VAMAN SHANKAR MARATHE P. LTD, MUMBAI V. DCIT CIR-3, MUMBAI

ITA 550/MUM/2010

• Counselvise Citation: 55019914 RSA 2010
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 16-11-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 22-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHANTAN BOSE
• Assessee Lawyers: SUBODH RATNAPARKHI
• Keywords: Income from undisclosed sources; Initiation of penalty proceedings
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER I.T.A. NO. 550/MUM/2010 ASSESSMENT YEAR : 2004-05. VAMAN SHANKAR MARATHE PVT.LTD., D Y COMMISSIONER OF INCOME-TAX, ABHIVADAN, IST FLOOR, SHIVAJI PATH, VS. CIRCLE-3, THANE. AMBEDKAR CHOWK, THANE (W). PAN AAACV 5507E. APPELLANT. RESPONDENT APPELLANT BY : SHRI SUBODH RATNA PARKHI. RESPONDENT BY: SHRI SHANTAN BO SE. DATE OF HEARING : 16-11-2011. DATE OF PRONOUNCEMENT : 30-11-2011. O R D E R. PER P.M. JAGTAP, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED CIT(APPEALS)-I, THANE DATED 15-10-2009 WHEREBY HE S USTAINED THE PENALTY IMPOSED BY THE AO U/S 271(1)(C) TO THE EXTENT OF R S.6,58,052/-. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF GOLD JEWELLERY AND OTH ER RELATED ITEMS. A SURVEY U/S 133A WAS CARRIED OUT AT THE BUSINESS PREMISES OF TH E ASSESSEE ON 09-10-2003. DURING THE COURSE OF SURVEY, STATEMENT OF SHRI ABHA Y WAMAN MARATHE, ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY WAS RECORDED WHER EIN HE SURRENDERED 2 ITA NO.550/MUM/2010 ASSESSMENT YEAR:2004-05. UNACCOUNTED INCOME OF THE ASSESSEE COMPANY TO THE T UNE OF RS.25,02,894/- ON ACCOUNT OF THE FOLLOWING DISCREPANCIES FOUND BY THE SURVEY TEAM : I) EXCESS STOCK OF GOLD ORNAMENTS : RS.10,60,200/ - II) EXCESS STOCK OF SILVER ARTICLES : RS. 6,27,4 94/- III) UNACCOUNTED SALES OF GOLD ORNAMENTS : RS, 8 ,15,200 -------------- ----------- TOTAL : RS.25,02,894/- -------------- ----------- THE INCOME SURRENDERED DURING THE COURSE OF SURVEY AS ABOVE WAS DECLARED BY THE ASSESSEE IN ITS RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION ON 31-10- 2004 UNDER THE HEAD OTHER INCOME. THE TOTAL INCOM E DECLARED BY THE ASSESSEE IN THE SAID RETURN WAS RS.27,42,620/-. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE GP RATE DISCLOSED BY THE AS SESSEE FOR THE YEAR UNDER CONSIDERATION WAS ONLY TO THE EXTENT OF 10.04% AS A GAINST GP RATES OF 19.67%, 18.98% AND 16.69% DECLARED FOR THE IMMEDIATELY PREC EDING THREE YEARS. THE ASSESSEE COULD NOT OFFER ANY SATISFACTORY EXPLANATI ON IN RESPECT OF THE FALL IN GP RATE AND IN THE ABSENCE OF THE SAME AS WELL AS KEEP ING IN VIEW THE DEFECTS NOTICED DURING THE COURSE OF SURVEY ACTION, THE AO REJECTED THE BOOK RESULTS SHOWN BY THE ASSESSEE. HE THEN PROCEEDED TO ESTIMATE THE INCOME OF THE ASSESSEE BY APPLYING A HIGHER GP RATE OF 17% WHICH RESULTED IN THE TRADING ADDITION OF RS.17,98,448/- TO THE TOTAL INCOME OF THE ASSESSEE. HE ALSO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C). MEANWHILE THE TRADING ADDITIONS MADE BY THE AO WERE CONFIRMED BY THE LEARNED CIT(APPEALS) WHILE DISPOSING OF THE APPEAL FILED BY THE ASSESSEE IN THE QUANTUM PROCEEDINGS VIDE HIS APPELLATE ORDER DATED 15-10-2007. THEREAFTER NOTICE U/S 274 READ WITH SECTION 271(1)(C) WAS ISSUED BY T HE AO REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY PENALTY U/S 271(1)(C) SHOULD N OT BE IMPOSED IN RESPECT OF 3 ITA NO.550/MUM/2010 ASSESSMENT YEAR:2004-05. TRADING ADDITION MADE TO ITS TOTAL INCOME. IN REPL Y FILED IN RESPONSE TO THE SAID NOTICE, IT WAS INTER ALIA, SUBMITTED BY THE ASSESSE E THAT ADDITIONAL INCOME OF RS.25,02,894/- DECLARED DURING THE COURSE OF SURVEY AS A RESULT OF DEFECTS AND DEFICIENCIES FOUND IN THE ACCOUNTS AND OTHER RECORD S WAS DULY OFFERED TO TAX IN THE RETURN OF INCOME FILED U/S 139(1). IT WAS CONTENDED THAT AFTER TAKING INTO CONSIDERATION THE SAID ADDITIONAL INCOME, THE GROSS PROFIT FOR THE YEAR UNDER CONSIDERATION WORKED OUT TO 19.73% WHICH WAS HIGHER THAN THE GP RATE DECLARED BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING THREE YEARS. IT WAS CONTENDED THAT THE TRADING ADDITION MADE TO THE TOTAL INCOME OF THE AS SESSEE THUS ITSELF WAS NOT WARRANTED AND IT WAS THUS NOT A CASE OF CONCEALMENT OF ITS INCOME BY THE ASSESSEE. IT WAS ALSO CONTENDED THAT THE TRADING ADDITION WAS MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) IN THE QUANTUM PROCEEDI NGS ON ESTIMATED BASIS WITHOUT THERE BEING ANY EVIDENCE TO SHOW CONCEALMEN T OF ITS INCOME BY THE ASSESSEE. RELYING ON THE VARIOUS JUDICIAL PRONOUNCE MENTS, IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT IMPOSITION OF PENALTY U /S 271(1)(C) IN RESPECT OF THE SAID ADDITION MADE ON ESTIMATED BASIS WAS NOT WARRANTED. THE AO DID NOT FIND MERIT IN THESE CONTENTIONS RAISED ON BEHALF OF THE ASSESSEE AND RELYING ON THE DEFECTS AND DISCREPANCIES FOUND DURING THE COURSE OF SURVEY AS WELL AS THE FAILURE OF THE ASSESSEE TO FURNISH THE QUANTITATIVE DETAILS OF PRI NCIPAL ITEMS OF RAW MATERIAL, FINISHED PRODUCTS ETC. ALONG WITH ITS RETURN OF INC OME, HE HELD THAT IT WAS A FIT CASE TO IMPOSE PENALTY U/S 271(1)(C). ACCORDINGLY HE IMP OSED A PENALTY OF RS.14,26,172/- TO THE TOTAL INCOME OF THE ASSESSEE BEING 100% OF THE TAX SOUGHT TO BE EVADED IN RESPECT OF TRADING ADDITION MADE TO TH E TOTAL INCOME OF THE ASSESSEE HOLDING THAT THE ASSESSEE HAD CONCEALED PARTICULARS OF ITS INCOME TO THAT EXTENT. 3. THE PENALTY IMPOSED BY THE AO U/S 271(1)(C) WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LEARNED CIT( APPEALS). DURING THE COURSE OF 4 ITA NO.550/MUM/2010 ASSESSMENT YEAR:2004-05. APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(APPEAL S), VARIOUS SUBMISSIONS WERE MADE ON BEHALF OF THE ASSESSEE WHICH, AS SUMMARIZED BY THE LEARNED CIT(APPEALS) IN HIS IMPUGNED ORDER, READ AS UNDER : I) THE OFFER OF ADDITIONAL INCOME OF RS.25,02,894/- WAS MADE TO COVER UP THE DEFECTS IN THE BOOKS OF ACCOUNT AND THE AO H AS NOT FOUND OUT ANY DEFECT IN THE BOOKS. II) IF THE ADDITIONAL INCOME IS CONSIDERED FOR WORK ING OUT THE GP, IT WOULD WORK OUT TO 19.73%, WHICH IS HIGHER THAN IN A LL THE THREE EARLIER YEARS AND IN EFFECT THE ADDITION AMOUNTING TO RS.17 ,98,448/- STANDS TAXED TWICE. III) WHILE INITIATION OF PENALTY PROCEEDINGS IS ON THE ADDITION OF RS.17,98,448/-, IMPOSITION OF PENALTY IS ON THE ENT IRE ASSESSED INCOME OF RS.42,27,430/- INCLUDING THE RETURNED INCOME U/S 139(1). IV) ESTIMATED INCOME DOES NOT INVITE LEVY OF PENAL TY U/S 271(1)(C). 4. THE ASSESSEE ALSO RELIED ON THE VARIOUS JUDICIAL PRONOUNCEMENTS IN SUPPORT OF ITS CASE WHICH, HOWEVER, WERE FOUND TO BE DISTIN GUISHABLE ON FACTS BY THE LEARNED CIT(APPEALS). THE LEARNED CIT(APPEALS) ALSO DID NOT FIND MERIT IN THE SUBMISSIONS MADE ON BEHALF OF THE ASSESSEE AND CONF IRMED THE PENALTY IMPOSED BY THE AO U/S 271(1)(C) OBSERVING THAT THERE WAS A SUR VEY ACTION IN THE CASE OF THE ASSESSEE DURING THE COURSE OF WHICH UNACCOUNTED STO CK OF GOLD AND SILVER ORNAMENTS HAD BEEN FOUND AND ADDITIONAL INCOME WAS OFFERED AS A RESULT OF THE SAME. HE HELD THAT EVIDENCE RELATING TO UNACCOUNTED SALES THUS WAS FOUND IN THE CASE OF THE ASSESSEE WHICH PROVED THAT THE ASSESSEE HAD BEEN INDULGING IN SUPPRESSION OF SALES AS WELL AS SUPPRESSION OF PROF ITS. THE LEARNED CIT(APPEALS), HOWEVER, FOUND MISTAKE IN THE QUANTUM OF PENALTY WO RKED OUT BY THE AO AS POINTED OUT ON BEHALF OF THE ASSESSEE AND ACCORDING LY DIRECTED THE AO TO RESTRICT THE PENALTY OF RS.14,26,172/- IMPOSED BY HIM TO A C ORRECT FIGURE OF RS.5,58,052/-. 5 ITA NO.550/MUM/2010 ASSESSMENT YEAR:2004-05. STILL AGGRIEVED BY THE ORDER OF THE LEARNED CIT(APP EALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE INCOME OF RS.25,02,894/- SURRENDERED DURING THE COURSE OF SUR VEY AND DECLARED BY THE ASSESSEE IN ITS RETURN OF INCOME WAS OVER AND ABOVE THE INCOME REFLECTED IN ITS BOOKS OF ACCOUNT. HE SUBMITTED THAT THE SAID ADDITI ONAL INCOME DECLARED BY THE ASSESSEE WAS DIRECTLY HAVING EFFECT ON THE TRADING RESULTS OF THE ASSESSEE AND THE SAME, THEREFORE, WAS LIABLE TO BE CONSIDERED TO WOR K OUT THE ACTUAL GROSS PROFIT DECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDE RATION. HE SUBMITTED THAT IF THE SAME WAS DONE, THE TRADING RESULTS DECLARED BY THE ASSESSEE GAVE A GROSS PROFIT RATE OF 19.73% WHICH WAS MORE THAN THE GP RATE DECLARED BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING THREE YEARS. HE CONTENDED THA T THERE WAS THUS NO CASE TO MAKE ANY TRADING ADDITION AND THE TRADING ADDITION MADE BY THE AO IN THE ASSESSMENT TO THE TOTAL INCOME OF THE ASSESSEE CLEA RLY RESULTED IN DOUBLE ADDITION. HE SUBMITTED THAT THIS ASPECT WAS BROUGHT TO THE NO TICE OF THE TRIBUNAL IN THE QUANTUM PROCEEDINGS BUT THE STAND OF THE ASSESSEE W AS NOT ACCEPTED BY THE TRIBUNAL ON THE GROUND THAT THERE WAS INCREASE IN T HE LABOUR CHARGES RECEIVED BY THE ASSESSEE BY MORE THAN RS.21 LAKHS AND IF THE SA ME WERE EXCLUDED ALONG WITH THE REDUCTION OF FINANCIAL EXPENSES FROM RS.16.62 L AKHS TO RS.7.30 LAKHS IN THE YEAR UNDER CONSIDERATION, THERE WOULD BE SUBSTANTIA L LOSS FROM SALE OF GOLD JEWELLERY WHICH COULD NOT BE ACCEPTED. HE CONTENDED THAT THE FIGURE OF LABOUR CHARGES TAKEN BY THE TRIBUNAL AT RS.21 LAKHS, HOWEV ER, WAS INDICATIVE OF GROSS RECEIPTS FROM WHICH EXPENSES WERE LIABLE TO BE DEDU CTED TO WORK OUT THE EXACT EFFECT ON THE PROFIT OF THE ASSESSEE COMPANY. HE CO NTENDED THAT THE TRADING ADDITION MADE TO THE TOTAL INCOME OF THE ASSESSEE IN THE PRE SENT CASE BY ITSELF IS NOT JUSTIFIED AS THE SAME CLEARLY AMOUNT TO DOUBLE ADDITION OF TH E SAME INCOME. HE SUBMITTED 6 ITA NO.550/MUM/2010 ASSESSMENT YEAR:2004-05. THAT THE AO AS WELL AS THE CIT(APPEALS), HOWEVER, HAS IMPOSED THE PENALTY U/S 271(1)(C) IN RESPECT OF THE TRADING ADDITION MAINLY RELYING ON THE ADVERSE FINDINGS OF THE SURVEY ACTION. HE CONTENDED THAT ADDITIONAL INCOME OF RS.25,02,894/- SURRENDERED BY THE ASSESSEE AS A RESULT OF DEFECTS AND DEFICIENCIES FOUND DURING THE COURSE OF SURVEY WAS DULY OFFERED TO TAX IN THE RET URN OF INCOME AND THE TRADING ADDITION MADE IN THE ASSESSMENT HAD NOTHING TO DO W ITH THE ADVERSE FINDINGS OF SURVEY. HE CONTENDED THAT THE RELIANCE OF THE AUTHO RITIES BELOW ON THE FINDINGS OF SURVEY TO IMPOSE THE PENALTY U/S 271(1)(C) IN RESPE CT OF TRADING ADDITION MADE THUS IS CLEARLY MISPLACED. 6. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THA T SPECIFIC DEFECTS AND DEFICIENCIES WERE FOUND DURING THE COURSE OF SURVEY CARRIED OUT IN THE CASE OF THE ASSESSEE WHICH REVEALED THAT THE ASSESSEE WAS INDUL GING IN SUPPRESSION OF SALES AS WELL AS SUPPRESSION OF PROFITS. HE SUBMITTED THAT E VEN THE QUANTITATIVE DETAILS SUBMITTED BY THE ASSESSEE WERE NOT VERIFIED BY ITS AUDITORS AND FOR THIS PURPOSE, THE AUDITORS HAD SIMPLY RELIED ON THE CERTIFICATE I SSUED BY THE MANAGEMENT OF THE ASSESSEE COMPANY. HE SUBMITTED THAT EVEN THE LOW GR OSS PROFIT RATE DECLARED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION AS COMPARE D TO IMMEDIATELY PRECEDING YEARS COULD NOT BE SATISFACTORILY EXPLAINED AND KEE PING IN VIEW THE SAME AS WELL AS THE DEFECTS AND DEFICIENCIES FOUND DURING THE COURS E OF SURVEY, BOOKS WERE RIGHTLY REJECTED BY THE AO. HE CONTENDED THAT AFTER THE REJ ECTION OF BOOKS OF ACCOUNT, ESTIMATE OF GROSS PROFIT WAS MADE BY THE AO ON A SO UND BASIS AND IT, THEREFORE, CANNOT BE SAID THAT PENALTY U/S 271(1)(C) WAS IMPOS ED BY HIM IN RESPECT OF ADDITION MADE MERELY ON THE BASIS OF ESTIMATE. THE LEARNED D R, THEREFORE, STRONGLY SUPPORTED THE IMPUGNED ORDER OF THE LEARNED CIT(APP EALS) CONFIRMING THE PENALTY IMPOSED BY THE AO U/S 271(1)(C). 7 ITA NO.550/MUM/2010 ASSESSMENT YEAR:2004-05. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT DEFECTS AND DEFICIENCIES IN THE BOOKS OF ACCOUNT AND OTHER RECORD MAINTAINED BY THE ASSESSEE WERE FOUND DURING THE COURSE OF SURVEY AND ACCEPTING THE SAME, ADDITIONAL INCOME OF RS.25,02,894/- WAS SURRENDERED BY THE ASSESSEE AT THE TIME OF SURVEY. THE DETAILS OF THE ADDITIONAL INCOME SO SURRENDERED ARE AS UNDER : I) EXCESS STOCK OF GOLD ORNAMENTS : RS.10,60,200/ - II) EXCESS STOCK OF SILVER ARTICLES : RS. 6,27,4 94/- III) UNACCOUNTED SALES OF GOLD ORNAMENTS : RS, 8 ,15,200 -------------- ----------- TOTAL : RS.25,02,894/- -------------- ----------- THE ADDITIONAL INCOME SURRENDERED DURING THE COURSE OF SURVEY AS ABOVE WAS OFFERED BY THE ASSESSEE TO TAX IN ITS RETURN OF INC OME FILED FOR THE YEAR UNDER CONSIDERATION UNDER THE HEAD OTHER INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE GP RATE DECLAR ED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS ONLY 10.04% AS COMPARED TO 16.69%, 18.98% AND 19.67% DECLARED DURING THE IMMEDIATELY PRECEDING YEARS. SI NCE THE ASSESSEE COULD NOT OFFER ANY EXPLANATION IN RESPECT OF FALL IN GP RATE DURING THE YEAR UNDER CONSIDERATION TO THE SATISFACTION OF THE AO, THE LA TTER ESTIMATED THE INCOME OF THE ASSESSEE BY APPLYING A GP RATE OF 17% WHICH RESULTE D IN THE TRADING ADDITION OF RS.17,98,448/-. AS SUBMITTED ON BEHALF OF THE ASSES SEE DURING THE COURSE OF QUANTUM PROCEEDINGS, THE ADDITIONAL INCOME OF RS.25 ,02,894/- OFFERED DURING THE COURSE OF SURVEY AND DECLARED IN THE RETURN OF INCO ME AS OTHER INCOME WAS RELATED TO THE ITEMS WHICH HAD A DIRECT EFFECT ON T HE GROSS PROFIT DECLARED BY IT AND IF THE SAME ARE TAKEN INTO CONSIDERATION, THE GP RA TE DISCLOSED BY IT FOR THE YEAR 8 ITA NO.550/MUM/2010 ASSESSMENT YEAR:2004-05. UNDER CONSIDERATION COMES TO 19.73% WHICH IS MORE T HAN THE GP RATE DECLARED IN THE IMMEDIATELY PRECEDING THREE YEARS. THERE WAS T HUS NO CASE OF MAKING ANY SEPARATE TRADING ADDITION. ALTHOUGH THIS STAND OF T HE ASSESSEE HAS NOT BEEN ACCEPTED BY THE TRIBUNAL IN THE QUANTUM PROCEEDINGS ON THE G ROUND THAT IF THE SAME WAS ACCEPTED AND THE INCREASE IN THE LABOUR CHARGES OF MORE THAN RS.21 LAKHS AND REJECTION IN FINANCIAL EXPENSES OF MORE THAN RS. 9 LAKHS WAS CONSIDERED, THERE WOULD BE A LOSS FROM THE ACTIVITY OF SALE OF GOLD J EWELLERY, THERE APPEARS TO BE MERIT IN THE CONTENTIONS RAISED BY THE LEARNED COUN SEL FOR THE ASSESSEE IN THIS REGARD BEFORE US THAT THE INCREASE IN LABOUR CHARGES CONSI DERED BY THE TRIBUNAL WAS IN GROSS RECEIPTS WITHOUT TAKING INTO ACCOUNT THE EXPE NSES INCURRED FOR EARNING THE LABOUR CHARGES. IT MAY BE WORTHWHILE TO NOTE HERE T HAT THE ADDITIONAL INCOME OF RS.25,02,894/- SURRENDERED DURING THE COURSE OF SUR VEY AND DECLARED IN THE RETURN OF INCOME AS OTHER INCOME WAS ON ACCOUNT OF EXCES S STOCK OF GOLD ORNAMENTS AND SILVER ORNAMENTS AS WELL AS ON ACCOUNT OF UNACC OUNTED SALES OF GOLD ORNAMENTS. IN OUR OPINION, ALL THESE ITEMS FOR WHIC H ADDITIONAL INCOME WAS DECLARED BY THE ASSESSEE HAD DIRECT BEARING ON THE TRADING RESULTS OF THE ASSESSEE AND IF THE SAME ARE TAKEN INTO CONSIDERATION, THE G P RATE DECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WOULD COME TO 19.7 3%. SINCE THE SAME IS HIGHER THAN THE GP RATE DECLARED BY THE ASSESSEE IN THE IM MEDIATELY PRECEDING YEARS, THERE APPEARS TO BE MERIT IN THE STAND OF THE ASSESSEE TH AT THE TRADING ADDITION MADE TO ITS TOTAL INCOME AMOUNTED TO DOUBLE ADDITION. IT IS OBS ERVED THAT WHILE IMPOSING A PENALTY U/S 271(1)(C) IN RESPECT OF THE TRADING ADD ITION, THE AUTHORITIES BELOW HAVE RELIED MAINLY ON THE ADVERSE FINDINGS OF THE SURVEY . AS RIGHTLY CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE ADDITIONAL IN COME SURRENDERED DURING THE COURSE OF SURVEY AS A RESULT OF THE SAID FINDINGS W AS DULY DECLARED BY THE ASSESSEE AND OFFERED TO TAX IN THE RETURN OF INCOME WHEREAS THE TRADING ADDITION WAS MADE SEPARATELY IN THE ASSESSMENT ON ACCOUNT OF LOWER GP RATE WHICH THE ASSESSEE COULD 9 ITA NO.550/MUM/2010 ASSESSMENT YEAR:2004-05. NOT EXPLAIN SATISFACTORILY. THE RELIANCE OF THE AUT HORITIES BELOW TO IMPOSE PENALTY U/S 271(1)(C) IN RESPECT OF TRADING ADDITION ON THE ADVERSE FINDINGS OF SURVEY WHICH HAD BEEN MADE GOOD BY THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE TO TAX IN THE RETURN OF INCOME, THEREFORE, WAS CLEARLY MISPLACED. IT IS WELL SETTLED THAT CONCEALMENT AS ENVISAGED IN SECTION 271(1)(C) HAS T O BE INFERRED FROM THE RETURN OF INCOME AND THE ASSESSEE HAVING ALREADY DECLARED THE ADDITIONAL INCOME SURRENDERED DURING THE COURSE OF SURVEY IN ITS RETURN OF INCOME , WE ARE OF THE VIEW THAT THE IMPOSITION OF PENALTY U/S 271(1)(C) IN RESPECT OF T RADING ADDITION MADE IN THE ASSESSMENT SEPARATELY CANNOT BE JUSTIFIED ON THE BA SIS OF ADVERSE FINDINGS OF THE SURVEY. IN OUR OPINION, THERE APPEARS TO BE A MERIT IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT TRADING ADDITION MADE TO THE TOTAL INCOME OF THE ASSESSEE BY ITSELF DOES NOT STAND ON A SOUND FOOTIN G AND SUCH ADDITION CANNOT BE TREATED AS CONCEALMENT OF PARTICULARS OF ITS INCOME BY THE ASSESSEE SO AS TO WARRANT IMPOSITION OF PENALTY U/S 271(1)(C). IN THAT VIEW O F THE MATTER, WE CANCEL THE PENALTY IMPOSED BY THE AO AND CONFIRMED BY THE LEAR NED CIT(APPEALS) AND ALLOW THIS APPEAL OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF NOV.,2011. SD/- SD/- (R.S. PADVEKAR) (P.M. J AGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 30 TH NOV., 2011. 10 ITA NO.550/MUM/2010 ASSESSMENT YEAR:2004-05. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, F-BENCH. 6. GUARD FILE. (TRUE COPY ) BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI. WAKODE