Sh. Pawan Kumar Garg, New Delhi V. ACIT, New Delhi

ITSSA 11/DEL/2011

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9598 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-10-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 01-10-2013
• Assessment Year: misc
• Appeal Filed On: 23-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VEENA JOSHI
• Keywords: Document seized; Accommodation entries; Block assessment
• Section: 69; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI A.D. JAIN, JUDICIAL MEMBER IT (SS) A NO.11/DEL/2011 BLOCK ASSESSMENT PERIOD : 1988-89 TO 1998-99 PAWAN KUMAR GARG, D-II/85, SECTOR 7, ROHINI, NEW DELHI. PAN : AAWPG5652R VS. ACIT, CIRCLE-21(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SATYEN SETHI & SHRI ARTA TRANA PANDA, ADVOCATE REVENUE BY : SMT. VEENA JOSHI, CIT,DR ORDER PER A.D. JAIN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE FOR THE BLOCK PE RIOD FROM ASSESSMENT YEAR 1988-89 TO 1998-99, AGAINST THE ORDER P ASSED BY THE CIT (A)-XXII, NEW DELHI, DATED 15.02.2011. THE FOLL OWING GROUNDS OF APPEAL HAVE BEEN RAISED:- 1. IN VIEW OF FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE, WHETHER THE LEARNED CIT (A) WAS JUSTIFIED IN CONFIRMIN G THE ACTION OF THE ASSESSING OFFICER IN LEVYING THE PENALTY OF RS.3.00 LACS UNDER THE PROVISION OF SEC.158BFA (2) OF THE ACT. 2. UNDER THE CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE FACTS, THE LEARNED CIT (A) GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE A.O. IN IMPOSING PENALTY U/S 158BFA (2) OF THE INCOME-TAX ACT, WITHOUT RECORDING SATISFACTION TO THIS EFFECT, IN THE ORDER U/S 158BC OF THE ACT. IT(SS)A NO.11/DEL/2011 2 2. REGARDING GROUND NO.2, NO ARGUMENT HAS BEEN PUT F ORWARD. ACCORDINGLY, GROUND NO.2 IS REJECTED AS NOT PRESSED. 3. APROPOS GROUND NO.1, THE FACTS ARE THAT A SEARCH & SEIZURE OPERATION U/S 132 OF THE IT ACT WAS CARRIED OUT ON 3. 9.1997, ON THE GOEL GROUP, INCLUDING MR. PAWAN KUMAR GARG, THE ASSE SSEE. THE ASSESSEE DERIVES INCOME FROM THE BUSINESS OF SALE OF SPARES A ND SERVICE OF INDUCTION FURNACES UNDER PROPRIETARY CONCE RNS M/S INDUCTION POWER COMPONENTS AND M/S PAWAN KUMAR GARG. DURING TH E COURSE OF SEARCH, CERTAIN DOCUMENTS (ANNEXURE A-25) WERE SEIZED (SEIZED ANNEXURE A25' IS AT PAGES 1-81 OF THE PAPER- BOOK). FOR THE ASSESSMENT YEARS 1996-97 & 97-98, THE ASSESSEE DECLARED UNDI SCLOSED INCOME OF RS.20,870/- AND RS.30,278/-, I.E., BELOW TH E TAXABLE LIMIT. FOR THE ASSESSMENT YEAR 1998-99 (UPTO 3.9.1997), THE ASSESSEE D ID NOT DECLARE ANY UNDISCLOSED INCOME FOR THE REASON THAT SINC E ON THE DATE OF SEARCH, THE PREVIOUS YEAR HAD NOT ENDED AND HENCE THE RETURN WAS NOT DUE AND THE INCOME RELATING TO THE UNEXPIRED PR EVIOUS YEAR WAS RECORDED IN ANNEXURE A-25 MAINTAINED IN THE NORMAL COURSE, THEREFORE, INCOME FOR THE ASSESSMENT YEAR 1998-99 (UPTO 3.9.1997) WAS OUTSIDE THE SCOPE AND AMBIT OF UNDISCLOSED INCOME FOR THE BLOC K PERIOD - SECTION 158BA(3) READ WITH 158BB(I)(D) OF THE ACT. THE ASSESSING OFFICER MADE ASSESSMENT U/S 143(3)/158BC AT AN INCOME O F RS.5,37,597/-, WHICH INCLUDED: (I) AN UNDISCLOSED PROFIT OF RS.1,40,539/- WORKED OUT ON THE BASIS OF SEIZED ANNEXURE A-25 FOR THE REASONS THAT TRANSACTIONS WERE NOT INCLUDED IN THE BOOKS OF ACCOUN T FOR NORMAL BUSINESS ACTIVITIES AND WERE NOT DISCLOSED TO THE DEPARTMENT (PARA 1.2 OF THE ASSESSMENT ORDER); AND IT(SS)A NO.11/DEL/2011 3 (II) AN ADDITION OF RS.3,15,179/- ON ACCOUNT OF UND ISCLOSED INVESTMENT IN THE BUSINESS. REJECTING THE STAND OF THE ASSESSEE THAT HE HAD TAKEN CASH LOANS FROM VARIOUS PERSONS, THE VALUE OF CLOSING STOCK AS ON 31.3.1997 WAS TAKEN AS UNDISCLOSED INVESTMENT (PARA 2.4 OF THE ASSESSMENT ORDER). 4. THE CIT(A) DELETED THE ADDITION OF RS. 1,40,539/ - FOR THE REASON THAT IN THE SEIZED ANNEXURE A-25 (STOCK REGISTER), ALL THE TRANSACTIONS OF PURCHASE AND SALE, GIVING THE QUANTITY, COST PRICE, SAL E PRICE AND PROFIT HAD BEEN RECORDED AND THAT THE ANNEXURE A-25 WAS MAI NTAINED IN THE NORMAL COURSE AND THAT INCOME OF RS.1,40,539/- HAD BE EN COMPUTED ON THE BASIS OF THIS ANNEXURE (PAGE 88 & 89 OF THE PAPER BOOK). THE ADDITION OF RS.3,15,179/ - WAS DELETED FOR THE REASON THAT THE ASSESSEE HAD FILED CONFIRMATIONS, INCOME TAX RETURNS WITH ACKN OWLEDGEMENT, BANK STATEMENT, STATEMENT OF ACCOUNT, ASSESSMENT ORDERS, G IVING PAN AND THE ASSESSING OFFICER DID NOT BRING OUT ANYTHING TO DISPROVE THE ASSESSEE'S STAND AND THAT NO EVIDENCE HAD BEEN FOUND DURI NG THE SEARCH TO THE EFFECT THAT ANY UNDISCLOSED INCOME WAS IN TRODUCED IN THE GARB OF CREDITORS (PAGE 92 & 93 OF PAPER BOOK). 5. THE ITAT REVERSED THE ORDER OF THE CIT(A), INTER ALIA , FOR THE REASONS THAT: (I) THE ANNEXURE A-25 WAS NOT MAINTAINED IN THE NORMAL COURSE. ONLY THE PURCHASES AND SALES GIVING QUANTITIES AN D RATES WERE RECORDED IN THE SEIZED STOCK REGISTER. THERE WERE NO ENTRIES FOR PAYMENTS OR RECEIPT OF MONEY ON ACCOUNT OF TRANSACTIONS OF PURCHASE AND SALE. SOURCE O F INVESTMENT IN PURCHASES WAS ALSO NOT RECORDED. THEREFORE , LOOKING TO SURROUNDING CIRCUMSTANCES, IT CANNOT BE SAID IT(SS)A NO.11/DEL/2011 4 THAT THE ASSESSEE HAD INTENTION TO DISCLOSE THE INCOME (PAGE 103 - 108 OF THE PAPER BOOK). (II) THOUGH THE CONFIRMATIONS/ACKNOWLEDGMENT OF R ETURN, PAN, COPY OF BANK ACCOUNT ETC. WERE FILED, THE ASSESSEE NEIT HER PRODUCED THE PARTIES, NOR EXPRESSED ITS INABILITY TO DO SO. IN BLOCK ASSESSMENT, UNDISCLOSED INCOME HAS TO BE DETERMINED ON THE BASIS OF THE MATERIAL FOUND AS A RESU LT OF SEARCH. IN THE PRESENT CASE, MATERIAL SHOWING PURCHASE OF TRADING STOCK AND INVESTMENT IN STOCK WAS FOUND IN SEAR CH. NO ENTRY IN RESPECT OF INVESTMENT IN THE STOCK WAS RECORDED IN THE SEIZED REGISTER. THEREFORE, BENEFIT OF SECTION 158BA(3) READ WITH 158BB(1)(D) CANNOT BE ALL OWED. HAD THE LOANS BEEN GENUINE, THE SAME WOULD HAVE BEEN RECORDED IN ANY OF THE DOCUMENTS MAINTAINED IN THE NORMAL COURSE (PAGE 108 112 OF THE PAPER BOOK). 6. THUS, A PENALTY OF RS.3,00,000/- HAS BEEN LEVIED BY THE ASSESSING OFFICER U/S 158BFA(2), PRIMARILY RELYING UPON THE FI NDINGS RECORDED BY THE ITAT. THE ORDER LEVYING THE PENALTY WAS CONFIRME D BY THE CIT (A) FOR THE REASON THAT DOCUMENT A-25 WAS MAINTAINED BY T HE ASSESSEE FOR HIS OWN INFORMATION AND NOT FOR DECLARATION BEFORE T AX AUTHORITIES AND THAT THE UNDISCLOSED INVESTMENT WAS NEITHER RECORDED IN THE DOCUMENTS FOUND, NOR PROVED BEFORE THE ASSESSING OFFICE R BY PRODUCTION OF THOSE PERSONS. 7. THE ASSESSEE IS BEFORE US AGAINST THE SAID ACTION OF THE LD. CIT (A). IT(SS)A NO.11/DEL/2011 5 8. THE LD. COUNSEL FOR THE ASSESSEE HAS ARGUED THAT THE L EVY OF PENALTY U/S 158BFA(2) IS DISCRETIONARY AND NOT MANDATO RY/AUTOMATIC. RELIANCE IS PLACED ON: I) CIT V. HARKARAN DAS VED PAL (2011) 336 ITR 8 (DEL ) = 177 TAXMAN 398; II) CIT V. SATYENDRA KUMAR DOSI (2009) 315 ITR 172 ( RAJ): AND III) CIT V. DODSAL LTD. (2009) 312 ITR 112 (BOM). 9. IT WAS ARGUED THAT SINCE THE LEVY OF PENALTY UNDER SECTION 158BFA(2) IS DISCRETIONARY AND NOT MANDATORY, BEFORE IMPOSING THE PENALTY, THE ASSESSING OFFICER OUGHT TO HAVE EXAMINED W HETHER IT WAS A FIT CASE NOT TO EXERCISE THE DISCRETION IN FAVOUR OF THE ASSESSEE; THAT IT IS MORE BY SO, BECAUSE THE PENALTY PROCEEDINGS ARE I NDEPENDENT OF THE ASSESSMENT PROCEEDINGS; THAT THE PENALTY IMPOSED U/S 1 58BFA(2) IN RESPECT OF AN ADDITION OF RS.1,40,539/- WAS NOT WAR RANTED BECAUSE: (I) THERE IS NO FINDING THAT ANY PURCHASE TRANSACTION OR ANY SALE TRANSACTION WAS NOT RECORDED IN THE SEIZED ANNEXURE; ( II) THERE IS ALSO NO FINDING THAT ANY RATE OF 'PURCHASE EFFECTED' OR 'SALE MADE' WAS INCORRECTLY RECORDED; (III) THERE IS ALSO NO FINDING THAT ANY QUANTITY WAS NOT CORRECTLY RECORDED; AND (IV) MORE IMPORTANTLY, INCOME OF RS.1,48,539/- WAS COMPUTED ON THE BASIS OF ENTRIES IN TH E SEIZED ANNEXURE; THAT THE TEST TO DETERMINE WHETHER ENTRIES WERE RECORDED IN THE BOOKS OR OTHER DOCUMENTS IN THE NORMAL COURSE IS, W HETHER INCOME CAN BE COMPUTED FROM THE RECORD MAINTAINED; THAT IN THE PRESENT CASE, THE INCOME WAS DISCERNABLE FROM THE SEIZED ANNEXURE A ND ABSENCE OF RECEIPT OF CASH AND PAYMENT HAD NO IMPACT TO DETERMI NE THE INCOME; THAT SIMILARLY, ABSENCE OF ENTRIES OF INVESTMENT IN STO CK HAD NO BEARING TO DETERMINE THE INCOME; THAT THE ADDITION OF RS.3,1 5,179/-, THOUGH LABELED AS PEAK INVESTMENT, WAS ACTUALLY AN AD HOC ADD ITION, INASMUCH AS VALUE OF CLOSING STOCK AS ON 31.3.1997 WAS TAKEN AS UN DISCLOSED IT(SS)A NO.11/DEL/2011 6 INVESTMENT; THAT IT IS NOT THE CASE THAT THE ADDITION OF RS.3,15,179/- WAS MADE ON THE BASIS OF THE DOCUMENT FOUND DURING THE COURSE OF SEARCH; THAT IN THE SEARCH, ONLY STOCK REGISTER (A-25) WAS FOUND AND SEIZED AND IN A-25, NO ENTRY OF CASH LOAN WAS FOUND; THAT THE CONCLUSION THAT THE ASSESSEE MUST HAVE INVESTED RS.3,15,179 /IN PURCHASE OF STOCK WAS ONLY AN INFERENCE; THAT NO PEAK INVESTMENT WAS WORKED OUT, RATHER, AN AD HOC FIGURE OF THE VALUE O F CLOSING STOCK AS ON 31.3.1997 WAS TAKEN AS PEAK INVESTMENT; THAT IN RESPECT OF SUCH ADHOC ADDITION, NO PENALTY U/S 158BFA(2) WAS WARRANTED; THA T IN THIS REGARD, RELIANCE IS PLACED ON BEENA RANI V. DY. CIT (2011 ) 11 ITR (TRIB) 106; THAT THOUGH THAT DECISION WAS RENDERED IN RESPECT OF E STIMATED ADDITION, THE PRINCIPLE IS SQUARELY APPLICABLE TO ADH OC ADDITION; THAT IN COMPUTING THE UNDISCLOSED INCOME, PROVISIONS OF SECTION 69 OF THE ACT ARE APPLICABLE [SECTION 158BB(2)]; THAT THE IMPORT OF SECTION 69 IS THAT WHERE THE ASSESSEE HAD MADE INVESTMENTS WHICH ARE NOT RE CORDED IN THE BOOKS AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT TH E NATURE AND SOURCE OF THE INVESTMENT OR THE EXPLANATION OFFERED I S NOT SATISFACTORY, THE VALUE OF THE INVESTMENT MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE; THAT THE MATERIAL AS TO THE SOURCE OF CASH LOANS (INVESTMENT), I.E. CONFIRMATIONS, TAX RETURNS WITH ACK NOWLEDGEMENT, BANK STATEMENTS, ASSESSMENT ORDERS, PAN ETC. MAY NOT BE AD EQUATE TO DELETE THE ADDITION; THAT HOWEVER, EXAMINING THE CA SE INDEPENDENTLY, IT CAN BE HELD THAT SINCE NOTHING WAS FOUND DURING TH E SEARCH TO PROVE THAT UNDISCLOSED INCOME WAS INTRODUCED IN THE GARB OF CASH LOANS, PENALTY WAS NOT LEVIABLE; THAT THIS FINDING OF CIT(A) IN THE QUANTUM PROCEEDINGS REMAINS UNCONTROVERTED; AND THAT THE REQU EST TO RECONSIDER THE REQUIREMENT TO PRODUCE THE PARTIES WHO HAD GRANTED LOANS NEEDS TO BE VIEWED IN THE LIGHT OF THE DOCUMENT S FURNISHED, WHICH ARE SUFFICIENT TO DISCHARGE THE ONUS THAT LAY ON THE ASSESSEE, FOR MOST OF THE PERSONS WERE ASSESSED TO TAX (PAGE 93 OF THE PAPER BOOK). IT(SS)A NO.11/DEL/2011 7 10. THE LD. DR, ON THE OTHER HAND, PLACING STRONG RE LIANCE ON THE IMPUGNED ORDER, HAS CONTENDED THAT IT IS EVIDENT THAT THE ADDITIONS MADE IN THE ASSESSMENT UNDER SECTION 158 BC OF THE ACT HAVE BEEN CONFIRMED BY THE ITAT, DELHI; THAT THE HON'BLE BENC H HAS HELD THAT THE ASSESSEE HAD ADMITTED THAT UNDISCLOSED INCOME WAS RECORDED BY IT IN THE SEIZED RECORDS OF A.YS. 1996-97, 1997-98 AND 1998 -99 (UPTO 03.09.1997); THAT AS THE PREVIOUS YEAR FOR A.Y. 1998 -99 HAD NOT ENDED, THE INCOME FOR THAT YEAR SHOULD NOT BE CONSIDERED AS U NDISCLOSED INCOME U/S 158BB OF THE ACT; THAT THE ITAT AGREED WI TH THE ASSESSING OFFICERS FINDING THAT THE SEIZED DOCUMENT A-25 WAS MA INTAINED ONLY FOR THE PURPOSE OF THE ASSESSEE'S OWN INFORMATION, AND NO T FOR DECLARATION BEFORE THE TAX AUTHORITIES, AND THE INCO ME RECORDED REQUIRED TO BE ASSESSED AS UNDISCLOSED INCOME; THAT THE ITAT ALSO UPHELD THE FINDING THAT THE UNDISCLOSED INVESTMENT IN STOCK OF RS.3,15,179/- COULD NOT BE EXPLAINED WITH REFERENCE TO LOANS WHICH WERE NEITHER RECORDED IN THE DOCUMENTS FOUND, NOR PR OVEN BEFORE THE ASSESSING OFFICER BY PRODUCTION OF THOSE PERSONS; THAT IT CAN BE CLEARLY SEEN THAT THIS IS NOT A CASE OF DEBATABLE CLAIM FOR DED UCTION, AS IN THE CASE OF NALWASONS INVESTMENTS LTD, 45 DTR 345, OR A CA SE OF DEDUCTION FOUND ERRONEOUS WHERE FACTS HAD BEEN DISCLO SED, AS IN THE CASE OF INTERNATIONAL AUDIO VISUAL CO., 288 ITR 570 ; THAT THE ADDITIONS, BASED ON EVIDENCE FOUND DURING SEARCH, OF UNDISCLOSED T RANSACTIONS AND OF UNDISCLOSED INVESTMENT IN STOCK, ARE NOT AT ALL COMPARABLE WITH CASES OF 'MERE NON-ACCEPTANCE OF EXPLANATION OF ASSESSEE' ; THAT THE ASSESSEE'S FAILURE TO MAINTAIN REGULAR BOOKS OF ACCOUNT L IKE THE CASH BOOK OR LEDGER, AND THE MAINTENANCE OF ONLY A REGIS TER GIVING A SUMMARY OF TRANSACTIONS, WITH QUANTITY AND RATES, INDI CATE THE INTENTION OF NOT DISCLOSING THE INCOME; AND THAT THE INVESTMENT IN UNDISCLOSED PURCHASES COULD ALSO NOT BE EXPLAINED WITH R EFERENCE TO THE ENTRIES IN THE BOOKS OF ACCOUNT, OR DOCUMENTS RECO RDED IN THE NORMAL COURSE OF BUSINESS. IT(SS)A NO.11/DEL/2011 8 11. THE LD. DR SOUGHT TO PLACE RELIANCE ON CIT VS. B ECHARBHAI P. PARMAR, 341 ITR 499 (GUJ), WHEREIN, IT WAS HELD THA T PENALTY IMPOSABLE U/S 158BFA (2) OF THE IT ACT IS DIFFERENT FR OM THAT LEVIABLE U/S 271(1)(C) THEREOF; AND THAT ADDITION IN QUANTUM PROCEEDINGS THAT HAS ATTAINED FINALITY CANNOT BE REOPENED. FURTHER, R ELIANCE HAS ALSO BEEN PLACED ON JRD STOCK BROKERS (P) LTD. VS. ACIT, 124 TTJ 566 (DEL), WHEREIN IT WAS FOUND THAT THERE WAS DIRECT EVIDENCE O F THE ASSESSEE HAVING INDULGED IN EARNING UNDISCLOSED INCOME THROUGH THE BUSINESS OF PROVIDING ACCOMMODATION OR FICTITIOUS ENTRIES. 12. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MA TERIAL ON RECORD. FIRST OF ALL, TRUE, THE TRIBUNAL, IN THE QUA NTUM APPEAL, REVERSED THE CIT (A)S FINDINGS AS ABOVE. HOWEVER, PENALTY PROC EEDINGS ARE INDEPENDENT PROCEEDINGS AND THE MATTER CAN BE EXAMIN ED INDEPENDENTLY. 13. APROPOS THE FIRST ADDITION, WHETHER THE STOCK REGI STER OF THE ASSESSEE AMOUNTS TO HIS BOOKS OF ACCOUNT, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WAS A DEBATABLE QUESTION. THI S IS EVIDENT FROM THE FACT THAT THE ASSESSING OFFICER HELD THE STOCK REGISTER NOT TO BE THE ASSESSEES BOOKS OF ACCOUNT. THE CIT (A), ON THE O THER HAND, HELD IT TO BE OTHERWISE, I.E., TO BE THE BOOKS OF ACC OUNT OF THE ASSESSEE. THE ITAT REVERSED THE CIT (A)S FINDINGS. NOW, IN CIT VS. HARKARAN DAS VED PAL (2011) 336 ITR 8 (DEL); CIT VS. SATYENDRA KUMAR DOSI (2009) 315 ITR 172 (RAJ); AND IN CIT VS. DODSAL LTD. (2009 ) 312 ITR 112 (BOM), IT HAS BEEN HELD THAT PENALTY U/S 158BFA (2) O F THE ACT IS NOT MANDATORY/AUTOMATIC, BUT IS DISCRETIONARY. IN THE SEC TION ITSELF, THE OPERATIVE WORD IS MAY AND NOT SHALL. 14. FURTHER, AS RIGHTLY POINTED OUT, NO FINDING IN T HE QUANTUM PROCEEDINGS WAS RECORDED TO THE EFFECT THAT ANY TRANSA CTION OF EITHER IT(SS)A NO.11/DEL/2011 9 PURCHASE OR SALE BY THE ASSESSEE WAS NOT RECORDED IN THE SE IZED DOCUMENT. THEN, IT WAS ALSO NOT FOUND THAT ANY RATE O F PURCHASE OR SALE HAD BEEN WRONGLY RECORDED, OR THAT ANY QUANTITY HAD NOT BEEN CORRECTLY SHOWN. SO MUCH SO, EVEN THE INCOME OF ` 1,4 8,539/- WAS COMPUTED, BASED ON THE ENTRIES RECORDED IN THE SEIZED REGISTER. THUS, AS CONTENDED, THE INCOME WAS DISCERNIBLE FROM THE REGI STER SEIZED. 15. SO FAR AS REGARDS THE SECOND ADDITION, UNDOUBTEDL Y AND ADMITTEDLY, IT IS A CASE OF AD HOC ADDITION, THE VALU E OF THE CLOSING STOCK AS ON 31.03.1997 HAVING BEEN TAKEN AS UNDISCLOSED INVESTMENT. IT WAS THIS ADDITION THAT WAS CONFIRMED. SUCH ADDITION WAS NOT MADE ON THE BASIS OF ANY MATERIAL FOUND AS A RESULT OF THE SEARC H. THE DOCUMENT SEIZED, I.E., STOCK REGISTER, ANNEXURE A-25, DID NOT C ONTAIN ANY ENTRY OF CASH LOAN. RATHER, THE ASSESSING OFFICER ONLY INFERRED T HE CONCLUSION THAT THE ASSESSEE MUST HAVE INVESTED THE AMOUNT OF ` 3,15,179/- IN PURCHASE OF STOCK. PERTINENTLY, NO PEAK INVESTMENT WAS WORKED OUT AND IT WAS THE VALUE OF THE CLOSING STOCK AS ON 31.03.1997, WHICH WAS TAKEN AS PEAK INVESTMENT. NOW, SUCH AD HOC FIGURE OF C LOSING STOCK CANNOT BE DEEMED TO BE THE VALUE OF INVESTMENT WHICH MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE, IN KEEPING WIT H THE PROVISIONS OF SECTION 69 OF THE ACT, WHICH GETS ATTRAC TED WHEN COMPUTING UNDISCLOSED INCOME, AS PER SECTION 158BB (2) OF THE ACT. TRUE, IT HAS BEEN HELD BY THE TRIBUNAL IN THE QUANTU M APPEAL, THAT THE CONFIRMATIONS, TAX RETURNS WITH ACKNOWLEDGEMENT, BANK STATEMENTS, ASSESSMENT ORDERS, PAN, ETC., I.E., MATERIAL COMPRISING T HE SOURCE OF THE CASH LOANS/INVESTMENT, ARE NOT ADEQUATE TO DELETE THE ADDITION MADE. HOWEVER, WHAT IS BEING DEALT WITH HERE IS THE I SSUE OF PENALTY U/S 158BFA (2) OF THE ACT AND QUA THAT, SINCE NOTHING HAS BEEN SHOWN TO HAVE BEEN FOUND IN THE SEARCH TO INCRIMINATE THE ASSESSEE OF HAVING INTRODUCED UNDISCLOSED INCOME AS CASH LOANS, THE SAID FIN DING OF THE IT(SS)A NO.11/DEL/2011 10 TRIBUNAL IS NOT DETRIMENTAL TO THE ASSESSEES CLAIM OF IN CULPABILITY TO THE LEVY OF PENALTY U/S 158BFA (2) OF THE ACT. 16. IN BEENA RANI VS. DCIT, 11 ITR (TRIB) 106 (DEL ), ADDITION WAS MADE TO THE INCOME OF THE ASSESSEE BY ESTIMATING THE PRO FIT AT A HIGHER RATE, WITHOUT ANY REFERENCE TO ANY SEIZED MAT ERIAL FOUND IN THE COURSE OF THE SEARCH. IN THESE FACTS, IT WAS HELD THAT SUCH INCOME COULD NOT BE TREATED AS UNDISCLOSED INCOME DETERMINED U/S 158BC (C) OF THE ACT AND THAT HENCE, NO PENALTY U/S 158BFA (2) OF THE ACT COULD BE IMPOSED. 17. IN THE PRESENT CASE, LIKEWISE, THE ADDITION OF ` 3 15,179/- DID NOT FIND, AS ITS BASIS, ANYTHING FOUND DURING THE SEARCH CO NDUCTED. RATHER, IN THE STOCK REGISTER (ANNEXURE A-25) SEIZED DURING TH E SEARCH, NO ENTRY OF CASH LOAN WAS FOUND RECORDED. IT HAS NOT BEEN SHOWN OTHERWISE. THEREFORE, IN KEEPING WITH BEENA RANI (SUPRA), PENALTY U/S 158BFA (2) CANNOT BE IMPOSED ON THIS ISSUE IN THE PRESEN T CASE. 18. BECHARBHAI (SUPRA), SOUGHT TO BE RELIED ON BY T HE DEPARTMENT, IT IS SEEN, IS NOT APPLICABLE HERETO. THERE IS NO DISPUTE TO WHAT WAS HELD THEREIN, I.E., THAT PENALTY IMPOSABLE U/S 158BFA (2) OF THE ACT IS DIFFERENT FROM PENALTY LEVIABLE U/S 271 (1)(C) THERE OF, AND THAT ADDITION IN QUANTUM PROCEEDING, HAVING ATTAINED FINALITY, CA NNOT BE REOPENED. HERE ALSO, THE QUANTUM PROCEEDINGS, WHICH HAVE CULMIN ATED IN THE ORDER OF THE ITAT, ARE FINAL. IT IS THE LEVY OF PENA LTY WHICH IS UNDER THE SCANNER HERE. MOREOVER, THE ADDITION IN BECHARBHAI WAS AN ESTIMATED ADDITION BASED ON DECODING OF THE JOTTINGS. THIS, UNDI SPUTEDLY, IS NOT SO HERE. 19. THEN, JRD STOCK BROKERS (P) LTD. VS. ACIT, 124 TTJ 566 (DEL), SOUGHT TO BE RELIED ON BY THE DEPARTMENT, IS ALSO NOT APPLICABLE. IT(SS)A NO.11/DEL/2011 11 THEREIN, DIRECT EVIDENCE EXISTED AGAINST THE ASSESSEE, SH OWING THAT IT HAD INDULGED IN EARNING UNDISCLOSED INCOME BY PROVIDI NG ACCOMMODATION ENTRIES. EVEN SO, THE ASSESSEE FILED NIL RE TURN FOR THE BLOCK PERIOD. THE FACTS IN THE PRESENT CASE, EVIDENTLY , ARE UNDOUBTEDLY DIFFERENT. HERE, NOTHING WAS FOUND AS A RESULT OF THE SEARCH TO HOLD THAT UNDISCLOSED INCOME HAD BEEN EARNED BY THE ASSESSEE. THE B ASIC FACT HERE IS THAT THE AD HOC ADDITION MADE WAS NOT BASED ON ANYTHING CONTAINED IN THE SEIZED REGISTER. RATHER, IT WAS BASED ON THE ASSUMPTION THAT THE ASSESSEE HAD INTRODUCED HIS OWN UNDISCL OSED INCOME AS CASH LOANS. THE LEVY OF PENALTY U/S 158BFA (2 ) OF THE ACT, AS DISCUSSED HEREINABOVE, BEING DISCRETIONARY AND NOT MAND ATORY, THE ASSESSING OFFICER, IN THE PENALTY PROCEEDINGS, OUGHT TO HAVE CONSIDERED THIS ASPECT OF THE MATTER, WHICH, OBVIOUSLY, HAS NOT BEEN DONE. 20. IN VIEW OF THE ABOVE, FINDING THE PENALTY LEVIE D ON BOTH THE COUNTS TO BE NOT MAINTAINABLE, WE HEREBY DELETE THE SAME. 21. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PA RTLY ALLOWED, AS INDICATED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 11.10.20 13. SD/- SD/- [S.V. MEHROTRA] [A.D. JAIN] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 11.10.2013. DK IT(SS)A NO.11/DEL/2011 12 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES