Nirma Limited, Ahmedabad V. The Dy.CIT, Circle-5, Ahmedabad

ITSSA 168/AHD/2015

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 4244 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 10-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 19-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Assessee Lawyers: HIMANSHU C SHAH
• Keywords: Question of law; Reasonable cause; Block assessment
• Section: 132; 2; 273B; 142(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ IT(SS)A.NO.168/AHD/2015 [BLOCK PERIOD : 1-4-1995 TO 27-9-2001] NIRMA LIMITED NIRMA HOUSE ASHRAM ROAD AHMEDABAD 380 009. PAN : AAACN 5350 K VS DCIT, CIR.3(1)(1) AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI S.N. SOPARKAR, AND SHRI HIMANSHU C. SHAH REVENUE BY : SHRI S.K. DEV, SR.DR / DATE OF HEARING : 03/10/2018 / DATE OF PRONOUNCEMENT: 10/10/2018 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF LD.CIT(A)-9, AHMEDABAD DATED 20.3.2015 PASSED FOR THE BLOCK PERI OD 1.4.1995 TO 27.9.2001. 2. SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CI T(A) HAS ERRED IN CONFIRMING PENALTY OF RS.6,18,386/- IMPOSED UNDER S ECTION 158BFA(2) OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT A SEARCH UNDER SECTION 132 OF THE ACT WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE ON 27.9.2001. SIMULTANEOUS SURVEYS WERE ALSO CONDUCTED AT DIFFERENT BUSINESS P REMISES. A NOTICE UNDER IT(SS)A NO168/AHD/2015 2 SECTION 158BC WAS ISSUED TO THE ASSESSEE, AND IN RE SPONSE TO THE NOTICE, THE ASSESSEE HAS FILED RETURN OF INCOME FOR THE BLOCK P ERIOD AT NIL. THE ASSESSMENT ORDER WAS PASSED ON 31.10.2003WHEREBY IN COME OF THE ASSESSEE FOR THE BLOCK PERIOD WAS DETERMINED AT RS.27,77,98, 314/-. THE LD.AO HAS MADE ADDITION ON TEN COUNTS. ON FURTHER APPEAL, AL MOST ALL THE ADDITIONS WERE DELETED EXCEPT AN ADDITION OF RS.7,70,960/- AND RS. 2,39,475/-. THE FACTS WITH REGARD TO THESE ADDITIONS ARE THAT DURING THE COURS E OF SURVEY AT BHAVNAGAR FACTORY PREMISES IT CAME TO THE NOTICE OF SURVEY TE AM THAT THE ASSESSEE WAS HAVING EXCESS STOCK OF LIME STONE OF 6704 MT HAVING VALUE OF RS.7,70,960/-. THIS VALUE OF EXCESS STOCK WAS ADDED TO THE TOTAL I NCOME AND ADDITION STAND CONFIRMED UPTO THE LEVEL OF THE TRIBUNAL. SIMILARL Y, DURING THE COURSE OF SEARCH AT THE RESIDENTIAL PREMISES OF CASHIER, SHRI MANILAL B. PATEL A FILE INVENTORISED AS ANNEXURE A/2 WAS FOUND AND SEIZED. THE FILE CONTAINED LOOSE PAPER-SHEETS. IN THE LOOSE PAPER NAMES OF SHRI MAH ENDRA FADIA AND OTHER ASSOCIATE PERSONS AND EMPLOYEES WERE MENTIONED. IN THE STATEMENT OF SHRI MANIBHAI B. PATEL, HE DISCLOSED THAT HE WAS WRITING DAILY CASH BOOK OF THE COMPANY AND NOTING IN THAT PAGES PERTAINED TO ADVAN CES GIVEN BY HIM ON BEHALF OF THE COMPANY FOR CASH EXPENSES TO BE INCUR RED BY THE ASSOCIATES AND EMPLOYEES. THUS, ON THE BASIS OF THAT EVIDENCE, UN EXPLAINED CASH AT RS.2,39,475/- WAS ADDED AS UNDISCLOSED INCOME OF TH E ASSESSEE. THIS ADDITION WAS ALSO STAND CONFIRMED UPTO THE TRIBUNAL. THE LD .COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS CHALLENGED ORDER OF THE TRIBUNAL BEFORE THE HONBLE HIGH COURT IN TAX APPEAL NO.306 OF 2012 AND QUESTION OF LAW RELATING TO BOTH THE ISSUE STAND ADMITTED. HE PLAC ED ON RECORD COPY OF INTERIM ORDER PASSED BY THE HONBLE HIGH COURT DATED 28.6.2 012. THE AO HAS IMPOSED A PENALTY UNDER SECTION 158BFA(2) OF THE AC T ON THIS ADDITION OF RS.10,10,435/-. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. IT(SS)A NO168/AHD/2015 3 4. WITH THE ASSISTANCE OF THE LD.REPRESNETATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. PENALTY UNDER SECTION 158BFA OF THE INCOME TAX ACT IS TO BE IMPOSED ON ALL TOGETHER DIFFERENT GROUNDS THAN T HE ONE IMPOSED UNDER SECTION 271(1)(C) FOR CONCEALMENT OF INCOME OR FURN ISHING INACCURATE PARTICULARS OF INCOME. RECENTLY, THE HONBLE HIGH COURT HAS CONSIDERED THIS ISSUE AND PROPOUNDED THE DISTINCTION ELABORATELY IN THE JUDGMENT RENDERED IN THE CASE OF CIT VS. BEECHARBHAI P.PARMAR, 341 ITR 4 99. BEFORE EMBARKING UPON AN INQUIRY ON THE FACTS OF THE PRESENT CASE, W E DEEM IT APPROPRIATE TO TAKE NOTE OF THE FINDING RECORDED BY THE HONBLE GU JARAT HIGH COURT IN THE CASE OF CIT VS.BEECHARBHAI P. PARMAR. THE HONBLE COURT HAS TAKEN NOTE OF SECTION 158BFA, AND THEREAFTER EXPOUNDED THE MEANIN G AND INTERPRETATION OF THIS SECTION. THE DISCUSSION MADE BY THE HONBLE C OURT FROM PARA 8 TO 9 IN THIS REGARD READS AS UNDER: 8. HAVING THUS HEARD LEARNED COUNSEL FOR THE PARTI ES, WE MAY TAKE NOTE OF THE RELEVANT STATUTORY PROVISIONS. SEC. 158 BFA OF THE ACT IS PART OF CHAPTER XIV-B, WHICH LAYS DOWN SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES. SEC. 158BFA PERTAINS TO LEVY OF INTER EST AND PENALTY IN CERTAIN CASES. SUB-S. (2) OF S. 158BFA, WHICH IS RE LEVANT FOR OUR PURPOSE, READS AS UNDER: '158BFA. LEVY OF INTEREST AND PENALTY IN CERTAIN CA SES(1) ................... (2) THE AO OR THE CIT(A), IN THE COURSE OF ANY PROC EEDINGS UNDER THIS CHAPTER, MAY DIRECT THAT A PERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHALL NOT BE LESS THAN THE AMOUNT OF TAX LEVI ABLE BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SO LEVIABL E IN RESPECT OF THE UNDISCLOSED INCOME DETERMINED BY THE AO UNDER CL. ( C) OF S. 158BC : PROVIDED THAT NO ORDER IMPOSING PENALTY SHALL BE MA DE IN RESPECT OF A PERSON IF (I) SUCH PERSON HAS FURNISHED A RETURN UNDER CL. (A ) OF S. 158BC; IT(SS)A NO168/AHD/2015 4 (II) THE TAX PAYABLE ON THE BASIS OF SUCH RETURN HA S BEEN PAID OR, IF THE ASSETS SEIZED CONSIST MONEY, THE ASSESSEE OFFERS TH E MONEY SO SEIZED TO BE ADJUSTED AGAINST THE TAX PAYABLE; (III) EVIDENCE OF TAX PAID IS FURNISHED ALONG WITH THE RETURN; AND (IV) AN APPEAL IS NOT FILED AGAINST THE ASSESSMENT OF THAT PART OF INCOME WHICH IS SHOWN IN THE RETURN : PROVIDED FURTHER THAT THE PROVISIONS OF THE PRECEDI NG PROVISO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOME DETERMINED BY TH E AO IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN AND IN SUCH CASES THE PENALTY SHALL BE IMPOSED ON THAT PORTION OF UNDISCLOSED INCOME DETER MINED WHICH IS IN EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN.' 8. UPON PERUSAL OF SUB-S. (2) OF S. 158BFA OF THE A CT, IT WOULD EMERGE THAT THE AO OR CIT(A) HAS THE POWER TO IMPOSE PENAL TY IN COURSE OF ANY PROCEEDINGS UNDER THE SAID CHAPTER, WHICH PENALTY W OULD RANGE BETWEEN 100 PER CENT TO 300 PER CENT OF THE TAX LEV IABLE ON THE UNDISCLOSED INCOME DETERMINED BY THE AO UNDER CL. ( C) OF S. 158BC OF THE ACT. 8.1 PROVISO TO SUB-S. (2) OF S. 158BFA OF THE ACT, HOWEVER, PROVIDES FOR FOUR CONDITIONS, UPON SATISFACTION OF WHICH, THE AS SESSEE WOULD GET IMMUNITY FROM SUCH PENALTY. SUCH CONDITIONS ARE TO BE SATISFIED CUMULATIVELY. IN ESSENCE, IT PROVIDES THAT THE PENA LTY SHALL NOT BE IMPOSED IF THE ASSESSEE FURNISHES A RETURN UNDER CL . (A) OF S. 158BC; ALSO PAYS TAX ON THE BASIS OF SUCH RETURN, OR OFFER S FOR ADJUSTMENT ANY MONEY SEIZED, OR PRODUCES EVIDENCE OF HAVING PAID S UCH TAX, AND ALSO DOES NOT FILE APPEAL AGAINST ASSESSMENT ON THAT PAR T OF THE INCOME WHICH IS SHOWN IN THE RETURN. IN OTHER WORDS, IN CA SES OF PROCEEDINGS FOR BLOCK ASSESSMENT, THE ASSESSEE WOULD HAVE AN AD DITIONAL CHANCE TO AVOID PENALTY BY FURNISHING A RETURN, PAYING TAX ON SUCH UNDISCLOSED RETURN AND ACCEPTING FINALITY WITH RESPECT TO THE S AME. 8.2 FURTHER PROVISO TO SUB-S. (2) OF S. 158BFA IS M ERELY IN NATURE OF CLARIFICATION AND PROVIDES THAT THE FIRST PROVISO W OULD NOT APPLY WHERE UNDISCLOSED INCOME DETERMINED BY THE AO IS IN EXCES S OF THE INCOME SHOWN IN THE RETURN AND IN SUCH CASES, PENALTY SHAL L BE IMPOSED ON THAT PORTION OF THE UNDISCLOSED INCOME DETERMINED, WHICH IS IN EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN. 8.3 CLOSELY SEEN, SUB-S. (2) OF S. 158BFA MAKES IT CLEAR THAT IT IS WELL WITHIN THE DISCRETION OF THE AO, WHILE FRAMING THE ASSESSMENT FOR THE IT(SS)A NO168/AHD/2015 5 BLOCK PERIOD, WHETHER OR NOT TO IMPOSE ANY PENALTY OR NOT. THE WORDS, 'MAY DIRECT' HAVE TO BE GIVEN ITS NORMAL MEANING, L EAVING DISCRETION TO THE OFFICER. IN ABSENCE OF ANY SPECIAL REASON THE W ORD, 'MAY' CANNOT BE READ AS 'SHALL'. 8.4 IN CASE OF HINDUSTAN STEEL LTD. VS. STATE OF OR ISSA (1972) 83 ITR (SC) 26 THE APEX COURT IN CONNECTION WITH PENALTY P RESCRIBED IN ORISSA SALES-TAX ACT OBSERVED : '.. ..AN ORDER IMPOSING PENALTY FOR FAILURE TO CARR Y OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEE DING, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED, EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CO NDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF IT S OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFU L TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EX ERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCE S. EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPET ENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSED PE NALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FROM ABONA FIDE BELIEF THAT THE OFFEND ER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE.' 9. THE CONTENTION OF THE COUNSEL FOR THE REVENUE TH AT ONLY UPON SATISFACTION OF THE CONDITIONS CONTAINED IN PROVISO TO SUB-S. (2) THAT THE ASSESSEE, IN CASE OF THE BLOCK ASSESSMENT CAN BE SP ARED OF THE PENALTY CANNOT BE ACCEPTED. IT IS, OF COURSE, TRUE THAT UPO N SATISFYING SUCH CONDITIONS, THE ASSESSEE WOULD GET IMMUNITY FROM PE NALTY. NEVERTHELESS, THIS IS NOT A THING AS TO SUGGEST THA T IN NO OTHER CASE, OR ON NO OTHER GROUND, THE AO MAY AT HIS DISCRETION, N OT IMPOSE PENALTY THE MOMENT ADDITIONS UNDER CL. (C) OF S. 158BC ARE SUSTAINED. IN OTHER WORDS, WE ARE UNABLE TO HOLD THAT THE PENALTY UNDER S. 158BFA(2) IS MANDATORY IN NATURE. 9.1 IT IS TRUE THAT S. 273B OF THE ACT WHICH PROVID ES THAT PENALTY SHALL NOT BE IMPOSED IN CERTAIN CASES ON THE ASSESSEE PRO VING THAT THERE WAS REASONABLE CAUSE FOR FAILURE TO PAY TAX REFERS TO S EVERAL PROVISIONS SUCH AS SS. 271, 271A, ETC., MAKES NO MENTION OF S. 158B FA(2). THIS STILL DOES NOT MEAN THAT PENALTY UNDER S. 158BFA(2) IS MA NDATORY. 5. IT IS PERTINENT TO MENTION HERE THAT CHAPTER XIV B STARTING FROM SECTION 158B PROVIDE SPECIAL PROCEDURE FOR ASSESSMENT OF SE ARCH CASES UPTO THE IT(SS)A NO168/AHD/2015 6 SEARCH CONDUCTED PRIOR TO 31.5.2003. UNDER THE SCH EME OF BLOCK ASSESSMENT, INCOME OF AN ASSESSEE FOR THE BLOCK PURPOSE IS TO B E COMPUTED UNDER SECTION 158BB. IN A SERIES OF DECISIONS, IT HAS BEEN HELD THAT INCOME FOR THE BLOCK IS TO BE COMPUTED ON THE BASIS OF SEIZED MATERIAL. IN OTHER WORDS, WHEN THE AO ISSUES NOTICE UNDER SECTION 158BC OF THE ACT, INVIT ING THE ASSESSEE TO FILE RETURN OF THE UNDISCLOSED INCOME, HE WOULD SUPPLY C OPIES OF SEIZED MATERIAL ON THE BASIS OF WHICH THE ASSESSEE HAS TO COMPUTE T RUE UNDISCLOSED INCOME. IN OTHER WORDS, MATERIAL ON THE BASIS OF WHICH INCO ME OF AN ASSESSEE HAS TO BE DETERMINED FOR THE PURPOSE OF BLOCK PERIOD IS COMMO N. IT IS THE MATERIAL COLLECTED DURING THE COURSE OF SEARCH. IN THESE CI RCUMSTANCES, THE ALLEGATIONS OR THE CHARGE AGAINST AN ASSESSEE COULD BE WHY HE F AILED TO COMPUTE TRUE UNDISCLOSED INCOME. THUS, THE QUESTION BEFORE US I S, WHETHER ON THE BASIS OF MATERIAL SUPPLIED BY THE LD.AO FOR PREPARING BLOCK RETURN, COULD IT BE CONSTRUED AS ASSESSEE KNOWINGLY NOT INCLUDED THE IN COME ON THESE TWO ISSUES WHICH HAS BEEN ADDED SUBSEQUENTLY IN THE ASSESSMENT PROCEEDINGS, AND CONFIRMED UPTO THE ITAT ? AS FAR AS ADDITION REGAR DING STOCK POSITION, AN EXPLANATION WAS GIVEN BY THE ASSESSEE DURING THE AS SESSMENT PROCEEDINGS AND COPY OF SUCH EXPLANATION IS AVAILABLE ON PAGE NO.10 8 OF THE PAPER BOOK. IT IS A LETTER DATED 17.12.2002 WRITTEN BY THE ASSESSEE I N RESPONSE TO THE NOTICE RECEIVED UNDER SECTION 142(1) OF THE ACT. IT IS IM PERATIVE UPON US TO TAKE NOTE OF RELEVANT PART OF THE REPLY, WHICH READS AS UNDER : [2] STOCK AT BHAVNAGAR CHEMICAL COMPLEX YOUR ABOVE REFERRED LETTER ALSO STATES THE DIFFEREN CE BETWEEN THE BOOK, STOCK AND PHYSICAL STOCK IN CASE OF LIMESTONE, SALT AND SODA ASH. THE QUESTION POSED PERTAINS TO OUR BHAVNAGAR SITE SURVE Y U/S.133A OF INCOME TAX ACT, 1961 WAS CARRIED OUT. ANY ISSUE OF SUCH SURVEY PROCEEDINGS CANNOT AND OUGHT NOT BE COVERED WHILE L OOKING INTO BLOCK ASSESSMENT. WITHOUT PREJUDICE TO ABOVE, WE DRAW YOU R ATTENTION TO THE FOLLOWING FACTS: IT(SS)A NO168/AHD/2015 7 IT IS PERTINENT TO BEAR IN MIND THE FOLLOWING VITAL FACTS, WHICH HAS SUBSTANTIAL BEARING IN THE PROCESS OF PHYSICAL STOC K TAKING. A. DURING THE COURSE OF SURVEY PROCEEDING, THE STOCK T AKING AND VERIFICATION TAKEN UP LATE EVENING AT AROUND 7.00 P .M. AND WAS COMPLETED WITHIN A TOTAL PERIOD OF ABOUT 2 TO 3 HOU RS SO THAT THE TIME ALLOTTED FOR STOCK TAKING AND VERIFICATION WAS VERY SHORT AND THE EXERCISE WAS UNDERTAKEN AT THE TIME WHEN THE PEOPLE PUT ON THE JOB WERE TOTALLY EXHAUSTED. B. SODA ASH PLANT IS SPREAD OUT IN TOTAL AREA OF ABOUT 480 ACRES OF LAND WHEREIN RAW MATERIAL STORAGE AREA WOULD BE ABOUT 10 0 ACRES, WHICH IS VERY HUGE AND THE DISTANCE BETWEEN LIMESTONE AND SALT WOULD BE ABOUT 2 KMS. AREA OF FINISHED GOODS GODOWN, WHERE SODA ASH IS STORED IS ABOUT 34,000 SQ.YD. THESE FIGURES ARE ONL Y TO GIVE AN IDEA OF THE VASTNESS AND THE SIZE AND THEREFORE THE TIME CONSTRAINTS, WHICH CAN SUBSTANTIALLY, THE CARE AND PRECISION IN THE ST OCK TAKING EXERCISE. C. THE RAW MATERIALS ARE MOSTLY BULKY IN NATURE, WHICH ARE STORED IN OPEN AREA THE QUANTITIES HAVE BEEN HUGE AND THE S AME HAS BEEN PHYSICALLY VERIFIED BY ADOPTING THE MEASUREMENT ME THOD', I.E. THE SIZE OF THE HEAP IN LENGTH, WIDTH AND HEIGHT IS MEASURED BY A MEASUREMENT TAPE AND THEN THE CALCULATIONS ARE MADE BY APPLYING FACTOR 10 ARRIVE AT AN ESTIMATE OF THE QUANTITY. ST OCK OF LIMESTONE AND SALT HAS BEEN BY ADOPTING THIS KIND OF METHOD A ND HAS NOT BEEN PHYSICALLY WEIGHED, I.E. OF THE STOCK WAS NOT CARRI ED OUT. THE METHODOLOGY SO ADOPTED ALWAYS HAS TOLERANCE LIMESTONE AND SALT ARE STORED IN OPEN YARD, IN EARM ARKED AREA WITHIN THE PLANT PREMISES. THEY ARE STOCKED UP IN HUGE MOUND. STACKS CANNOT BE UNIFORM. APART FROM VALLEYS AND H ILLS, THEY ARE TRIANGULAR, TRIPODICAL, RECTANGLE AND LOOSE DUMPS A LSO. GIVEN THE MATURE OF STOCKS AND/OR MOUNDS, IT IS IMP OSSIBLE TO MEASURE AN ACCURATE STOCK STOCK TAKING OF VOLUMETRIC STOCK IS A PECULIAR EXER CISE, REQUIRING SPECIAL EXPERTISE IT CAN BE QUITE SUBJECTIVE EXERCISE DEPENDING ON TH E NATURE OF MATERIAL AND TEAM OF PERSONS MEASURING THE VOLUMETR IC STOCK. IT(SS)A NO168/AHD/2015 8 STOCK MEASUREMENT IS ALWAYS AFFECTED BY THE APPROAC H OR HANDLING OF THE MEASURING PROCESS BY THE TEAM OF PE RSONS UNDERTAKING THE MEASUREMENT. EVEN HOLDING THE MEAS UREMENT TAPE LOOSE OR TIGHT, ON THE MOUND TO BE MEASURED, C AN RESULT INTO VARIATION IN STOCK, AND THIS FACT WAS BROUGHT TO TH E NOTICE EVEN DURING THE SEARCH PROCEEDINGS. IN FACT SOME OF THE ABOVE FACTORS WERE BROUGHT TO T HE NOTICE OF THE DEPARTMENTS OFFICER IN THE STATEMENT OF MR.V.N.DEW SAI, OUR VICE PRESIDENT. THE RELEVANT REPLY WAS RECORDED IN GUJAR ATI, TRANSLATED IN ENGLISH TO REPRODUCE HEREUNDER. XXXX XXXX XXX XXXX XXXX XXX WE ENCLOSE HEREWITH A COPY OF A STATEMENT OF STOCK PHYSICALLY VERIFIED ON 27.9.2001. YOU MAY OBSERVE THEREIN AT THE TOP O F THE PAPER, IT HAS BEEN MENTIONED THAT PHYSICAL STOCK TAKEN ON URGENT BASIS AND BELOW THAT NORMAL STOCK AND UNDERSIZE STOCK HAVE BEEN SEPARATELY TAKEN AND CALCULATED. INADVERTENTLY, THIS STOCK HAS BEEN COMPARED WITH BOOK STOCK. IN FACT THE CORRECT CALCULATION OF STOCK SHO ULD BE: QTY. IN MT A. STOCK OF USABLE LIME STONE AS SPECIFICALLY STATED NORMAL 30,937.600 B. STOCK OF UNUSABLE UNDER SIZE MATERIAL (NOT TO BE TAKEN FOR BOOK STOCK COMPARISON) 7,847,100 IT(SS)A NO168/AHD/2015 9 C. STOCK AS PER BOOKS 32,080,082 BOOK STOCK FOUND IN EXCESS 1,142,482 6. A PERUSAL OF THE ABOVE REPLY WOULD INDICATE THAT MEASUREMENT OF STOCK WAS TAKEN HYPOTHETICALLY IN ESTIMATED MANNER. THE DETAILS OF STOCK TAKING PROCEEDINGS HAVE BEEN PLACED ON PAGES 103 TO 107 OF THE PAPER BOOK. FOR EXAMPLE WEIGHT OF HEAP WAS WORKED OUT AT 4389 MTS. BY TAKING MEASUREMENT AS 28 X 33 X 9.5. THIS IS PURELY A ROUGH CALCULATI ON. WHEN SUCH TYPE OF MATERIAL IS SUPPLIED, THEN ANY ASSESSEE PREPARING I TS RETURN WOULD HARBOR A BELIEF THAT HE WILL EXPLAIN HIS POSITION TO THE AO DURING THE ASSESSMENT PROCEEDINGS AND NO ADDITION WILL BE MADE. IT IS A DIFFERENT MATTER THAT ADDITION AS MADE AND CONFIRMED UPTO THE ITAT, BUT I T IS ALSO IMPORTANT TO NOTE THAT HONBLE COURT HAS ADMITTED QUESTION OF LAW ON THIS POINT. SIMILARLY, WITH REGARD TO SECOND ADDITION, THE ASSESSEE HAS GIVEN I TS EXPLANATION THAT THESE ARE THE ROUGH SHEETS SHOWING CASH GIVEN TO THE EMPLOYEE S FOR INCURRING CERTAIN NECESSARY EXPENSES. ACCORDING TO THE ASSESSEE, THE SE EXPENSES MUST HAVE BEEN POSTED IN THE REGULAR BOOKS. HENCE IT WOULD N OT PARTAKE CHARACTER OF INCOME ASSESSABLE IN ITS HAND. THESE ARE POSSIBLE OPINION, WHICH WOULD HAVE BEEN HARBOURED BY THE ASSESSEE AT THE TIME OF FILIN G OF RETURN. THERE CANNOT BE ANY ALLEGATIONS AGAINST THE ASSESSEE THAT IT HAS DE LIBERATELY NOT COMPUTED HIS TRUE UNDISCLOSED INCOME FROM THE SEIZED MATERIAL. AS AGAINST THE ABOVE, IT IS TO BE SEEN THAT THE AO HAS COMPUTED THE INCOME FROM THE SEIZED MATERIAL AT RS.24.77 CRORES. HIS COMPUTATION TOTALLY FAILED EX CEPT AN ADDITION OF RS.10 LAKHS. THE LD.COUNSEL FOR THE ASSESSEE AT THE TIME OF ARGUING THIS APPEAL HAS SUBMITTED THAT NO CONSEQUENCES HAVE BEEN PROVIDED A GAINST THE LD.AO FOR FORMATION OF SUCH AN OPINION. HE EXPRESSED THE DIS APPOINTMENT OF THE ASSESSEE AGAINST THE MANNER IN WHICH PENALTY HAS BE EN IMPOSED UPON IT. WE RECOGNIZE THE DISAPPOINTMENT, BUT IN THE PRESENT FO RM NO REMEDY IS AVAILABLE TO THE ASSESSEE ON THIS ASPECT. HOWEVER, WE ARE CO NVINCED THAT THE ASSESSEE IT(SS)A NO168/AHD/2015 10 DOES NOT DESERVE TO BE VISITED WITH PENALTY UNDER S ECTION 158BFA IN THE GIVEN CIRCUMSTANCES. WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE PENALTY. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE COURT ON 10 TH OCTOBER, 2018 AT AHMEDABAD. SD/- SD/- ( PRADIPKUMAR KEDIA ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER