (1) SHALL APPL Y IF THE ASSESSEE, 10 ITA NO.2974/DEL/2015 (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UN DER SUB-SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPECIFIES TH E MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCL OSED INCOME WAS DERIVED; AND (III) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY , IN RESPECT OF THE UNDISCLOSED INCOME. (3) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) O F SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN RESPECT O F THE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTION (1). (4) THE PROVISIONS OF SECTIONS 274 AND 275 SHALL, S O FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED TO IN THIS SECTION. EXPLANATION.FOR THE PURPOSES OF THIS SECTION, (A) 'UNDISCLOSED INCOME' MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPR ESENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHE R VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHICH HAS (A) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEA RCH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE PRINCIPAL CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIONER BEFORE THE DATE OF SEARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REP RESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RE CORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR WHICH IS FOUND TO BE FA LSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCT ED; (B) 'SPECIFIED PREVIOUS YEAR' MEANS THE PREVIOUS Y EAR (I) WHICH HAS ENDED BEFORE THE DATE OF SEARCH, BUT THE DATE OF FILING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 1 39 FOR SUCH YEAR HAS NOT EXPIRED BEFORE THE DATE OF SEARCH AND THE ASSESSEE HAS NOT FURNISHED THE RETURN OF INCOME FOR THE PREVIOUS YEAR BEFORE THE S AID DATE; OR (II) IN WHICH SEARCH WAS CONDUCTED. 13. SINCE THE ASSESSING OFFICER IN THE IMPUGNED YEA R MADE THE ADDITION TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED STO CK FOUND DURING THE COURSE OF 11 ITA NO.2974/DEL/2015 SEARCH, THEREFORE, THE IMPUGNED ASSESSMENT YEAR BEI NG WITHIN THE MEANING OF SPECIFIED YEAR I.E. THE YEAR IN WHICH THE SEARCH WA S CONDUCTED AND THE ADDITION MADE BY THE ASSESSING OFFICER BEING IN NATURE OF UN DISCLOSED INCOME ONLY THE PROVISIONS OF SECTION 271AAA HAS TO BE APPLIED AND PENALTY CANNOT BE LEVIED U/S 271(1)(C) OF THE I.T. ACT. 14. EVEN OTHERWISE ALSO, WE FIND THE ADDITION HAS B EEN MADE BY THE ASSESSING OFFICER BY ESTIMATING THE GP RATE AND THE REBY DETERMINING THE DIFFERENCE IN THE CLOSING STOCK AND THE INVENTORY W HICH HAS BEEN ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IT IS THE SETTLED PO SITION OF LAW THAT PENALTY IS NOT LEVIABLE ON ACCOUNT OF AD-HOC ADDITIONS. FURTHER, IN THE INSTANT CASE THE DIFFERENCE IS JUST 4% OF THE VALUE ESTIMATED BY THE ASSESSING OFFICER AND SUCH AMOUNT IS NEGLIGIBLE CONSIDERING THE HUGE AMOUNT OF STOCK OF RS.43,49,74,000/-. WE FIND THE ASSESSING OFFICER IN THE BODY OF THE AS SESSMENT ORDER HAS OBSERVED AS UNDER :- THE AVERAGE G.P. RATE EARNING IN THE PRECEDING YEA RS COMES TO 39.20% BY APPLYING THIS G.P. RATE ON THE TAG PRICE OF RS4,21,17,000 - RS.92,50,000 (BEING PAINTINGS OWNED BY ASSESSEE HERSELF IN PERSONAL CAPACITY) = R S.3,28,67,000/-, THE VALUE OF SUCH INVENTORY COMES TO RS.1,99,83,136/- AND THE AVERAGE GP RATE ON TAG PRICE OF RS.38,86,658/- (W.R.T. CONSIGNMENT BELOW RS.5 LAKHS ) AS DISCUSSED ABOVE THE VALUE OF SUCH INVENTORY COMES TO RS.23,63,088/-. THUS THE ADDITION REQUIRED ON THIS ACCOUNT OF UNEXP LAINED STOCK FOUND DURING THE COURSE OF THE SEARCH COMES TO RS.1,99,83,136 + RS.2 3,63,088 = RS.2,23,46,224/- + RS.92,50,000/- = RS.3,15,96,224/-. THE ASSESSEE HAS INCLUDED AN AMOUNT OF RS.3,00,00,000/- IN HER RETURN OF INCOME ON THE DIF FERENCE OF INVENTORY. CONSIDERING THE SAME AN ADDITION OF RS.15,96,224/- (RS.3,15,96, 224 - RS.3,00,00,000/-) IS BEING MADE ON THIS ACCOUNT. THE DIFFERENCE BETWEEN THE UN EXPLAINED STOCK AND THE INCOME OFFERED OF RS.3,00,00,000/- I.E. RS.15,96,224/- IS BEING ADDED TO THE INCOME OF THE 12 ITA NO.2974/DEL/2015 ASSESSEE. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ARE BEING INITIATED ARE SEPARATELY. 15. IT IS PERTINENT TO MENTION HERE THAT THE ADDITI ON OF RS.15,96,224/- HAS BEEN REDUCED TO RS.12,42,729/- IN THE ORDER PASSED U/S 1 54 OF THE I.T. ACT. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE CONSIDERED OPIN ION THAT BOTH LEGALLY AND FACTUALLY THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIR MING THE PENALTY LEVIED BY THE ASSESSING OFFICER. WE, THEREFORE, SET-ASIDE THE OR DER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO CANCEL THE PENALTY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH SEPTEMBER, 2018. SD/- SD/- (SUCHITRA KAMBLE) (R. K. P ANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 12-09-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI