Bagga Distilleries Hyderabad Pvt.Ltd, Hyderabad V. DCIT, Central Circle-1, Hyderabad

ITSSA 28/HYD/2011

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7661 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 14-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARI LAL NAIK
• Assessee Lawyers: S RAMA RAO
• Keywords: Search and seizure; Cost of acquisition; Block assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER IT(SS)A NO.28/HYD/2011 BLOCK ASSTT. PERIOD: 1996-97 TO 2001-02 BAGGA DISTILLERIES HYDERABAD PVT. LTD., HYDERABAD. (PAN:AACCB 3837H) VS DCIT, CIR-1, HYDERABAD. APPELLANT RESPONDENT APPELLANT BY : SRI S.RAMA RAO RESPONDENT BY : SRI HARILAL NAIK DATE OF HEARING : 29-02-2012. DATE OF PRONOUNCEMENT : 14 -03-2012. ORDER PER SAKTIJIT DEY, J.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 19-9-2011 PASSED BY THE CIT (A)-II, HYDERABAD VIDE ITA NO.0073/CIT(A)-II, HYD/2009-10 PERTAINING TO THE BLOCK ASSESSMENT PERIOD FROM 1996-97 TO 2001-02 CONFIRMING THE PENALTY OF RS.1,27,84,457/- IMPOSED UNDER SECTION 158BFA(2) OF THE INCOME-TAX ACT. IT(SS)A NO.28/H/2011 BAGGA DISTILLERIES HYD. =============================== 2 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE-APPELLANT EARLIER KNOWN AS M/S GEMINI DISTILLERIES, HYDERABAD IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF INDIAN MADE FOREIGN LIQUOR (IN SHORT IMFL). A SEARCH AND SEIZURE OPERATION WA S CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 3-1- 2002. DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS, VARIOUS DOCUMENTS AND MATERIALS WERE SEIZED INCLUDING THE COST SHEET GIVING OUT THE COSTING OF A CASE CONTAINING 180ML IMFL BOTTLES. IN RESPON SE TO THE NOTICE ISSUED UNDER SECTION 158 BC OF THE ACT , THE ASSESSEE FILED RETURN SHOWING UNDISCLOSED INCOM E AT NIL. IN THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER WHILE VERIFYING THE BOOKS OF ACCOUNTS WITH THE SEIZED MATERIAL FOUND HUGE DIFFERENCES BETWEEN THE NUMBER OF BOTTLES ISSUED AND NUMBER OF BOTTLES SOLD. THE ASSESSEE CLAIMED THE DIFFERENCE WAS ON ACCOUNT OF BREAKAGE O F BOTTLES AND PERCENTAGE OF BREAKAGE VARIES FOR DIFFERENT SIZES OF BOTTLES. THE PERCENTAGE OF BREAKAGE RECORDED IN THE BOOKS OF ACCOUNTS WAS FOUND TO BE RANGING FROM 6.92% TO 54% DEPENDING UPON SIZES OF THE BOTTLES. WHILE COMPARING THESE FIGURES WITH THE COST SHEET SEIZED DURING THE SEARC H AND SEIZURE OPERATIONS, THE ASSESSING OFFICER FOUND THAT BREAKAGE OF BOTTLES HAS BEEN SHOWN AT 6% IN TH E COST SHEET. THEREFORE, BY ADOPTING THE BREAKAGE AT 6% , HE MADE AN ADDITION OF RS.4,35,60,320/-. WHILE EXAMINING THE COST OF PURCHASES OF BOTTLES BY THE IT(SS)A NO.28/H/2011 BAGGA DISTILLERIES HYD. =============================== 3 ASSESSEE, THE ASSESSING OFFICER HAS OBSERVED THAT T HE ASSESSEE HAS INFLATED THE COST OF PURCHASES. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD PURCHASED BOTTLES FROM THE CONCERNS CONNECTED WITH THE ASSESSEE AS WELL AS FROM OTHER CONCERNS. THE PURCHASE COST OF THE BOTTLES FROM THE CONNECTED CONCERNS IS SHOWN AT HIGHER RATES. THE ASSESSEE EXPLAINED THAT SECOND HAND BOTTLES FROM THE CONNECTED CONCERNS WERE SUPPLIED AFTER WASHING AND CLEANING AND THEREFORE, HIGHER RATE WAS PAID. THE ASSESSING OFFICER DID NOT ACCEPT THIS EXPLANATION O F THE ASSESSEE. THE ASSESSING OFFICER RELYING UPON THE COST SHEET DURING THE COURSE OF SEARCH OPERATION, ADOPTED THE COST OF BOTTLES AT 1.50 PER BOTTLE OF 180ML IMFL AGAINST PURCHASE COST FROM THE CONNECTED CONCERN SHOWN AT RS.1.90 PER BOTTLE BY THE ASSESSEE AND ADDED AN AMOUNT OF RS.3,22,29,886/-. IN CASE OF BOTTLES SUPPLIED BY OTHER SUPPLIERS ALSO, THE ASSESSING OFFICER RESTRIC TED THE COST AT RS.1.50 PER BOTTLE WHICH RESULTED IN AN ADDITION OF RS.2,62,61,621/-. THUS, THE UNDISCLOS ED INCOME WAS DETERMINED AT RS.10,20,51,830/-. 3. THE ASSESSEE-APPELLANT CHALLENGED THE BLOCK ASSESSMENT ORDER BEFORE THE CIT (A). THE CIT (A) WHILE CONSIDERING THE ADDITION MADE ON ACCOUNT OF BREAKAGE OBSERVED THAT THE AVERAGE RATE AT 6% APPLIED BY THE ASSESSING OFFICER IS JUSTIFIED. HOW EVER, THE ASSESSEE HAS PURCHASED THE BOTTLES OF DIFFERENT IT(SS)A NO.28/H/2011 BAGGA DISTILLERIES HYD. =============================== 4 SIZES FROM OTHER CONCERNS ALSO. HENCE, THE CIT (A) RESTRICTED THE DISALLOWANCE TO RS.3,84,09,408/-. S O FAR AS THE ADDITIONS MADE BY TAKING THE COST OF BOTTLES AT RS.1.50 PER BOTTLE, THE CIT (A) UPHELD T HE ADDITIONS OF RS.3,22,29,886/- WHICH REPRESENTS THE COST OF BOTTLES PURCHASED FROM THE CONNECTED CONCERNS. THE CIT (A) HOWEVER DELETED THE ADDITION OF RS.2,62,61,621/- ON THE REASONING THAT NOTHING WAS FOUND ON RECORD TO SHOW THAT OTHER SUPPLIERS WERE IN ANY WAY CONNECTED TO THE ASSESSEE AND THE EXCESS SALE CONSIDERATION HAS BEEN RECEIVED BACK BY ANY MEMBER OF BAGGA FAMILY. THE ASSESSEE THEREAFTER FILED AN APPEAL BEFORE THE ITAT, HYDERABAD. THE ITAT, HYDERABAD VIDE ITS ORDER DATED 11-4-2008 WHILE DEALING WITH THE ADDITION ON ACCOUNT OF BREAKAGE, DIRECTED THE ASSESSING OFFICER TO ADOPT 15% THE RELEVANT PORTION OF THE ORDER OF THE ITAT IS REPRODUCED BELOW (PARA-16 OF THE TRIBUNAL ORDER): 16. WE HAVE FULLY CONSIDERED THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD. THE MAIN CONTENTION OF T HE LEARNED COUNSEL IS THAT WHEN NO DEFECTS HAVE BEEN POINTED OUT IN THE QUANTITATIVE RECORDS OF BOTTLES AND WHEN PURCHASES HAVE NOT BEEN DOUBTED, THERE IS NO CASE TO RESTRICT THE ALLOWANCE OF BREAKAGES MERELY O N THE BASIS OF ONE COST SHEET FOUND DURING THE SEARCH. I T IS TRUE THAT THE ASSESSING OFFICER HAS NOT DOUBTED THE QUANTITATIVE RECORDS OF EMPTY BOTTLES. HOWEVER, IT CANNOT BE DENIED THAT THE BREAKAGE SHOWN BY THE ASSESSEE IS PHENOMENALLY ON THE HIGHER SIDE. IF NOT IT(SS)A NO.28/H/2011 BAGGA DISTILLERIES HYD. =============================== 5 FULLY, THE ASSESSING OFFICER IS SOMEWHAT JUSTIFIED I N DISBELIEVING THE BREAKAGE CLAIMED BY THE ASSESSEE. HOWEVER, THE JOB WELL BEGUN BY HIM WAS ALLOWED TO BE WITHERED AWAY BY NOT CONDUCTING FULL AND NECESSARY ENQUIRIES AND HENCE THE ADDITION MADE BY HIM DOES NOT SEEM TO BE FULLY JUSTIFIABLE. PURCHASING THE BOTTLES THROUGH SISTER CONCERNS MAY RAISE A DOUBT ABOUT THE INTENTIONS OF THE ASSESSEE. HOWEVER, WITHOUT BRINGI NG FULL AND PROPER FACTS ON RECORD, THE CONCLUSION DRAWN BY THE ASSESSING OFFICER IS REDUCED TO AN INFERENCE ONLY . MOREOVER, THE CONNECTED CONCERNS ARE NOT HELD TO BE EITHER FICTITIOUS OR BENAMI CONCERNS OF THE ASSESSE E. THUS, WHEN THE SALES OF THESE CONCERNS ARE NOT DOUBTE D, THERE HARDLY REMAINS ANY ROOM TO DOUBT THE PURCHASES OF THE ASSESSEE. THE FACT THAT CERTAIN PAPERS RELATI NG TO THE CONNECTED CONCERNS WERE FOUND AT THE PREMISES OF THE ASSESSEE DOES NOT HAVE ANY BEARING ON THE CONCLUSION DRAWN BY THE ASSESSING OFFICER. AFTER ALL, THEY ARE CONNECTED CONCERNS AND HENCE THE SAME STAFF MAY BE LOOKING AFTER THE RECORDS OF ALL THE CONCERNS. THEN, THE ASSESSING OFFICER HAS NOT CONSIDERED OTHER FACTORS LIKE THE SKILLS OF THE WORKERS HANDLING THE BOTTLES AND THE QUALITY OF BOTTLES PURCHASED BY THE ASSESSEE. FURTHER, THE ASSESSING OFFICER HAS PLACED HEAVY RELIANCE ON THE COST SHEET FOUND DURING THE SEARCH. THIS COST SHEET PERTAINS ONLY TO 180 ML. BOTT LES WHEREAS THE ASSESSEE USES VARIOUS SIZES IN LARGE NUMBER OF QUANTITIES. THEREFORE, TO BASE THE BREAKAGE ON THE BASIS OF THAT COST SHEET IS LIKELY TO GIVE A VERY SKEWED FIGURE OF INFLATED PURCHASES, WHICH IS THE ALLEGATION OF THE REVENUE TO THE EFFECT THAT PURCHAS ES HAVE BEEN INFLATED BY CLAIMING EXCESS BREAKAGES. THUS, WHEN ALL THE CORE AS WELL AS PERIPHERAL FACTORS ARE VIEWED IN TOTALITY, THE UNAVOIDABLE CONCLUSION ONE ARRIVES AT IS THAT, ON THE ONE SIDE, THE ASSESSEE HA S CLAIMED EXCESS BREAKAGES AND, ON THE OTHER HAND, THE ADDITION DETERMINED BY THE ASSESSING OFFICER IS ON THE IT(SS)A NO.28/H/2011 BAGGA DISTILLERIES HYD. =============================== 6 HIGHER SIDE. THE ISSUE ULTIMATELY BOILS DOWN TO A FA IR ESTIMATE OF BREAKAGES TO BE ALLOWED TO THE ASSESSEE. A S MENTIONED EARLIER, THE BREAKAGE CLAIMED BY THE ASSESSEE RANGES FROM 6 PER CENT TO 54 PER CENT. THE ASSESSING OFFICER HAS RESTRICTED THE SAME AT 6 PER- CE NT. THE CIT (A) HAS UPHELD THE SIX PER CENT RATE APPLIED BY THE ASSESSING OFFICER BUT DIRECTED HIM TO APPLY AVERAGE RATE WHILE WORKING OUT THE DISALLOWANCE. IF THE FIGUR ES GIVEN BY THE CIT (A) IN PARA-18 OF HIS ORDER ARE CONSIDERED, THEN THE AVERAGE RATE OF BREAKAGE IN EACH OF THE YEARS AFTER TAKING INTO CONSIDERATION THE VARI OUS SIZES OF BOTTLES, COMES TO 24.5 PER CENT. THUS, THOU GH THE BREAKAGE CLAIMED BY THE ASSESSEE IS ON THE HIGHER SIDE, IT IS NOT SO ALARMING SO AS TO IMPLICATE THE ASSESSEE TO A VERY GREAT EXTENT. IN OUR VIEW, IT WOU LD BE FAIR TO ALLOW BREAKAGE TO THE ASSESSEE UP TO 15 PER CENT ON AVERAGE RATE OF VARIOUS SIZES OF BOTTLES BUT ONLY I N THOSE CASES WHERE THE ASSESSEE HAS CLAIMED BREAKAGE HIGHER THAN 15 PER CENT. IN CASES WHERE THE BREAKAGE CLAIMED IS BELOW 15 PER CENT, THE SAME NEED NOT BE DISTURBED. WE GIVE BELOW IN TABULAR FORM THE PERCENTAGE CLAIMED BY THE ASSESSEE IN RESPECT OF EACH YEAR AND IN RESPECT OF THE VARIOUS SIZES OF THE BOTTLE S AND ALSO INDICATE THE BREAKAGE TO BE ALLOWED IN EACH CASE. 1998-99 180 375 750 32% - 16% 15% - 15% 1999-2000 180 375 750 19% 27% 7% 15% 15% 7% 2000-01 180 375 750 18% 15% 50% 15% 15% 15% 2001-02 180 14% 14% IT(SS)A NO.28/H/2011 BAGGA DISTILLERIES HYD. =============================== 7 375 750 30% 54% 15% 15% 2002-03 180 12% 12% THE PERCENTAGE CLAIMED BY THE ASSESSEE AS MENTIONED IN THE ABOVE TABLE, HAVE BEEN COMPUTED ON THE BASIS OF THE FIGURES PROVIDED BY THE CIT (A) IN PARA -18 OF HI S ORDER. THUS, WE ALLOW BREAKAGE UP TO 15% WHERE THE BREAKAGE IS MORE THAN 15% AND HAVE RETAINED THE SAME BREAKAGE WHERE IT IS LESS THAN 15%. WE HOLD ACCORDINGLY AND DIRECT THE ASSESSING OFFICER TO WORK O UT THE DISALLOWANCE AS MENTIONED ABOVE. 4. WITH REGARD TO THE ADDITION MADE BY APPLYING THE RATE OF RS.1.50 PAISE PER BOTTLE, THE ITAT DIRE CTED THE ASSESSING OFFICER TO WORK OUT THE DISALLOWANCE BY ADOPTING THE RATE OF RS.1.80 PER BOTTLE. THE RELEV ANT PORTION FROM THE FINDINGS OF THE TRIBUNAL APPEARING IN PARA-22 OF THE SAID ORDER, EXTRACTED HEREUNDER FOR READY REFERENCE: THUS, CONSIDERING THESE DATA AS ALSO THE FACT THAT NO CONCRETE EVIDENCE HAS BEEN FOUND OF PURCHASES BEING INFLATED, IN OUR VIEW, THERE IS HARDLY ANY CASE TO S USTAIN THE ADDITION MADE BY THE ASSESSING OFFICER. THERE IS N O CONCRETE FINDING ABOUT THE QUALITY OF BOTTLES SUPPLIED BY THE VARIOUS SUPPLIER, NO MATERIAL TO ASCERTAIN WHETH ER THE BOTTLES SUPPLIED BY OUTSIDE PARTIES WAS INCLUSIVE OF FREIGHT AND OTHER CHARGES OR OTHER-WISE AND SO ON. THE AVERMENT OF THE ASSESSING OFFICER THAT THE LIQUOR PRODUCED BY THE ASSESSEE IS OF LOW QUALITY MEANT FOR LOWER INCOME GROUP OF CONSUMERS DOES NOT THROW ANY LIGHT ON THE FRAGILITY OF THE BOTTLES. THEREFORE, IN OUR IT(SS)A NO.28/H/2011 BAGGA DISTILLERIES HYD. =============================== 8 VIEW, THE RATE OF RS.1.50 ADOPTED BY THE ASSESSING OFFICER FOR 180 ML BOTTLES IS NOT JUSTIFIED. EARLIER, WE DID MAKE A MENTION THAT THERE MAY BE SOME JUSTIFICATION FOR THE DEPARTMENT TO MAKE SOME ADDITION, BOTH IN VIEW OF THE DEFINITION OF 'UNDISCLOSED INCOME' AND ALSO FOR THE REASON THAT THE ASSESSEE DID NOT PROVIDE PROPER EXPLANATION FOR PAYING HIGHER PRICES IN SOME CASES TO THE CONNECTED CONCERNS. THIS LAPSE, IF IT CAN BE SO CALLED, HAS TO BE WEIGHED AGAINST THE FACT THAT BOOKS O F ACCOUNT HAVE NOT BEEN REJECTED, BOOK RESULTS ARE NOT REJECTED AND PURCHASE VOUCHERS ARE NOT FAULTED WITH. THEREFORE, CONSIDERING ALL THESE SURROUNDING FACTORS, WE DIRECT THE ASSESSING OFFICER TO ADOPT RS.1.80 PER BOTTLE IN PLACE OF RS.1.50 ADOPTED BY HIM AND REWORK THE DISALLOWANCE ACCORDINGLY. 5. THUS, AS A CONSEQUENCE OF THE ORDER PASSED BY TH E ITAT, THE UNDISCLOSED INCOME WAS FINALLY DETERMINED AT RS.1,93,70,319/. ON THE BASIS OF DETERMINATION OF UNDISCLOSED INCOME, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS UNDER SECTION 158BFA(2) OF THE ACT. TH E ASSESSEE IN ITS EXPLANATION SUBMITTED THAT THE ENTI RE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ON THE BASIS OF ESTIMATE ONLY. NEITHER THE SEIZED MATERIA L NOR ANY OTHER EVIDENCE HAS BEEN BROUGHT ON RECORD TO ESTABLISH THAT THE ASSESSEE HAS CONCEALED ITS INCOM E AND HENCE NO PENALTY CAN BE IMPOSED. THE ASSESSING OFF ICER HOWEVER REJECTED THE EXPLANATION OF THE ASSESSEE AN D PASSED AN ORDER UNDER SECTION 158BFA(2) OF THE ACT IMPOSING PENALTY OF RS.1,27,84,457/-. HAVING FAILED BEFORE THE CIT (A), THE ASSESSEE IS NOW IN APPEAL B EFORE US. IT(SS)A NO.28/H/2011 BAGGA DISTILLERIES HYD. =============================== 9 6. THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE INVITED OUR ATTENTION TO PAGE-86 OF THE P APER BOOK AND SUBMITTED THAT THE ENTIRE ASSESSMENT HAS B EEN MADE AND UNDISCLOSED INCOME HAS BEEN DETERMINED SOL ELY ON THE BASIS OF THE COST SHEET SEIZED DURING THE CO URSE OF SEARCH OPERATION. THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT THE COST SHEET WHICH IS UNDATED AND UNSIGNED AT BEST CAN BE AN ESTIMATE OF THE COST OF ONE CASE OF 180 ML IMFL ONLY. IT HAS NEITHER ANY RELE VANCE NOR NEXUS TO THE ACTUAL COST OF BOTTLES OR PERCENTA GE OF BREAKAGE. HE SUBMITTED THAT RIGHT FROM THE ASSESSM ENT STAGE, ADDITIONS HAVE BEEN MADE ON PURELY ESTIMATE BASIS. IN CASE OF BREAKAGE OF BOTTLES WHILE THE AS SESSEE SHOWN AT 19%, THE ASSESSING OFFICER BY RELYING UPON THE COST SHEET, ADOPTED THE SAME AT 6 PER CENT. THE IT AT IN ITS ORDER PASSED IN QUANTUM APPEAL ESTIMATED THE BREAKAGE AT 15%. SIMILARLY, REGARDING THE COST OF BOTTLES, THE ASSESSEE HAS SHOWN AT RS.1.90 PER BOTTLE. THE ASSESSING OFFICER ESTIMATED THE COST AT RS.1.50 PER BOTTLE AND THE ITAT ESTIMATED THE COST AT RS.1.80 PER BOTT LE. THE LEARNED AR SUBMITTED WHEN THE SEIZED MATERIALS DO NOT CONCLUSIVELY PROVE OF ANY UNDISCLOSED INCOME OR CONCEALMENT OF INCOME, PENALTY CANNOT BE IMPOSED UN DER SECTION 158 BFA(2) OF THE ACT. HE FURTHER SUBMITTE D THAT THE UNDISCLOSED INCOME HAVING BEEN DETERMINED PUREL Y ON ESTIMATE BASIS, NO PENALTY CAN BE IMPOSED. IN THIS REGARD, HE PLACED RELIANCE UPON THE ORDER PASSED BY THE ITAT, JAIPUR BENCH IN THE CASE OF ACIT VS. SHANTI K UMAR CHABARA REPORTED IN (2009) 121 TTJ (JP) 985. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT ON LY BECAUSE AN UNDISCLOSED INCOME HAS BEEN DETERMINED, IT(SS)A NO.28/H/2011 BAGGA DISTILLERIES HYD. =============================== 10 PENALTY UNDER SECTION 158BF(2) CANNOT BE IMPOSED AUTOMATICALLY. IN SUPPORT OF SUCH CONTENTION, THE LEARNED AR OF THE ASSESSEE RELIED ON THE FOLLOWING TWO DECI SIONS:- I) CIT VS.JOSHI (315 ITR 172) (RAJASTHAN) II) CIT VS. DODSAL LIMITED (312 ITR 112) (BOM) 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, WHILE SUPPORTING THE ORDER OF THE C IT (A) SUBMITS THAT ONCE AN UNDISCLOSED INCOME IS DETERMINED, IMPOSITION OF PENALTY IS MANDATORY. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND GONE THROUGH THE DOCUMENTS FILED BEFORE US BY WAY OF PAPER BOOK. A PERUSAL OF THE BLOCK ASSESSMENT ORDER CLEARLY REVEALS THAT THE ASSESSING OFFICER HAS PUT MUCH EMPHASIS ON THE COST SHEET SEIZED AT T HE TIME OF SEARCH WHICH IS AVAILABLE AT PAGE-86 OF THE PAPER BOOK. WE FIND FORCE IN THE CONTENTION OF THE LEAR NED AR OF THE ASSESSEE THAT THE ENTIRE ASSESSMENT HAS BEEN MADE SOLELY ON THE BASIS OF THE FIGURES MENTIONED I N COST SHEET. IT IS A FACT THAT THE ASSESSEE HAS MAINTAIN ED BOOKS OF ACCOUNTS IN REGULAR COURSE OF BUSINESS AND ALL I TS PURCHASES AND SALES HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNTS AND SUPPORTED BY INVOICES. THE ITAT WHILE DECIDING THE QUANTUM APPEAL IN PARA-16 OF ITS ORDER HAS CATEGORICALLY OBSERVED THAT THE ASSESSING OFFICER W ITHOUT CONDUCTING NECESSARY ENQUIRIES OR WITHOUT BRINGING FULL AND PROPER FACTS ON RECORD HAS ADOPTED THE FIGURE O F 6% SO FAR AS THE CLAIM OF BREAKAGE IS CONCERNED. THER EFORE, THE ITAT ESTIMATED THE FIGURE AT 15%. SIMILARLY, W HILE IT(SS)A NO.28/H/2011 BAGGA DISTILLERIES HYD. =============================== 11 DEALING WITH THE ADDITION MADE BY THE ASSESSING OFF ICER ON ALLEGED INFLATED PURCHASES OF BOTTLES BY PAYING HIG HER RATES TO ITS CONNECTED CONCERNS, THE ITAT IN PARA-2 2 OF ITS ORDER HAS GIVEN A CATEGORICAL FINDING THAT THE ASSE SSING OFFICER HAS NOT BROUGHT ANY CONCRETE EVIDENCE TO PR OVE THAT THE PURCHASES HAVE BEEN INFLATED. THE ITAT HA S FURTHER GIVEN A FINDING THAT THE ASSESSING OFFICER HAS NOT FOUND ANY FAULT WITH THE BOOKS OF ACCOUNTS OR PURCH ASE VOUCHERS. THEREFORE, NEITHER BOOKS OF ACCOUNTS NOR THE BOOK RESULTS HAVE BEEN REJECTED BY THE ASSESSING OF FICER. CONSIDERING THESE FACTORS, THE ITAT DIRECTED THE AS SESSING OFFICER TO ADOPT RS.1.80 PER BOTTLE AND CALCULATE T HE DISALLOWANCE ACCORDINGLY. FROM THE AFORESAID FACTS ARRIVED AT BY THE ITAT IN THE QUANTUM APPEAL PROCEEDINGS, ONE INESCAPABLE CONCLUSION WHICH ARISE S IS THAT NEITHER THE ASSESSING OFFICER NOR THE CIT (A) OR THE ITAT COULD WITH ANY DEGREE OF CERTAINTY COME TO A F INDING ABOUT THE ACTUAL PERCENTAGE OR THE COST OF THE BOTT LES. THEREFORE, ESTIMATION WAS MADE TO ARRIVE AT A REASO NABLE FIGURE. IN THE AFORESAID FACTUAL SITUATION, WE FIN D FORCE IN THE CONTENTIONS OF THE LEARNED AUTHORIZED REPRESENT ATIVE OF THE ASSESSEE THAT PENALTY CANNOT BE IMPOSED UND ER SECTION 158BFA(2) OF THE ACT WHEN UNDISCLOSED INCOM E HAD BEEN DETERMINED PURELY ON ESTIMATE BASIS. THIS VIEW IS ALSO SUPPORTED BY THE ORDER OF THE ITAT, JAIPUR BENCH, JAIPUR IN THE CASE OF ACIT VS. SHANTI KUMAR CHABARA REPORTED IN 121 TTJ 985. 9. A READING OF SECTION 158BFA(2) MAKES IT CLEAR TH AT IMPOSITION OF PENALTY UNDER THIS PROVISION IS NOT MANDATORY IN EACH AND EVERY CASE WHERE UNDISCLOSED IT(SS)A NO.28/H/2011 BAGGA DISTILLERIES HYD. =============================== 12 INCOME HAS BEEN DETERMINED. THIS PROVISION ALLOWS THE ASSESSING OFFICER TO USE HIS DISCRETION EITHER TO I MPOSE OR NOT IMPOSE PENALTY AFTER TAKING INTO CONSIDERATION THE EXPLANATION OFFERED BY THE ASSESSEE. DETERMINATION OF UNDISCLOSED INCOME WILL NOT AUTOMATICALLY RESULT IN IMPOSITION OF PENALTY UNDER SECTION 158BFA (2) OF T HE ACT. THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. SATYENDRAKUMAR DOSI (315 ITR 172) AND HONBLE BOMBA Y HIGH COURT IN THE CASE OF CIT VS. DODSAL LIMITED (3 12 ITR 112) (BOM) HAVE ALSO DECIDED THE LAW AS SUCH. THEREFORE, CONSIDERING THE FACT THAT THE UNDISCLOSE D INCOME HAS BEEN DETERMINED PURELY ON ESTIMATE BASIS AND KEEPING IN MIND THE ORDER PASSED BY THE JAIPUR BENC H OF ITAT, AND THE LAW LAID DOWN BY THE BOMBAY HIGH COUR T AND RAJASTHAN HIGH COURTS DISCUSSED ABOVE, WE ARE O F THE CONSIDERED OPINION THAT NO PENALTY CAN BE IMPOSED U NDER SECTION 158BFA(2) OF THE INCOME-TAX ACT, 1961 AGAIN ST THE APPELLANT. IN VIEW OF THE ABOVE, WE DELETE THE PENALTY IMPOSED AND ALLOW THE CLAIM OF THE ASSESSEE . 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 14 -03-2012. SD/- SD/- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER SD/- (SAKTIJIT DEY) JUDICIAL MEMBER DATED THE 14 TH MARCH, 2012. IT(SS)A NO.28/H/2011 BAGGA DISTILLERIES HYD. =============================== 13 COPY FORWARDED TO: 1. C/O SRI S. RAMA RAO, ADVOCATE, 3-6-643, SHRIYAS ELEGANCE, FLAT NO.102, STREET NO. 9, HIMAYATNAGAR, HYDERABAD. 2. DCIT, CENTRAL CIRCLE-1, HYDERABAD. 3. CIT (A)-II, HYDERABAD. 4. THE CIT CONCERNED, HYDERABAD 5. THE DR, ITAT, HYDERABAD JMR*