ITO, Jaipur V. BHAGWANG DAS THAWARNI, Jaipur

ITA 402/JPR/2011

• Counselvise Citation: 40223114 RSA 2011
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 03-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD JOHARI
• Assessee Lawyers: O P AGARWAL
• Keywords: Loose papers; Difference of opinion; Change of opinion
• Section: 133A

Judgement Text

1 ITA 402-11 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 402/JP/2011 ASSTT. YEAR : 2006-07. THE INCOME-TAX OFFICER, VS. SHRI BHAGWAN DAS THAW ARNI, WARD 1(3), PROP. M/S. RAJKUMAR VISHANDAS, JAIPUR. 1, TRIPOLIYA BAZAR, JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VINOD JOHARI RESPONDENT BY : SHRI O.P.AGARWAL & SHRI MANISH AGARWAL DATE OF HEARING : 22.09.2011 DATE OF PRONOUNCEMENT : 14.10.2011. ORDER DATE OF ORDER : 14/10/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AGAINST CANCELING THE LEVY OF PENALTY UNDER SEC5ION 271(1)(C) RELATING TO ASSESSMENT YEAR 2006- 07. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME WAS FILED SHOWING AN INCOME OF RS.2410415/- WHICH WAS ASSESSED AT RS.552 32220/-. IN FIRST APPEAL RELIEF OF RS.45296225/- WAS ALLOWED. AN ADDITION OF RS.75 LAC S WAS SUSTAINED ON ACCOUNT OF UNEXPLAINED, EXCESS STOCK FOUND DURING SURVEY. ON T HIS CONFIRMED ADDITION, PENALTY U/S 271(1)(C) WAS LEVIED. 2.1. SURVEY U/S 133A WAS CARRIED OUT ON 19.7.05 IN THE ASSESSEE'S CASE AND COST OF 2 EXCESS PHYSICAL STOCK FOUND WAS ASCERTAINED AT RS.6 0927252/- AFTER REDUCING THE STOCK BY APPLYING G.P. RATE OF 12% FROM THE TOTAL COST. THE VALUE OF UN EXPLAINED EXCESS STOCK WAS DETERMINED AT RS.52227982/-. THE ASSESSEE MADE SURR ENDER OF RS.54228792/- BUT WHILE FILING RETURN OF INCOME, THE APPELLANT RETRACTED FR OM DISCLOSURE EARLIER MADE. DURING THE ASSESSMENT PROCEEDINGS, IT WAS POINTED OUT BY THE A R THAT A SUM OF RS.5240761/- HAS BEEN CONSIDERED IN ASSESSMENT YEAR 2005-06 OUT OF T OTAL UNACCOUNTED STOCK DETERMINED AT RS.52227982/-. THE AO ACCORDINGLY, EXCLUDED THIS VALUE FROM THE UNACCOUNTED STOCK. FURTHER, REDUCTION OF RS.256202/- WAS ALLOWED DUE T O CALCULATION ERROR. WITH THIS, UNACCOUNTED STOCK OF RS.46731019/- WAS DETERMINED. IN FIRST APPEAL, ADDITION OF RS.75 LACS WAS CONFIRMED AGAINST WHICH SECOND APPEAL IS P ENDING BEFORE, THE HON'BLE ITAT. 2.2. DURING THE PENALTY PROCEEDINGS, THE AO HELD TH AT THE LOOSE PAPERS IMPOUNDED FROM BUSINESS PREMISES OF THE ASSESSEE UNDISPUTEDLY ESTABLISHED THAT THE ASSESSEE INDULGED IN UNACCOUNTED PURCHASE AND SALES. DURING THE COURSE OF SURVEY THE ASSESSEE ALSO CONFESSED. THE STOCK TAKING WAS DONE IN THE PR ESENCE OF THE ASSESSEE AND HIS EMPLOYEES AND, THEREFORE, THE EXCESS STOCK DETERMIN ED AFTER CONSIDERING ARITHMETICAL CALCULATION ERRORS CAME TO RS.46731019/- WHICH WAS CONFIRMED IN FIRST APPEAL. THE ASSESSEE OUGHT TO HAVE DECLARED THIS INCOME IN THE RETURN, VOLUNTARILY BUT BY NOT SHOWING IN THE RETURN OF INCOME, THE ASSESSEE CONCEALED PAR TICULARS OF HIS TRUE INCOME. THE AO HAS RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF UNION OF INDIA AND OTHERS VS. DHARMENDRA TEXTILE PROCESSORS & OTHERS W HEREIN THE PRINCIPLE WAS LAID DOWN THAT WILLFUL CONCEALMENT IS NOT ESSENTIAL INGREDIEN T FOR ATTRACTING CIVIL LIABILITY AS IS THE CASE IN THE MATTER OF PROSECUTION U/S 276C. MENSREA IS NOT AN ESSENTIAL INGREDIENT OF SECTION 271(1)(C) FOR THE PURPOSE OF IMPOSITION OF PENALTY U/S 271 (1)( C). IN THE PRESENT 3 CASE, THE ASSESSEE WAS FOUND FURNISHING INACCURATE PARTICULARS OF HIS INCOME WILLFULLY THOUGH HE WAS AWARE THAT UNEXPLAINED STOCK SURFACES AS A RESULT OF SURVEY OPERATION REPRESENTS HIS UNDISCLOSED INCOME WHICH WAS LIABLE TO BE INCLUDED IN THE TOTAL INCOME. AS THE ASSESSEE REFRAINED FROM DISCLOSING SUCH INCO ME, TRUE PARTICULARS OF HIS INCOME WERE NOT DISCLOSED IN THE RETURN AND, THEREFORE, PE NALTY U/S 271(1)(C) LEVIED @ 200% OF TAX SOUGHT TO BE EVADED. 3. IT WAS CONTENDED BEFORE LD. CIT (A) THAT THE ASS ESSEE DEALS IN HARDWARE GOODS AND FITTINGS ITEMS. A SURVEY U/S 133A WAS CARRIED OUT O N 19.7.05. PENALTY OF RS.5049000/- WAS LEVIED U/S 271(1)(C) ON THE ALLEGED CONCEALED I NCOME OF RS.75 LACS BEING EXCESS STOCK AS UPHELD BY THE CIT(A). 3.1. ONLY ON 8.7.08 I.E. AFTER 3 YEARS FROM SURVEY, COPIES OF INVENTORY LIST PREPARED BY THE SURVEY TEAM WERE PROVIDED AND THEN ASSESSEE COU LD VERIFY THE SAME. THE MISTAKE AND ERRORS COMMITTED BY THE SURVEY TEAM IN QUANTIFYING SALES VALUING THE STOCK WERE NOTICED AND IF THE SAME ARE CONSIDERED THERE ARE NO EXCESS OR SHORT STOCK AVAILABLE WITH THE ASSESSEE. 3.2. FURTHER, WHILE UPHOLDING THE ADDITION OF RS.75 LACS THE CIT(A) OBSERVED THAT THE AO'S WORKING OF EXCESS STOCK FOUND DURING THE COURS E OF SURVEY COULD NOT BE ACCEPTED BUT AT THE SAME TIME VALUATION GIVEN BY THE ASSESSE E WAS NOT FULLY CHECKED BY THE AO AND, THEREFORE, IN THE INTEREST OF JUSTICE, IT WILL BE MORE LOGICAL IF A LUMP SUM ADDITION ON THIS ACCOUNT OF EXCESS STOCK FOUND IS MADE. THUS, I T IS EVIDENT THAT IN FIRST APPEAL, ERRORS AND OMISSIONS IN THE INVENTORY AND VALUATION OF STO CK PREPARED BY THE SURVEY TEAM WERE ACCEPTED AND ONLY FOR THE POSSIBLE LEAKAGES OF REVE NUE, A LUMP SUM ADDITION WAS MADE. THIS ADDITION IS NOT BASED ON ANY MATERIAL BUT IS M ERE ESTIMATION FOR WHICH PENALTY 4 CANNOT BE LEVIED. THE ITA T HAS ALSO CONFIRMED THE FINDING OF CIT(A) AND HAS REDUCED THE ADDITION OF RS.75 LACS MADE IN FIRST APPEAL TO RS.60 LACS, ON ESTIMATE BASIS WITHOUT ANY ADVERSE VIEW THAT THE ASSESSEE HAS FURNISHED AN Y INACCURATE PARTICULARS OF INCOME. THE ITAT HAS OBSERVED THAT THE SURVEY PARTY HAS INV ENTORISED THE STOCK IN HURRIED MANNER, REDUCTION ON ACCOUNT OF GROSS PROFIT RATE W AS ALLOWED @ 12% WHEREAS IN THE IMMEDIATELY PRECEDING YEAR THE G.P. RATE WAS 16%. F ROM THE OBSERVATIONS OF HON'BLE ITAT, IT IS CLEAR THAT THE ADDITION ON ACCOUNT OF E XCESS STOCK WAS SUSTAINED ONLY ON ESTIMATION BASIS WITHOUT GIVING ANY ADVERSE VIEW TH AT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THE AO'S OBSERVAT IONS THAT THE ASSESSEE HAS INDULGED IN UNRECORDED PURCHASES/SALES ON THE BASIS OF STATEMEN T RECORDED DURING THE COURSE OF SURVEY ARE NOTHING BUT ONLY ASSUMPTIONS. THE CASE L AWS RELIED UPON BY THE AO WHILE IMPOSING PENALTY ARE CLEARLY DISTINGUISHABLE. THE A O HAS IMPOSED PENALTY @ 200% WITHOUT ANY LOGICAL GROUND. 3.3. RELIANCE WAS PLACED ON THE DECISION IN THE CAS E OF CIT VS. SUPER METAL RE- ROLLERS 265 ITR 82 (DEL) WHEREIN IT WAS HELD THAT C ONDITION PRECEDENT FOR LEVY OF PENALTY IS THE SATISFACTION OF AO THAT THERE HAS BEEN CONCE ALMENT OF INCOME WHICH MUST BE CLEARLY SPELT OUT. THE AO HAS MISERABLY FAILED TO E STABLISH CONSCIOUS CONCEALMENT AND HAS ACTED IN DELIBERATE DEFIANCE OF LAW. THE ASSESSEE H AS FILED EVERY PRECISE DETAIL AS REQUIRED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO PROVE THAT THE ASSESSEE HAS IN ANY MANN ER FURNISHED INACCURATE PARTICULARS OF HIS INCOME OR HAD IN ANY MANNER COMMITTED A FRAUD O R CONCEALMENT OF INCOME. WITH THIS, IT WAS SUBMITTED THAT THE PENALTY LEVIED MAY BE DEL ETED. RELIANCE WAS ALSO PLACED ON VARIOUS CASE LAWS INCLUDING THE FOLLOWINGS: 5 1. 110 ITR 602 (MAD) 2. 258 ITR 85 (P&H) 3. 125 ITR 700 (RAJ) 4. 291ITR519(SC) 4. AFTER CONSIDERING THE SAME AND PERUSING THE MATE RIAL PLACED ON RECORD, THE LD. CIT (A) HELD THAT THE LEVY OF PENALTY IS NOT JUSTIFIED. ACCORDINGLY HE CANCELLED THE LEVY OF PENALTY. 5. NOW THE DEPARTMENT IS IN APPEAL HERE BEFORE THE TRIBUNAL. 6. THE LD. D/R FIRSTLY PLACED RELIANCE ON THE ORDER OF THE AO. BRIEF NOTE OF WRITTEN SUBMISSION WAS ALSO FILED. IT WAS FURTHER ADDED THA T THE ADDITIONS WERE MADE ON THE BASIS OF SURRENDER MADE DURING THE COURSE OF SURVEY CONDU CTED UNDER SECTION 133A. THEREFORE, THE AO WAS CORRECT IN LEVYING PENALTY @ 200% OF THE TAX EVADED. IT IS ALSO MENTIONED IN THE WRITTEN SUBMISSION BY LD. D/R THAT THE QUANTUM ADDITIONS WERE REDUCED BY LD. CIT (A) TO RS. 75,00,000/- AGAINST THE TOTAL ADDITION M ADE BY THE AO AT RS. 4.67 CRORES OR ODD. ON FURTHER APPEAL BY DEPARTMENT AND ASSESSEE, THE QUANTUM ADDITION WAS REDUCED TO RS. 60,00,000/- BY THE TRIBUNAL. IT WAS FURTHER SU BMITTED THAT THE AO HAS LEVIED A PENALTY ON THE AMOUNT OF RS. 75,00,000/- IN VIEW OF THE ORD ER OF LD. CIT (A) WHO REDUCED THE ADDITION TO RS. 75,00,000/-. NOW, AS THE TRIBUNAL HAS REDUCED THE ADDITION TO RS. 60,00,000/-, THEREFORE, AT THE BEST THE PENALTY LEV IED BY AO ON THE BASIS OF ADDITION OF RS.75,00,000/- CAN BE REDUCED ON THE AMOUNT OF ADDI TION OF RS. 60,00,000/-. FURTHER, RELIANCE WAS PLACED ON THE WRITTEN SUBMISSIONS FILE D DURING THE APPELLATE PROCEEDINGS. 7. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE PLACED RELIANCE ON THE ORDER OF LD. CIT (A). IT WAS FURTHER SUBMITTED THAT THE ISS UE HAS BEEN DISCUSSED IN DETAIL BY THE LD. CIT (A) WHILE REDUCING THE ADDITION BY THE LD. CIT (A) WHILE REDUCING THE ADDITION TO RS. 6 75,00,000/-. IT WAS ALSO SUBMITTED THAT IT IS A SE TTLED POSITION OF LAW THAT THE STATEMENT RECORDED DURING THE COURSE OF SURVEY UNDER SECTION 133A CANNOT BE TREATED AS A PIECE OF EVIDENCE IF THERE IS NO CORROBORATIVE EVIDENCE. IT WAS SUBMITTED THAT WHEN THE SURVEY WAS CONDUCTED AND THE STOCK INVENTORY WAS PREPARED IN 1 78 PAGES AND THE SURVEY TEAM HAS COMPLETED THE SURVEY PROCEEDINGS WITHIN 6 HOURS, IT WAS NOT POSSIBLE TO TAKE A RIGHT VALUATION AT THE TIME OF SURVEY. THE ASSESSEE WAS NOT IN A SOUND STATEMENT OF MIND AND, THEREFORE, HE SURRENDERED THE AMOUNT AND OFFERED FO R TAXATION. THEREAFTER, HE REQUESTED THE DEPARTMENT TO GIVE COPY OF STATEMENT RECORDED D URING THE COURSE OF SURVEY ALONG WITH OTHER MATERIALS. HOWEVER, IT TOOK THREE YEARS TO SU PPLY THE RECORD AND STATEMENT AND WHEN IT WAS GIVEN TO THE ASSESSEE, THE RECONCILIATION OF STATEMENT WAS PREPARED AND FILED DURING THE ASSESSMENT PROCEEDINGS. HOWEVER, THE AO HAD MA DE ADDITION ON THE BASIS OF STATEMENT RECORDED DURING SURVEY PROCEEDINGS. THE L D. CIT (A) WHO REDUCED THE QUANTUM ADDITION TO RS. 75,00,000/- HAVE DEALT WITH THE ISS UE IN DETAIL AND AFTER ASCERTAINING FULL FACTS OF THE CASE, THEN ONLY ADDITION MADE BY THE A O WAS REDUCED TO RS. 75,00,000/-. THEREAFTER ON FURTHER APPEAL BY DEPARTMENT AS WELL AS BY ASSESSEE, THE TRIBUNAL HAS FURTHER REDUCED THE ADDITION TO RS. 60,00,000/- AGA INST RS. 75,00,000/- REDUCED BY LD. CIT (A). ACCORDINGLY IT WAS SUBMITTED THAT THIS IS A P URE CASE OF ESTIMATION OF INCOME BY APPLYING PROVISIONS OF SECTION 145(3) AND, THEREFOR E, ON ESTIMATION OF INCOME PENALTY CANNOT BE LEVIED. ACCORDINGLY, THE LD. CIT (A) WAS JUSTIFIED IN CANCELING THE LEVY OF PENALTY. A COPY OF WRITTEN SUBMISSIONS WAS FILED BY LD. A/R WHICH IS PLACED ON RECORD. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED T HEM CAREFULLY. WE HAVE PERUSED THE MATERIAL ON RECORD ON WHICH OUR ATTENTI ON WAS DRAWN ALONG WITH WRITTEN SUBMISSIONS FILED ON BEHALF OF THE DEPARTMENT AS WE LL AS ON BEHALF OF THE ASSESSEE. AFTER 7 GOING THROUGH ALL THE MATERIAL AND THE ORDER OF LD. CIT (A) INCLUDING THE ORDER OF AO WHO LEVIED THE PENALTY, WE FIND THAT LD. CIT (A) WAS JU STIFIED IN CANCELLING THE LEVY OF PENALTY. FINDINGS OF LD. CIT (A) HAVE BEEN RECORDED AT PAGES 4 & 5 OF HIS ORDER ARE AS UNDER :- CONTENTION OF THE AR IS CONSIDERED. AT THE TIME OF SURVEY, EXCESS STOCK OF RS.52227982/- WAS DETERMINED. LATER ON BEING POI NTED OUT BY THE AR FURTHER REDUCTIONS OF RS.5240761/- AND RS.256202/- WERE ALLOWED AND UNACCOUNTED STOCK OF RS.46731019/- WAS DETERMINED. THIS WAS FURTHER REDUCED TO RS.75 LACS IN FIRST APPEAL AND FINALLY R S.60 LACS BY HON'BLE ITAT IN SECOND APPEAL. THUS, AT VARIOUS STAGES QUAN TUM OF UNACCOUNTED STOCK WAS DISTURBED AND FINALLY WHAT WAS DETERMINED WAS ONLY ON ESTIMATION. IN FIRST APPEAL, AGAINST THE QUANTUM AD DITION, IT WAS HELD THAT THE AO'S WORKING OF EXCESS STOCK FOUND DURING THE C OURSE OF SURVEY WAS NOT ACCEPTABLE BUT AS IN' THE REMAND REPORT ALSO TH E AO FAILED TO CHECK THE WORKING GIVEN BY THE APPELLANT, IN THE INTEREST OF JUSTICE, A LUMP SUM ADDITION WAS SUSTAINED. THIS ADDITION SUSTAINED WAS MAINLY BECAUSE THE WORKING GIVEN BY THE APPELLANT COULD NOT BE VERIFIE D BY THE AO. VARIOUS DISCREPANCIES IN CALCULATION OF THE AO WERE NOTICED BY HON'BLE ITAT LIKE- TO DETERMINE THE STOCK AS PER BOOK~, GROSS PROFIT RA TE WAS WRONGLY APPLIED AND THE INVENTORY WAS PREPARED IN HURRIED MANNER. T HUS THE ADDITION SUSTAINED WAS ONLY ON ESTIMATE BASIS AND NOT ON THE BASIS OF ANY MATERIAL FOUND DURING THE COURSE OF SURVEY. THE AO HAS NOT P OINTED OUT ANY CASE OF UNRECORDED PURCHASE OR SALE THOUGH HE HAS MADE A GE NERAL OBSERVATION. IT IS A VERY SETTLED LAW THAT ASSESSMENT PROCEEDINGS A ND PENALTY PROCEEDINGS ARE SEPARATE AND INDEPENDENT FROM EACH OTHER. WHILE LEVYING PENALTY THE AO HAS MERELY RELIED UPON THE INVENTORY PREPARED DU RING THE COURSE OF SURVEY AND THE ADDITION CONFIRMED IN FIRST APPEAL. NO INDEPENDENT MATERIAL HAS BEEN BROUGHT ON RECORD TO LEVY PENALTY. IT IS N OT A CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME AS ALL THE FACTS A RE AVAILABLE ON RECORD. THE AO HAS RELIED UPON THE DECISION OF HON'BLE S.C. IN THE CASE OF UNION 8 OF INDIA & OTHERS VS. DHARMENDRA TEXTILE PROCESSORS & OTHERS AND OBSERVED THAT WILLFUL CONCEALMENT IS NOT ESSENTIAL INGREDIENTS FOR ATTRACTING CIVIL LIABILITY. IN THE CASE OF CIT VS. SIDHARTH EN TERPRISES (2009) 184 TAXMAN 460, THE HON'BLE P&H GOVT. HAS HELD THE DECI SION OF S.C. IN UNION OF INDIA & OTHERS VS. DHARMENDRA TEXTILE PROC ESSORS & OTHERS (2008) 306 ITR 277 CANNOT BE READ AS LAY DOWN THAT IN EVERY CASE WHERE PARTICULARS OF INCOME ARE INACCURATE, PENALTY MUST FOLLOW. WHAT HAS BEEN LAID DOWN IS THAT QUALITATIVE DIFFERENCE BETWEEN CR IMINAL LAW LIABILITY U/S 273C AND PENALTY U/S 271(1)(C) HAS TO BE KEPT IN MI ND. EVEN SO CONCEPT OF PENALTY HAS NOT UNDERGONE CHANGE BY VIRTUE OF SA ID JUDGMENT. PENALTY IS IMPOSED WHEN THERE IS SOME ELEMENT OF DELIBERATE DE FAULT AND NOT FOR MERE MISTAKE. THE PRESENT CASE IS NOT CASE OF FILING OF INACCURATE PARTICULARS OF INCOME BUT IS A CASE OF CHANGE OF OPINION AT VARIOU S STAGES AND THEREBY REDUCING THE QUANTUM OF ADDITION. AS HELD BY VARIOU S COURTS, PENALTY FOR CONCEALMENT IS NOT LEVIABLE WHEN ADDITION IS MADE O N ESTIMATION. MAKING A CLAIM WHICH IS FOUND TO BE UNACCEPTABLE IN LAW, C ANNOT BE TREATED AS FURNISHING OF INACCURATE PARTICULARS OF INCOME, AS HELD BY HON'BLE SC IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS (P) LTD. (2010) 322 ITR 158 (SC). UNLESS THERE IS A FINDING THAT DETAILS SUPPLI ED BY APPELLANT IN RETURN OF INCOME WERE FOUND TO BE INCORRECT OR ERRONEOUS O R FALSE, THERE WOULD BE NO QUESTION OF INITIATING PENALTY PROCEEDINGS U/S 2 71(1)(C). THE AO IS, THEREFORE, DIRECTED TO DELETE THE PENALTY LEVIED U/S 271(1)(C). THESE FINDINGS OF LD. CIT (A), IN OUR VIEW, ARE COR RECT FINDING. THE LD. D/R, HOWEVER, HAS STATED THAT LD. CIT (A) HAS DELETED THE PENALTY BY OBSERVING THAT THE UNACCOUNTED STOCK WAS FINALLY DETERMINED ONLY ON ESTIMATION AND, THER EFORE, NO PENALTY IS LEVIABLE. IN THIS REGARD IT HAS BEEN STATED THAT THE AO HAS ALSO MADE ADDITION ONLY ON ESTIMATION AS HE MADE THE ADDITION ON THE BASIS OF VALUATION OF STOC K MADE DURING THE SURVEY PROCEEDINGS AND ACCEPTED BY THE ASSESSEE. IT WAS ALSO MENTIONE D THAT ABOUT THE REMAND REPORT SENT BY 9 AO, THE LD. CIT (A) HAS MENTIONED THAT AO FAILED TO CHECK THE WORKING GIVEN BY ASSESSEE AS THE SURVEY INVENTORY WAS PREPARED HURRIEDLY. IN THIS CONNECTION IT WAS SUBMITTED THAT IT IS NOT REASONABLE TO EXPECT THE AO TO VERIFY THE STOCK WORKING AFTER 4-5 YEARS OF SURVEY IN REMAND PROCEEDINGS AND WHY THIS CLAIM WAS NOT MA DE DURING THE ASSESSMENT PROCEEDINGS. THEREFORE, THE OBSERVATIONS OF LD. CIT (A) ARE NOT CORRECT. REGARDING THE OBSERVATIONS OF LD. CIT (A) THAT NO INDEPENDENT MAT ERIAL WAS BROUGHT ON RECORD TO LEVY THE LEVY, IT WAS SUBMITTED IN THE WRITTEN SUBMISSIO NS BY LD. D/R THAT PHYSICAL STOCK WAS FOUND EXCESS BY RS. 5.22 CRORES AND STOCK INVENTORY WAS PREPARED. THEREFORE, OBSERVATIONS OF LD. CIT (A) ARE NOT CORRECT. IT WA S FURTHER MENTIONED THAT LD. CIT (A) HAS PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN CASE OF RELIANCE PETROPRODUCTS, 322 ITR 158. IN THIS REGARD IT WAS S UBMITTED THAT DECISION IS IN FAVOUR OF THE DEPARTMENT AND NOT IN FAVOUR OF THE ASSESSEE. T HEREFORE, RELIANCE PLACED BY LD. CIT (A) IS NOT CORRECT AND THERE WAS ADMITTED UNDISCLOS ED INVESTMENT IN STOCK AT RS. 5.22 CRORES. IT WAS FURTHER MENTIONED THAT LD. CIT (A) HAS RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN CASE OF DHARMENDRA TEXTILE PROCESS ORS, 306 ITR 277. IN THIS REGARD IT WAS SUBMITTED THAT IT RELATES TO PROSECUTION PROCEE DINGS UNDER SECTION 276C AND RELATES TO CERTAIN DUTY INFRINGEMENT UNDER CENTRAL EXCISE ACT. THEREFORE, THERE IS NO DIRECT REFERENCE TO CONSPICUOUS DEFAULT AKIN TO THE FACTS OF THE ASSESSEES CASE. 8.1. WE HAVE CONSIDERED THIS ASPECT AND FIND THAT T HE ARGUMENT OF THE DEPARTMENT ARE NOT CORRECT OR ACCEPTABLE. FIRST OF ALL WE WOULD LI KE TO MENTION THAT LD. CIT (A) HAS NOT PLACED RELIANCE ON THE DECISION OF DHARMENDRA TEXTI LE PROCESSORS (SUPRA) BUT THE AO HAS PLACED RELIANCE ON THIS DECISION. THE LD. CIT (A) H AS OBSERVED IN THIS REGARD THAT AT THE BOTTOM OF PAGE 4 OF HIS ORDER THAT DECISION OF DHAR MENDRA TEXTILE PROCESSORS CANNOT BE 10 READ AS LAY DOWN THAT IN EVERY CASE WHERE PARTICULA RS OF INCOME ARE INACCURATE, PENALTY MUST FOLLOW AND THEREAFTER PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) WH EREIN IT IS HELD THAT UNLESS THERE IS A FINDING THAT DETAILS SUPPLIED BY ASSESSEE IN THE RE TURN OF INCOME WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE, THERE WOULD BE NO QUESTION OF INITIATING PENALTY PROCEEDINGS. ACCORDINGLY WE HOLD THAT IT IS INCORR ECT TO SAY THAT LD. CIT (A) HAS PLACED RELIANCE ON THE DECISION OF APEX COURT IN CASE OF D HARMENDRA TEXTILE PROCESSORS. 8.2. REGARDING THE DECISION OF APEX COURT IN CASE O F RELIANCE PETROPRODUCTS PVT. LTD., WE FIND THAT THIS DECISION OF APEX COURT IS APPLICA BLE ON THE FACTS OF THE PRESENT CASE. NO MATERIAL WHATSOEVER WAS FOUND THAT ASSESSEE HAS CON CEALED SOME INCOME. INVENTORY OF STOCK WAS PREPARED HURRIEDLY WHICH RUNS INTO 170 PA GES AND IT IS IMPOSSIBLE TASK TO PREPARE STOCK INVENTORY IN SIX HOURS ONLY. FROM TH IS FACT, IT CAN BE SAID THAT STOCK WAS HURRIEDLY VALUED AND NO COPY OF STATEMENT WAS PROVI DED TO THE ASSESSEE AT THE TIME OF SURVEY. COPY OF STATEMENT WAS PROVIDED AFTER A GAP OF THREE YEARS AND THEN ONLY THE ASSESSEE HAS PREPARED RECONCILIATION STATEMENT OF S TOCK AND SUBMITTED TO THE AO. HOWEVER, THE AO DID NOT ACCEPT AND MADE THE ADDITIO N ON THE BASIS OF SURRENDER MADE BY ASSESSEE DURING THE COURSE OF SURVEY. THE HONBLE KERALA HIGH COURT IN CASE OF PAUL MATHEW HAVE CLEARLY HELD THAT NO MUCH CREDENCE WILL BE GIVEN TO THE STATEMENT RECORDED DURING THE COURSE OF SURVEY UNDER SECTION 133A UNLE SS THERE IS CORROBORATIVE EVIDENCE. CORROBORATIVE EVIDENCE FURNISHED BY THE ASSESSEE WA S IN FAVOUR OF THE ASSESSEE AND THEN ONLY THE ADDITIONS SUSTAINED BY AO WAS REDUCED TO R S. 75,00,000/- BY HOLDING THAT SINCE FROM THE BOOKS OF ACCOUNT TRUE PROFIT CANNOT BE DED UCED AND, THEREFORE, ON THE BASIS OF PAST HISTORY THE TRADING ADDITION WAS SUSTAINED AT RS. 75,00,000/- WHICH WAS REDUCED BY 11 THE TRIBUNAL TO RS. 60,00,000/-. THEREFORE, THIS IS A CASE OF ESTIMATION OF INCOME AND LD. CIT (A), IN OUR VIEW, WAS CORRECT IN HOLDING THAT O N ESTIMATION OF INCOME, PENALTY PROVISIONS UNDER SECTION 271(1)(C) ARE NOT ATTRACTE D. THIS VIEW IS SUPPORTED BY VARIOUS DECISIONS I.E. IN CASE OF HARIGOPAL SINVH, 258 ITR 85 (P&H), IN CASE OF GOSWAMI SMT. CHANDRALATA, 125 ITR 700 (RAJ.), IN CASE OF SHIV LA L TAK, 251 ITR 373 (RAJ.), IN CASE OF S. RAHAMAT KHAN BIRBALKHAN BADRUDDIN & PARTY, 240 I TR 778 (RAJ.) AND MANY OTHERS MENTIONED IN THE WRITTEN SUBMISSIONS FILED ON BEHAL F OF THE ASSESSEE. THEREFORE, WITHOUT GOING INTO DETAIL FURTHER, WE HOLD THAT LD. CIT (A) WAS JUSTIFIED IN CANCELING THE LEVY OF PENALTY. ACCORDINGLY, WE CONFIRM THE ORDER OF LD. CIT (A). 9. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMI SSED. 10. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 14 .10.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- THE ITO WARD 1(3), JAIPUR. SHRI BHAGWAN DAS THAWARNI, JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 402/JP/2011) BY ORDER, AR ITAT JAIPUR.