Ronak Ceramics Industries Ltd., Mehsana V. The ACIT., Cent.Circle-1(4), Ahmedabad

ITSSA 92/AHD/2007

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8100 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 28 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-05-2012
• Assessment Year: misc
• Appeal Filed On: 18-05-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D P GUPTA
• Assessee Lawyers: G C PIPARA
• Keywords: Business income; Rectification of order; Loose papers; Opportunity of being heard; Question of law; Reasonable cause; Bad and doubtful debts
• Section: 43B; 273B; 37; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.(SS)A. NO.73 & 92 / AHD/2007 (BLOCK PERIOD FORM 1.4.1990 TO 9.1.2001) RONAK CERAMICS INDUSTRIES LTD., NR. SHOBHASAN RAILWAY CROSSING, VIJAPUR ROAD, SHOBHASAN, MEHSANA VS. ACIT, CC-1(4), AHMEDABAD PAN/GIR NO. : AAACR7297P (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI G C PIPARA, AR RESPONDENT BY: SHRI D P GUPTA, CIT DR DATE OF HEARING: 17.05.2012 DATE OF PRONOUNCEMENT: 15.06.2012 O R D E R PER SHRI A. K. GARODIA, AM:- BOTH THESE APPEALS ARE FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF LD. CIT(A) III, AHME DABAD DATED 22.02.2007 IN RESPECT OF PENALTY PROCEEDINGS AND OF CIT(A) I, AHMEDABAD DATED 30.03.2007 IN RESPECT OF QUANTUM PR OCEEDINGS AGAINST THE ORDER PASSED BY THE A.O. U/S 154 ON 6.12.2006 F OR THE SAME BLOCK PERIOD (01.04.1990 TO 09.01.2001). BOTH THESE APPE ALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST, WE TAKE UP THE QUANTUM APPEAL IN IT(SS)A NO.92/AHD/2007. 2.1 GROUND NO.1 IS GENERAL. I.T.A.NO. 73,92 /AHD/2007 2 2.2 GROUND NO.2 IS AS UNDER: 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN REJECTING APPLICATION FOR RECTIFICATION OF MISTAKE APPARENT FROM RECORD AMOUNTING TO RS.25,11,325/- ON ACCOUNT OF DI FFERENCE BETWEEN RS.68,80,250/- AND RS.43,68,925/- BEING THE MISTAKE IN SALES FOR 2 MONTHS. IN VIEW OF THE FACTS AND SUBMIS SIONS FILED, THE LEARNED CIT(A) OUGHT TO HAVE DIRECTED THE A.O. TO R ECTIFY THE ORDER GIVING EFFECT TO THE ITAT'S ORDER TO THE EXTENT OF RS.25,11,625/- AS CLAIMED BY THE APPELLANT AND REDUCED THE REVISED TO TAL INCOME BY THE SAID AMOUNT. 2.2.1 BRIEF FACTS OF THE CASE ARE THAT IN THE COURS E OF FIRST ROUND, SOME RELIEF WAS ALLOWED BY THE TRIBUNAL AND APPEAL EFFEC T ORDER WAS PASSED BY THE A.O. AND AGAINST THIS APPEAL EFFECT ORDER PASSE D BY THE A.O., THE ASSESSEE MOVED AN APPLICATION DATED 27.09.2006 POIN TING OUT CERTAIN MISTAKES IN THE APPEAL EFFECT ORDER PASSED BY THE A .O. AGAINST 4 MISTAKES POINTED OUT BY THE ASSESSEE, ONE MISTAKE W AS RECTIFIED BY THE A.O. AND REGARDING OTHER THREE MISTAKES POINTED OUT BY THE ASSESSEE, IN SUCH APPLICATION U/S 154, IT WAS HELD BY THE A.O. T HAT THERE IS NO SUCH MISTAKE IN THE APPEAL EFFECT ORDER PASSED BY HIM. AGAINST THIS ORDER OF THE A.O. U/S 154, REJECTING HIS REQUEST OF RECTIFIC ATION OF THREE ALLEGED MISTAKES, THE ASSESSEE MOVED AN APPEAL BEFORE LD. C IT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 2.2.2 THIS GROUND NO.2 IS REGARDING ONE SUCH MISTAK E ALLEGED BY THE ASSESSEE IN THE APPLICATION U/S 154 BEFORE THE A.O. WHICH WAS REJECTED BY THE A.O. AS PER THE TRIBUNAL ORDER IN IT(SS)A NO.2 96 AND 315/AHD/2003 DATED 03.03.2005, COPY OF WHICH IS AVA ILABLE ON PAGE 6-22 OF THE PAPER BOOK, IT WAS HELD BY THE TRIBUNAL THAT THE A.O. IS DIRECTED TO ESTIMATE THE SALE FOR THE PERIOD 01.01.2000 TO 28.0 2.2000 BECAUSE IT IS NOTED BY THE TRIBUNAL THAT THE A.O. HAS RECORDED TH E FINDING THAT THE ACCOUNTING COLLECTION BOOK FOR THE PERIOD JAN-FEB, 2000 WERE FOUND AND I.T.A.NO. 73,92 /AHD/2007 3 SEIZED AT THE TIME OF SEARCH WHICH IS MARKED AS A-1 AND, THEREFORE, UNACCOUNTED SALES FOR THESE TWO MONTHS ARE TO BE ES TIMATED BUT NOT BEYOND THAT. THE SAME WAS ESTIMATED BY THE A.O. ON THIS BASIS THAT AS PER THE ORIGINAL ASSESSMENT ORDER, SALES FOR THREE MONT HS FORM 01.01.2000 TO 31.03.2000 WAS ESTIMATED ON THE BASIS OF SALE FOR T HE PERIOD FROM 01.07.1999 TO 31.12.1999. FOR THOSE SIX MONTHS, TH E SALE WAS FOUND AT RS.2,62,13,554/- AND, THEREFORE, FOR THE THREE MONT HS FROM 01.07.2000 TO 31.3.2000, SALE WAS ESTIMATED TO THE EXTENT OF 50% OF SUCH SALE AT RS.1,31,06,777/- IN THE ORIGINAL ASSESSMENT ORDER. WHILE PASSING APPEAL EFFECT ORDER, AS PER THE DIRECTION OF THE TRIBUNAL, SALE OF ONLY TWO MONTHS I.E. JAN FEB 2000 WAS ESTIMATED ON THE BASIS OF T HE SAME DATA RELATING TO THE PERIOD OF SIX MONTHS I.E. FORM 01.07.1999 TO 31 .12.1999. WHEN THE ASSESSEE MOVED RECTIFICATION PETITION, THE SAME WAS REJECTED BY THE A.O. 2.2.3 IN THE COURSE OF HEARING BEFORE US, IT WAS SU BMITTED BY THE LD. A.R. THAT IT IS NOTED BY THE A.O. ON PAGE 6 OF THE ORIGI NAL ASSESSMENT ORDER DATED 31.01.2003 THAT THE TOTAL SALES AS PER COLLEC TION BOOK A-1 FOR THE PERIOD DEC, 1999 TO 26.02.2000 WAS RS.1,22,15,322/- . HE ALSO SUBMITTED THAT AS PER PAGE 11 OF THE PAPER BOOK, THE SALE FOR THE MONTH OF DEC. 1999 WAS FOUND BY THE A.O. AT RS.51,07,557/- WHICH IS PA RT OF SALE OF 6 MONTHS FORM 01.07.1999 TO 31.12.1999 OF RS.2,62,13,554/- A ND THIS SALE FIGURE OF 6 MONTHS WAS TAKEN AS THE BASIS BY THE A.O. HE SUB MITTED THAT WHEN ACTUAL SALE FIGURE FOR THE PERIOD 01.01.2000 TO 26. 02.2000 ARE AVAILABLE AS PER PAGE 6 OF THE ASSESSMENT ORDER, THERE IS NO REQ UIREMENT OF ESTIMATING SALES FOR THE PERIOD UP TO 26.02.2000 AND ONLY THE SALE OF THREE DAYS OF FEB 2000 I.E. 27.02.2000 TO 29.02.2000 IS REQUIRED TO BE ESTIMATED AND FROM THESE FIGURES OF SALE FROM DEC.1999 TO 26.02.2 000, THE SALE OF DEC 1999 SHOULD BE REDUCED AND IT WILL GIVE THE FIGURE OF SALE FROM I.T.A.NO. 73,92 /AHD/2007 4 01.01.2000 TO 26.02.2000 AND ON THE BASIS OF SUCH S ALES, THE SALE FOR LAST THREE DAYS OF FEB. 2000 CAN BE ESTIMATED. 2.2.4 LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 2.2.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT AS PER THE TRIBUNAL ORDER IN THE FIRST ROUND, IT WAS DIRECTED BY THE TRIBUNAL THAT THE SALES OF TWO MONTHS I.E. 01.01.20 00 TO 29.02.2000 SHOULD BE ESTIMATED BUT THERE IS NO SUCH DIRECTION BY THE TRIBUNAL THAT THE SAME HAS TO BE ESTIMATED ON THE BASIS OF SALE FOR S IX MONTHS I.E. FROM 01.07.1999 TO 31.12.1999. THEREFORE, IN OUR CONSID ERED OPINION, SUCH ESTIMATION HAS TO BE MADE AS CLOSE AS POSSIBLE TO T HE ACTUAL FIGURE. WHEN THE A.O. HIMSELF NOTED THE SALE FIGURE FROM 01.12.1 999 TO 26.02.2000 ON PAGE 6 OF THE ASSESSMENT ORDER AND THE SALE FIGURE FOR DEC 1999 IS SEPARATELY AVAILABLE ON PAGE 11 OF THE PAPER BOOK W HICH WAS ALSO CONSIDERED BY THE A.O., THEE IS NO REQUIREMENT TO E STIMATE THE SALE FROM 01.01.2000 TO 26.02.2000 BECAUSE THE ACTUAL SALE FI GURE FOR THIS PERIOD CAN BE EASILY WORKED OUT BY REDUCING THE SALE FIGUR E OF DE 1999 FORM THE SALE FIGURE OF 01.12.1999 TO 26.02.2000. THE SAME IS WORKED OUT AS UNDER: (A) SALE FIGURE FROM 01.12.1999 TO 26.02.2000 AS NOTED BY A.O. ON PAGE 6 OF ASSESSMENT ORDER RS.1,22,15,322/- (B) LESS SALE FIGURE OF DEC 1999 AS PER PAGE 11 BEI NG PART OF TOTAL SALE FROM 01.02.99 TO 31.12.99 OF RS.2,62,13,554/- OF DEC.1999 ALONE RS.51,07,557/- (C) SALE FOR THE PERIOD 01.01.2000 TO 26.02.2000 R S.71,07,765/- 2.2.6 NOW, THE ABOVE FIGURE OF RS.71,07,765/- IS TH E SALE OF 57 DAYS FORM 01.01.2000 TO 26.02.2000 AND HENCE, SALE OF REMAINI NG THREE DAYS OF FEB 2000 CAN BE WORKED OUT ON THE BASIS OF SALE FIGURE OF 57 DAYS WHICH IS I.T.A.NO. 73,92 /AHD/2007 5 WORKED OUT TO RS.37,093/- AND HENCE, THE TOTAL SALE FOR THE PERIOD FORM 01.01.2000 TO 29.02.2000 COMES AT RS.74,81,858/- WH EREAS, THE SALE OF THREE MONTHS ESTIMATED BY THE A.O. (JAN-MAR 2000 IN THE ORIGINAL ASSESSMENT ORDER IS AT RS.1,31,06,777/- AND HENCE, THE ASSESSEE IS ELIGIBLE FOR THE RELIEF OF RS.56,24,919/- AS AGAINST RELIEF ALLOWED BY THE A.O. IN THE APPEAL EFFECT ORDER OF RS.43,68,925/- AND RELIEF CL AIMED BY THE ASSESSEE IN 154 PETITION AS WELL AS IN THE PRESENT GROUND BEFOR E US OF RS.68,80,250/-. WE DIRECT THE A.O. TO ADOPT THE ESTIMATED SALE FIGU RE OF TWO MONTHS FROM 01.01.2000 TO 29.02.2000 AT RS.74,81,858/- AND IN T HIS MANNER, ASSESSEE GETS RELIEF OF RS.12,55,994/- OVER AND ABOVE THE RE LIEF ALLOWED BY THE A.O. IN THE APPEAL EFFECT ORDER PASSED BY HIM AS AG AINST RELIEF CLAIMED BY THE ASSESSEE IN GROUND NO.2 FOR RS.25,11,325/-. TH IS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 2.3 GROUND NO.3 IS AS UNDER: 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN REJECTING APPLICATION FOR RECTIFICATION OF MISTAKE APPARENT FROM RECORD AMOUNTING TO RS.73,64,574/- BEING MISTAKE IN AMOUNT OF EXPENDITURE ALLOWED-AT RS.47,87,106/- AS AGAINST RS .1,21,51,680/-. IN VIEW OF THE FACTS AND SUBMISSIONS FILED, THE LEA RNED CIT(A) OUGHT TO HAVE DIRECTED THE A.O. TO RECTIFY THE ORDE R GIVING EFFECT TO THE ITAT'S ORDER TO THE EXTENT OF RS.73,64,574/- AS CLAIMED BY THE APPELLANT AND REDUCED THE REVISED TOTAL INCOME BY T HE SAID AMOUNT. 2.3.1 BRIEF FACTS OF THE CASE ARE THAT IN THE ORIGI NAL TRIBUNAL ORDER, IT WAS CONTENDED BEFORE THE TRIBUNAL BY THE ASSESSEE THAT THE DEDUCTION ALLOWED BY THE A.O. WITH REGARD TO EXCESS EXPENDITURE DEBIT ED IN THE RECEIPT AND PAYMENT ACCOUNT AS COMPARED TO THE EXPENSES DEBITED IN THE P & L ACCOUNT WAS SHORT ALLOWED BY THE A.O. TO THE EXTENT OF RS.1,21,51,680/-. ON THIS ISSUE, IT WAS HELD BY THE TRIBUNAL THAT THE ASSESSEE HAS GIVEN A CHART POINTING OUT THE LESS DEDUCTION HAVING BEEN A LLOWED BY THE A.O. BUT I.T.A.NO. 73,92 /AHD/2007 6 IT REQUIRES VERIFICATION AND THE TRIBUNAL DIRECTED THE A.O. TO VERIFY THE ASSESSEES CHART AND ALLOW THE DEDUCING OF EXPENDIT URE WHICH IS DEBITED IN ANNEXURE A-15 WHICH IS IN EXCESS OF THE EXPENDIT URE DEBITED IN THE P & L ACCOUNT. IN THE ORDER PASSED BY THE A.O. U/S 154, IT IS NOTED BY THE A.O. THAT IT WAS CLAIMED BY THE ASSESSEE BEFORE HIM IN HIS APPLICATION U/S 154 THAT THERE IS A MISTAKE IN THE AMOUNT OF EXPEND ITURE ALLOWED AT RS.47,87,106 AS AGAINST RS.1,21,51,680/- I.E. SHORT ALLOWED BY RS.73,64,574/-. THE A.O. HAS HELD THAT THIS CONTEN TION OF THE ASSESSEE IS NOT CORRECT BECAUSE IN THE ORIGINAL ASSESSMENT ORDE R AT PAGE 23, THE ASSESSEE HAS CONFIRMED THAT THIS PAYMENT TO THE FIN ANCIAL INSTITUTION, BANK, GUJARAT ELECTRICITY BOARD, GAIL AND PF PAYMENTS HAV E BEEN RECORDED IN THE BOOKS OF ACCOUNT AND THE SAME HAVE BEEN CLAIMED IN THE RETURN OF INCOME FILED. IN THE APPEAL EFFECT ORDER PASSED BY THE A.O. ON 23.08.2005, IT IS STATED BY THE A.O. IN ANNEXURE A- THERETO THAT DIFFERENCE IN GUJARAT ELECTRICITY BOARD AND PF IS NOT CONSIDER ED AS IN THE ASSESSMENT ORDER, IT IS CLEARLY MENTIONED THAT ALL THESE EXPEN SES HAVE BEEN RECORDED AND BOOKED AND CLAIMED IN THE RETURN OF INCOME AND EVEN IF IT IS CONSIDERED, DIFFERENCE WOULD BE RS.4,37,542/- WHICH IS VERY NOMINAL AS COMPARED TO THE TOTAL EXPENDITURE INCURRED ON THIS ACCOUNT AND HENCE, IGNORED. IN THE CHART GIVEN BY THE ASSESSEE BEFORE THE TRIBUNAL IN THE FIRST ROUND, WHICH IS AVAILABLE ON PAGE 54 OF THE PAPER B OOK, THE EXPENDITURE IN RESPECT OF GAS BURNING AND GEB BILL AS PER RECEI PT AND PAYMENT ACCOUNT WAS WORKED OUT AT RS.2,26,27,570/- WHEREAS THE SAME EXPENSES AS PER THE BALANCE SHEET HAVE BEEN NOTED AT RS.1,69 ,79,150/- AND THE DIFFERENCE HAS BEEN WORKED OUT AT RS.56,48,420/-. WITHOUT POINTING OUT ANY MISTAKE IN THESE FIGURES AS PER THE CHART WHICH WAS AVAILABLE BEFORE THE TRIBUNAL ALSO IN THE FIRST ROUND, THE A.O. HAS NOTED IN THE APPEAL EFFECT I.T.A.NO. 73,92 /AHD/2007 7 ORDER THAT NO DIFFERENCE IS ALLOWABLE ON ACCOUNT OF GEB, GAS BURNING AND PF BECAUSE IT WAS STATED BY THE A.O. IN THE ASSESSM ENT ORDER THAT THESE EXPENSE HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT AND UNLESS SOME MISTAKE IS POINTED OUT IN THESE TWO FIGURES AS PER THE CHART, IT CANTO BE SAID THAT ALL THESE EXPENSES WERE CLAIMED AND ALLOW ED AS PER THE ORIGINAL BOOKS OF ACCOUNT. SIMILARLY, IN RESPECT OF THE FAC TORY EXPENSES, THE ASSESSEE HAS WORKED OUT DIFFERENCE OF RS.14,56,206/ - AS PER THE CHART AVAILABLE ON PAGE 54 OF THE PAPER BOOK BUT THE A.O. HAS ALLOWED DEDUCTION OF RS.4,63,927/- AND NO BASIS IS GIVEN BY HIM AS TO HOW, HE HAS WORKED OUT THIS AMOUNT. THE A.O. REJECTED THE ASSE SSEES CONTENTION IN SECTION 154 ORDER PASSED BY HIM AND AGAINST THE SAM E, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 2.3.2 IT IS SUBMITTED BY THE LD. A.R. THAT SINCE NO BASIS IS GIVEN BY THE A.O. IN THE APPEAL EFFECT ORDER PASSED BY HIM IN RE SPECT OF REJECTION OF CLAIM OF THE ASSESSEE ABOUT EXPENSES CLAIMED BY THE ASSESSEE OF RS.1,21,51,680/-, AGAINST WHICH THE A.O. ALLOWED ON LY RS.47,87,106/-, THE MATTER MAY BE RESTORED BACK TO THE FILE OF THE A.O. FOR DECIDING THIS ASPECT AFRESH AND TO PASS SPEAKING ORDER. 2.3.3 LD. D.R. OF THE REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 2.3.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDER OF AUTHORITI ES BELOW. WE FIND THAT THE TRIBUNAL IN THE FIRST ROUND NOTED THAT CHA RT SUBMITTED BY THE ASSESSEE AS PER WHICH IT WAS CLAIMED BY THE ASSESSE E THAT THE A.O. HAS NOT ALLOWED IN FULL THE DEDUCTION OF RS.1,21,51,680/- B EING THE DIFFERENCE OF EXPENDITURE CLAIMED IN THE RECEIPT AND PAYMENT ACCO UNT AND IN THE P & L ACCOUNT. THE TRIBUNAL HAS RESTORED BACK THE MATTER TO THE FILE OF THE A.O. I.T.A.NO. 73,92 /AHD/2007 8 FOR EXAMINATION OF THIS CONTENTION OF THE ASSESSEE AND TO DECIDE THE MATTER AFRESH. THE A.O. HAS ALLOWED DEDUCTION OF RS.47,87 ,106/- BUT HE HAS NOT GIVEN ANY BASIS FOR WORKING OUT OF THIS AMOUNT AS A GAINST CLAIM OF THE ASSESSEE OF RS.1,21,51,680/-. WE FEEL THAT IN THE INTEREST OF JUSTICE, THIS MATTER SHOULD GO BACK TO THE FILE OF THE A.O. FOR A FRESH DECISION. THE A.O. SHOULD EXAMINE THE RECEIPT AND PAYMENT A/C OF THE ASSESSEE AND EVEN IF HE IS NOT SATISFIED ABOUT THE CLAIM OF THE ASSESSEE, HE HAS TO GIVE REASONING AND BASIS FOR REJECTION OF ANY PART OF TH IS CLAIM OF THE ASSESSEE, BY WAY OF PASSING SPEAKING AND REASONED ORDER. NEE DLESS TO SAY, HE SHOULD ALLOW ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 2.4 GROUND NO.4 IS AS UNDER: 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN REJECTING APPLICATION FOR RECTIFICATION OF MISTAKE APPARENT FROM RECORD AMOUNTING TO RS.57,55,817/- BEING MISTAKE IN NOT GRANTING DEDUCTION OF SALES TAX OF RS.57,55,817/-. IN VIEW O F THE FACTS AND SUBMISSIONS FILED, THE LEARNED CIT(A) OUGHT TO HAVE DIRECTED THE A.O. TO RECTIFY THE ORDER GIVING EFFECT TO THE ITAT 'S ORDER TO THE EXTENT OF RS.57,55,817/- AS CLAIMED BY THE APPELLAN T AND REDUCED THE REVISED TOTAL INCOME BY THE SAID AMOUNT. 2.4.1 BRIEF FACTS OF THE CASE ARE THAT IT WAS CLAIM ED BY THE ASSESSEE BEFORE THE TRIBUNAL IN THE FIRST ROUND THAT FOR THE PURPOS E OF COMPARING SALE RECORDED IN THE BOOKS OF ACCOUNT AND THE SALE RECOR DED IN THE RECEIPT AND PAYMENT ACCOUNT, THE A.O. SHOULD HAVE ADDED COLLECT ION OF THE SALES TAX ALSO IN THE SALE AS PER BOOK AS HE HAS DONE IN RESP ECT OF COLLECTION OF EXCISE DUTY. THE TRIBUNAL DIRECTED THE A.O. TO VER IFY AND IF IT IS FOUND THAT THERE IS ANY SEPARATE COLLECTION OF SALES TAX IN THE BOOKS, HE SHOULD GIVE SIMILAR TREATMENT TO THE SAME AS WAS GIVEN IN RESPECT OF EXCISE DUTY COLLECTION. AS PER THE APPEAL EFFECT ORDER PASSED BY THE A.O., HE HAS I.T.A.NO. 73,92 /AHD/2007 9 REJECTED THE CLAIM OF THE ASSESSEE BY OBSERVING THA T THERE IS NO SEPARATE COLLECTION OF SALES TAX IN THE BOOKS OF ACCOUNT. I N THE APPLICATION MOVED BY THE ASSESSEE BEFORE THE A.O. U/S 154, IT WAS CLA IMED BY THE ASSESSEE THATS THERE IS COLLECTION OF SALES TAX AS PER BOOK S OF RS.57,55,817/- AND, THEREFORE, TO THIS EXTENT, THERE IS MISTAKE IN THE APPEAL EFFECT ORDER PASSED BY THE A.O.. IT WAS HELD BY THE A.O. IN THE ORDER PASSED BY HIM U/S 154 THAT THE ASSESSEE HAS NOT FURNISHED PROOF OF SALES TAX PAID TO THE SALES TAX AUTHORITIES BEFORE FILLING THE RETURN OF INCOME WHI CH IS NECESSARY AS PER SECTION 43B OF THE INCOME TAX ACT, 1961 AND, THEREF ORE, THERE IS NO MERIT IN THE CLAIM OF THE ASSESSEE AND HENCE, REJECTED. THE ASSESSEE CARRIED THE MATER IN APPEAL BEFORE LD. CIT(A) ON THIS ISSUE ALS O BUT WITHOUT SUCCESS AND NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE U S. 2.4.2 IT WAS SUBMITTED BY THE LD. A.R. BEFORE US TH AT AS PER THE COPY OF AUDITED ACCOUNTS SUBMITTED IN THE PAPER BOOK FOR FI NANCIAL YEAR 1993-94 TO THE FINANCIAL YEAR 1999-2000, THERE IS OUTSTANDI NG SALES TAX AS ON 31.03.1996 OF RS.10,11,306/- AS PER THE DETAILS OF UNPAID COPY OF BALANCE SHEET AVAILABLE ON PAGE 131 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT THE LOSS AS PER P & L ACCOUNT FOR THIS YEAR WAS RS. 24,96,906/- BUT AS PER THE RETURN OF INCOME FILED BY THE ASSESSEE FOR THIS YEAR AVAILABLE ON PAGE 200 OF THE PAPER BOOK, THE LOSS CLAIMED BY THE ASSE SSEE WAS ONLY RS.1,35,570/- WHICH WAS ACCEPTED FOR THIS YEAR AVAI LABLE ON PAGE 201 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT LOSS AS PER INTIMATION BOOKS WAS REDUCED BY THIS AMOUNT OF UNPAID SALES TAX BY W AY OF MAKING DISALLOWANCE U/S 43B AND, THEREFORE, FOR THE PURPOS E OF COMPUTATION OF BOOK SALES, THE SALES TAX COLLECTION DURING THAT YE AR HAS TO BE ADDED TO THE SALE AS PER BOOKS AND, THEREFORE, UNACCOUNTED SALE WORKED OUT BY THE A.O. WILL GO DOWN. HE FURTHER SUBMITTED THAT THE ASSESS MENT FOR THE I.T.A.NO. 73,92 /AHD/2007 10 ASSESSMENT YEAR 1997-98 WAS COMPLETED BY THE A.O. U /S 143(3), COPY OF WHICH IS AVAILABLE ON PAGE 205 -208 OF THE PAPER BO OK. HE SUBMITTED THAT AS PER THIS ASSESSMENT ORDER, A.O. HAS ALLOWED BENE FIT TO THE ASSESSEE OF RS.7,24,521/- BECAUSE THE ASSESSEE HAS BEEN ALLOWED THE BENEFIT OF SALES TAX DEFERMENT AND, THEREFORE, NO DISALLOWANCE IS CA LLED FOR U/S 43B. HE FURTHER SUBMITTED THAT WORKING OF THIS AMOUNT OF RS .7,24,521/- IS AVAILABLE ON PAGE 204 OF THE PAPER BOOK WHERE IT IS NOTED THAT THE TOTAL SALES TAX UNPAID UP TO 31.03.1997 WAS RS.17,36,202/ - AND UNPAID SALES TAX UP TO 31.03.1996 DISALLOWED IN THE RELEVANT EAR LIER YEAR WAS RS.10,11,681/- AND, THEREFORE, UNPAID SALES TAX REL ATING TO ASSESSMENT YEAR 1997-98 WAS WORKED OUT AT RS.7,24,521/- AND THE SAM E WAS ADDED BY THE ASSESSEE IN THE INCOME AS PER COMPUTATION OF INCOME AVAILABLE ON PAGE 203 OF THE PAPER BOOK BUT THE A.O. HAS ALLOWED DEDU CTION ON THIS ACCOUNT ON THE BASIS THAT SALES TAX DEFERMENT IS ALLOWED TO THE ASSESSEE. HE SUBMITTED THAT IN THE LIGHT OF THESE FACTS ,ASSESSE E HAS ESTABLISHED BOTH THESE ASPECTS THAT THERE IS COLLECTION OF SALES TAX AS PER BOOKS OF ACCOUNT SEPARATELY WITHOUT CREDITING TO THE SALES TAX ACCOU NT AND THE SAME IS CREDITED TO THE LIABILITY ACCOUNT AND NO DISALLOWAN CE IS CALLED FOR U/S 43B ON THE BASIS OF NON PAYMENT OF SALES TAX BECAUSE TH E ASSESSEE HAS BEEN FOUND ELIGIBLE FOR DEFERMENT OF SALES TAX AND HENCE , NO DISALLOWANCE IS CALLED FOR IN RESPECT OF UNPAID SALES TAX AND THE A .O. HIMSELF HAS ALLOWED DEDUCTION TO THE ASSESSEE ON THIS ACCOUNT. HE SUB MITTED THAT ON THIS ISSUE ALSO, THE MATTER MAY BE RESTORED BACK TO THE FILE O F THE A.O. FOR A FRESH DECISION. 2.4.3 LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 2.4.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT AS PER THE COMPUTATION OF INCOME FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR I.T.A.NO. 73,92 /AHD/2007 11 1997-98, AND AS PER THE ASSESSMENT ORDER PASSED BY THE A.O. FOR THIS YEAR U/S 43B AND OTHER DETAILS, IT IS SEEN THAT THERE WA S UNPAID SALES TAX AS ON 31.03.1997 AS PER BOOKS OF ACCOUNT OF RS.17,36,202/ - OUT OF WHICH AN AMOUNT OF RS.10,11,681/- WAS FOR THE PERIOD UP TO 3 1.03.1996 AND THE SALES TAX OUTSTANDING FOR THE FINANCIAL YEAR 1996-9 7 WAS RS.7,24,521/-. IN THE COMPUTATION OF INCOME FOR THE ASSESSMENT YEAR 1 997-98, ADDITION WAS MADE BY THE ASESSEE OF THIS AMOUNT ON THE BASIS OF UNPAID SALES TAX BUT IN THE ORDER PASSED BY THE A.O. U/S 143(3), HE HAS ALL OWED DEDUCTION TO THE ASSESSEE OF THIS AMOUNT OF RS.7,24,521/- ON THIS BA SIS THAT SALES TAX DEFERMENT WAS ALLOWED TO THE ASSESSEE. THIS PROVES BOTH THE POINTS THAT ASSESSEE IS HAVING COLLECTION OF SALES TAX AS PER B OOKS AND THE SAME IS NOT CREDITED TO THE SALES ACCOUNT BUT CREDITED TO LIABI LITY ACCOUNT. IT IS ALSO COMING OUT FROM THE ASSESSMENT ORDER FOR THE ASSESS MENT YEAR 1997-98 THAT THE ASSESSEE HAS BEEN FOUND ELIGIBLE FOR SALES TAX DEFERMENT AND, THEREFORE, NO ADDITION IS CALLED FOR IN RESPECT OF UNPAID SALES TAX AND THE A.O. HIMSELF ALLOWED DEDUCTION ON THIS BASIS IN THA T YEAR IN THE SCRUTINY ASSESSMENT. HENCE, WE FEEL THAT ON THIS ASPECT ALS O, THE A.O. SHOULD EXAMINE THE RECORDS AFRESH TO FIND OUT AS TO HOW MU CH SALES TAX WAS COLLECTED DURING THE BLOCK PERIOD AND CREDITED TO T HE LIABILITY ACCOUNT WITHOUT CREDITING TO THE SALES ACCOUNT AS PER THE B OOKS OF ACCOUNT. HE SHOULD ALSO FIND THE DEFERMENT OF SALES TAX AS PERM ITTED BY THE STATE GOVERNMENT. TO THE EXTENT OF SALES TAX COLLECTED D URING THE BLOCK PERIOD WITHOUT CREDITING THE SALES ACCOUNT, THE AMOUNT SHO ULD BE ADDED BACK IN THE SALES AS PER BOOKS FOR WORKING OUT UNACCOUNTED SALES AS HAS BEEN DIRECTED BY THE TRIBUNAL IN THE ORIGINAL ROUND. SI MILARLY, TO THE EXTENT SALES TAX DEFERMENT HAS BEEN ALLOWED BY THE STATE G OVERNMENT, NO ADDITION IS CALLED FOR U/S 43B ALSO ON ACCOUNT OF U NPAID SALES TAX. THE I.T.A.NO. 73,92 /AHD/2007 12 A.O. SHOULD DECIDE THIS ISSUE BY WAY OF REASONED AN D SPEAKING ORDER AS PER ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 2.5 IN THE RESULT, APPEAL OF THE ASSESSEE STANDS AL LOWED IN TERMS INDICATED ABOVE. 3. NOW, WE TAKE UP THE PENALTY APPEAL IN I.T.(SS)A NO.73/AHD/2007. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN PARTLY CONFIRMING THE PENALTY U/S. 158BFA(2) TO THE EXTENT OF RS.1,96,71,944/- OUT OF TOTAL PENALTY OF RS.2,42,46 ,944/-LEVIED BY THE A.O. IN VIEW OF THE FACTS AND SUBMISSIONS FILED AS WELL AS THE LEGAL POSITION AND MORE PARTICULARLY THE FACT THAT THE ADDITIONS CONFIRMED BEING BASED ON MERE ESTIMATES, THE PENALT Y OF RS.1,96,71,944/- AS SUSTAINED BY THE LEARNED CIT(A) REQUIRES TO BE QUASHED / DELETED. 2. THE LEARNED CIT(A) HAS FURTHER ERRED IN L AW AND ON FACTS IN TREATING THE CONCEALED INCOME AT RS.2,80,22,714/- A S PER ORDER U/S. 154 REVISING ORDER GIVING EFFECT TO ITAT'S ORDER AS AGAINST CORRECT ASSESSED INCOME ON GIVING EFFECT TO ITAT'S ORDER BE ING RS.1,23,90,988/-. IN VIEW OF THE FACT THAT THE APPE LLANT HAVING FILED AN APPEAL AGAINST THE ORDER U/S. 154 OF THE ACT DET ERMINING INCOME AT RS.2,80,22,714/-, THE PENALTY U/S. 158BFA(2) CON FIRMED BY THE CIT(A) TO THE EXTENT OF RS.1,96,71,944/- IS EVEN OT HERWISE WHOLLY UNJUSTIFIED AND BAD IN LAW, PENDING DETERMINATION O F CORRECT AMOUNT OF QUANTUM. 3.1 BRIEF FACTS TILL THE STAGE OF IMPOSITION OF PEN ALTY BY THE A.O. ARE NOTED BY LD. CIT(A) IN PARA 3 & 4 OF HIS IMPUGNED O RDER DATED 22.02.2007 AND FOR THE SAKE OF READY REFERENCE, PAR A 3 & 4 OF THE ORDER OF LD. CIT(A) ARE REPRODUCED BELOW. 3. THE APPELLANT WAS SEARCHED II/S. 132 ON 9/1/2001. THE CONSEQUENT ASSESSMENT WAS FRAMED U/S. 158B C ON 31/1/2003 AT THE UNDISCLOSED INCOME OF RS. 5,1 1,40, 380/-. THE BREAK-UP OF UNDISCLOSED INCOME, IS FROM SUPPRESSIO N OF PRODUCTION AND SALES UP TO 31/3/2000, AT RS.4.5 CRO RE AND FROM I.T.A.NO. 73,92 /AHD/2007 13 ESTIMATED PRODUCTION AND SALES CONSIDERED SUPPRESSE D FOR THE PERIOD 1/4/2000 TO 9/1/2001. THIS ESTIMATED SUPPRE SSION WAS COMPUTED AT RS.60,54,951/- ON A PROPORTIONATE BASIS (AS PER PARA 2.6 OF THE ASSESSMENT ORDER). THE A.O. ALSO HELD MA T STOCK WAS UNEXPLAINED TO THE EXTENT OF RS.20. 37 LAKHS AND SO ALSO, THE INVESTMENT IN SHARES TO THE EXTENT OF RS.75.05 LAKH S. NO SEPARATE ADDITION WAS HOWEVER, MADE FOR THE STOCK/SHARES TO THE TOTAL UNDISCLOSED INCOME, AS THESE WERE CONSIDERED TO BE INVESTMENT OUT OF THE COMPUTED UNDISCLOSED INCOME OF RS.5.11 CRORE S. THE APPEAL AGAINST THE ASSESSMENT ORDER WAS DECIDED BY THE THE N CIT(A)-I, IN HIS ORDER DTD. 26/5/2003 IN WHICH ADDITION(S) OF RS .3.21 CRORES WERE DELETED AND THE REVISED UNDISCLOSED INCOME DET ERMINED AFTER CIT(A) ORDER WAS RS.1,89,85,035/-. IN FURTHER APPEA L, THE HON'BLE ITAT\_AHMEDABAD, JN ITA NO. IT(SS)/296/MD/20037~IN~ 7TS ORDER DTD. 3/3/2005 MADE CERTAIN OBSERVATIONS AND D IRECTED THE A.O. TO VERIFY THE DEDUCTION FOR EXPENDITURE/SALES TAX AND EXCISE DUTY. THE A.O. ACCORDINGLY PROVIDED OPPORTUNITY TO THE APPELLANT IN RESPECT OF THE PROPOSED APPEAL EFFECT ORDER, VID E LETTERS DTD. 23/8/2005 AND 12/9/2005 AND THEREAFTER IN THE APPEA L EFFECT ORDER, REVISED THE TOTAL UNDISCLOSED INCOME AT RS. 3,45,11 ,318/- AND ALSO SERVED PENALTY NOTICE DTD. 19/9/2005. 4. IN THE P ENALTY ORDER II/S. I58BFA(2), THE A.O. NOTED THAT THE SEARCH HAD RESUL TED INTO SEIZURE OF DOCUMENTARY EVIDENCE, RELATING TO THE SUPPRESSIO N OF PRODUCTION AND SALES TURNOVER, (B) DISCREPANCIES IN STOCK AND (C) UNDER REPORTING OF INCOME. THE APPELLANT HAS NOT COMPLIED WITH AND /OR FILED SUBMISSIONS IN RESPECT OF THE PENALTY NOTICE/ SHOW CAUSE THE A.O., THEREFORE, LEVIED THE PENALTY OF RS.2,42,26,9 44/- I.E. 100% OF THE TAX PAYABLE ON THE CONCEALED INCOME OF RS.3,45, 11,318/-. 3.2 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE LD. CIT(A). BEFORE LD. CIT(A), IT WAS SUBMITTED BY THE LD. A.R. THAT AFTER PASSING THE APPEAL EFFECT ORDER BY THE A.O., IN THE QUANTUM PROCEEDINGS, ASSESSEE HAS MOVED AN APPLICATION U/S 154 ON 14.09.2005 AND THE SAME WAS DISPOSED OFF BY THE A.O. BY WAY OF ORDER DATED 13.02.2007 AS PER WHICH THE FINAL ASSESSED INCOME W AS DETERMINED BY HIM AT RS.2,80,22,714/- AS AGAINST THE INCOME DETER MINED IN THE APPEAL EFFECTS ORDER AT RS.3,45,11,318/-. IT WAS ALSO SUB MITTED BEFORE LD. I.T.A.NO. 73,92 /AHD/2007 14 CIT(A) THAT THE UNDISCLOSED INCOME OF RS.280 LACS W AS DETERMINED ON ESTIMATE BASIS AND INCORRECT INTERPRETATION OF THE SEIZED RECORDS. RELIANCE WAS ALSO PLACED ON VARIOUS JUDGMENTS NOTED BY LD. C IT(A) ON PAGE 4 OF HIS ORDER BUT LD. CIT(A) WAS NOT SATISFIED AND HE C ONFIRMED THE PENALTY ORDER TO THE EXTENT OF UNDISCLOSED INCOME OF RS.2,8 0,22,714/-. HE SUSTAINED THE PENALTY OF RS.1,96,71,944/- AGAINST T HE PENALTY IMPOSED BY THE A.O. OF RS.2,42,26,944/-. NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US FOR THE PENALTY CONFIRMED BY LD. CIT(A). 3.2.1 IT IS SUBMITTED BY THE LD. A.R. BEFORE US THA T PENALTY U/S 158BFA(2) IS DISCRETIONARY AND NOT MANDATORY AND WH ERE THE ADDITION MADE IS BASED ON ESTIMATE, NO PENALTY IS JUSTIFIED. HE PLACED RELIANCE ON THE FOLLOWING JUDGMENTS: (A) DR. HAKEEM S.A. SYED SATHAR VS ACIT 120 ITD 01/ 123 TTJ 573 (CHENNAI). (B) ACIT VS SHANTI KUMAR CHABARA 121 TTJ 985 / 32 S OT 21 (JP.)(URO). (C) SALUJA HIRE PURCHASE LTD. VS ACIT 305 ITR (AT) 39 (LUCK.) (D) ITO VS JANTA BAZAR & STORS (P) LTD. 109 TTJ (MU M.) 535 (E) ENFIELD INDUSTRIES LTD. VS DCIT 107 ITD 01 (KOL ) (F) DCIT VS SURESH KUMAR 97 ITD 527 (KOL.) (G) NEMICHAND VS ACIT 93 TTJ 564 (BANG.) 3.2.2 HE ALSO SUBMITTED THAT THE APPEAL OF THE ASSE SSEE IN QUANTUM PROCEEDINGS HAS BEEN ADMITTED BY HONBLE GUJARAT HI GH COURT AND HE SUBMITTED A COPY OF THIS JUDGMENT OF HONBLE GUJARA T HIGH COURT DATED 26.12.2006 AS PER WHICH, THE APPEAL OF THE ASSESSEE WAS ADMITTED BY HONBLE GUJARAT HIGH COURT. HE FURTHER SUBMITTED T HAT SINCE APPEAL OF THE ASSESSEE WAS ADMITTED BY THE HONBLE GUJARAT HI GH COURT, PENALTY IS NOT JUSTIFIED BECAUSE ADMITTEDLY, THE ADDITION MADE BY THE A.O. AND CONFIRMED BY THE TRIBUNAL LEADS TO SUBSTANTIAL QUES TION OF LAW AS PER I.T.A.NO. 73,92 /AHD/2007 15 HONBLE GUJARAT HIGH COURT AND IT IS A DEBATABLE ISSUE AND HENCE, PENALTY IS NOT JUSTIFIED. 3.2.3 AS AGAINST THIS, LD. D.R. SUPPORTED THE ORDER OF LD. CIT(A). HE ALSO SUBMITTED THAT NOW, THIS ISSUE IS COVERED AGAI NST THE ASSESSEE BY THE JUDGMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS BECHARBHAI P. PARMAR AS REPORTED IN 341 ITR 499 (GU J.) AND ALSO IN THE CASE OF KANDOI BHOGILAL MULCHAND VS DCIT AS REPORTE D IN 341 ITR 271 (GUJ.). HE SUBMITTED THAT AS PER THESE TWO JUDGMEN TS, IT WAS HELD BY HONBLE GUJARAT HIGH COURT THAT THE PRINCIPLE THAT ONUS IS ON THE REVENUE TO PROVE CONCEALMENT OF INCOME CANNOT BE IMPORTED W HILE CONSIDERING THE QUESTION OF PENALTY UNDER SUB-SECTION (2) OF SE CTION 158BFA OF THE INCOME TAX ACT, 1961. IT IS SUBMITTED THAT AS PER THESE TWO JUDGMENTS OF THE HONBLE GUJARAT HIGH COURT, IT WAS HELD THAT WH ERE THE ADDITION IS CONFIRMED BY THE TRIBUNAL, PENALTY IS LIABLE TO BE IMPOSED ALTHOUGH IT IS DISCRETIONARY. HE ALSO PLACED RELIANCE ON THE FOLL OWING TWO TRIBUNAL DECISIONS: (A) JRD STOCK BROKERS PVT. LTD. VS ACIT 124 TTJ 56 6 (DEL.) (B) SMT. MADHUBEN R BAROT VS ACIT 12 ITR (T) 465 3.2.4 IN THE REJOINDER, IT WAS SUBMITTED BY THE LD. A.R. THAT EVEN HONBLE GUJARAT HIGH COURT HAS DECIDED IN THE CASE OF BECHARBHAI P PARMAR (SUPRA) THAT PENALTY U/S 158BFA(2) IS NOT MA NDATORY. IT IS FURTHER POINTED OUT BY HIM THAT IT IS ALSO OBSERVED BY HON BLE GUJARAT HIGH COURT IN THAT CASE THAT ALTHOUGH U/S 273B OF THE INCOME T AX ACT, 1961, THERE IS NO MENTION OF SECTION 158BFA(2) BUT STILL IT CANNOT BE SAID THAT PENALTY U/S 158BFA(2) IS MANDATORY. HE WENT ON SUBMITTING THAT IN THE PRESENT CASE, THE ADDITION CONFIRMED BY THE TRIBUNAL IN RES PECT OF THE AMOUNT DEBITED BY THE ASSESSEE IN THE RECEIPT AND PAYMENT ACCOUNT ON PAGE 15 OF RS.2,49,30,205/- IS NOT AN ALLOWABLE EXPENDITURE BU T THIS ISSUE HAD NOT I.T.A.NO. 73,92 /AHD/2007 16 ATTAINED FINALITY BECAUSE THE HONBLE GUJARAT HIGH COURT HAS ADMITTED THE APPEAL OF THE ASSESSEE ON THIS VERY ISSUE AND IT IS BY NOW A SETTLED POSITION OF LAW THAT QUANTUM PROCEEDINGS AND PENALTY PROCEED INGS ARE DISTINCT AND SEPARATE AND, THERFORE, IN THE COURSE OF PENALTY PR OCEEDINGS, THIS ASPECT CAN BE VERY WELL EXAMINED AS TO WHETHER SUCH ADDITI ON IS JUSTIFIED OR NOT AND WHETHER IN THE FACTS OF THE PRESENT CASE, THE P ENALTY IS JUSTIFIED OR NOT. 3.2.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PER USED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE JUDGEMENT CITED BY THE LD. D.R. THERE IS NO DISPUT E ON FACTS BECAUSE ADMITTEDLY THE ASSESSED INCOME IS FINALLY DETERMINE D BY THE A.O. IN THE ORDER PASSED BY HIM U/.S 154 AT RS.2,80,22,714/- AN D PENALTY CONFIRMED BY LD. CIT(A) IS ONLY TO THIS EXTENT OF UNDISCLOSED INCOME COMPUTED BY THE A.O. AGAINST THIS ORDER OF THE A.O. U/S 154 AL SO, THERE IS QUANTUM APPEAL FILED BY THE ASSESSEE, WHICH IS ALREADY DECI DED BY US AS PER PARA 2 TO 2.5 ABOVE GRANTING SOME RELIEF TO THE ASSESSEE A ND RESTORING BACK TWO MATTERS TO THE FILE OF THE A.O. WHATEVER ULTIMATE RELIEF IS ALLOWED TO THE ASSESSEE, PENALTY WILL GET AUTOMATICALLY REDUCED TO THAT EXTENT AS THE SAME IS CONSEQUENTIAL BUT THE ISSUE BEFORE US IS, WHETHE R PENALTY IS JUSTIFIED ON THE ESTIMATED ASSESSED INCOME. LD. D.R. HAS PLAC ED RELIANCE ON TWO JUDGEMENTS OF HONBLE GUJARAT HIGH COURT RENDERED I N THE CASE OF BECHARBHAI P PARMAR AND KANODI BHOGILAL MULCHAND (S UPRA). IN THESE JUDGEMENTS, IT WAS HELD BY HONBLE GUJARAT HIGH COU RT THAT THEY ARE UNABLE TO HOLD THAT PENALTY U/S 158BFA(2) IS MANDAT ORY IN NATURE. HONBLE GUJARAT HIGH COURT ALSO REFERRED TO SECTION 273B OF THE INCOME TAX ACT, 1961 AND IT IS OBSERVED THAT ALTHOUGH THER E IS NO MENTION OF SECTION 158BFA(2) IN THE SECTION 273B BUT STILL IT DOES NOT MEAN THAT THE PENALTY U/S 158BFA(2) IS MANDATORY. HENCE, AS PER THESE TWO I.T.A.NO. 73,92 /AHD/2007 17 JUDGEMENTS OF HONBLE GUJARAT HIGH COURT ALSO, THE PENALTY IS NOT MANDATORY AND IN A GIVEN CASE, IT MAY BE THAT PENAL TY IS NOT JUSTIFIED ALTHOUGH QUANTUM ADDITION IS SUSTAINED. NOW, THE Q UESTION IS, WHAT CAN BE THOSE CIRCUMSTANCES WHEN PENALTY U/S 158BFA(2) I S NOT JUSTIFIED ALTHOUGH THE QUANTUM ADDITION HAD ATTAINED FINALITY . IN THE PRESENT CASE, THE QUANTUM ADDITION IS ALSO NOT YET REACHED ITS FI NALITY BECAUSE AGAINST THE TRIBUNAL ORDER IN THE QUANTUM PROCEEDINGS, ASSE SSEE HAS FILED AN APPEAL BEFORE HONBLE GUJARAT HIGH COURT AND THE SA ME HAS BEEN ADMITTED BY HONBLE GUJARAT HIGH COURT AS PER TAX A PPEAL NO.1211/2006 DATED 26.12.2006 AND THE FOLLOWING SUBSTANTIAL QUES TION OF LAW WERE ADMITTED BY HONBLE GUJARAT HIGH COURT: (I) WHETHER, IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ITAT WAS RIGHT IN LAW IN HOLDING THAT DEBIT UNDER THE HEAD DEBTORS IN ANNEXURE A- 15 IS NOT AN ALLOWABLE EXPENDITURE? (II) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE ITAT WAS RIGHT IN LAW IN NOT ACCEPTING DEBIT SIDE OF THE SEI ZED ANNEXURE A-15 WHEN THE CREDIT SIDE OF THE VERY SAME SEIZED ANNEXURE HA S BEEN THE BASIS FOR MAKING ADDITIONS IN THE HANDS OF THE APPELLANT? 3.2.6 FROM THE ABOVE, IT IS SEEN THAT HONBLE GUJAR AT HIGH COURT HAS ADMITTED THESE TWO SUBSTANTIAL QUESTION OF LAW AS T O WHETHER THE TRIBUNAL WAS JUSTIFIED THAT AN AMOUNT DEBITED UNDER THE HEAD DEBTORS IN A ANNEXURE A-15 IS NOT ALLOWABLE EXPENDITURE. SUCH D EDUCTION CLAIMED BY THE ASSESSEE IS OF RS.249.30 LACS WHERE AS THE UNDI SCLOSED INCOME DETERMINED BY THE A.O. AS PER ORDER U/S 154 IS RS.2 ,80,22,714/- AGAINST THIS WE HAVE ALREADY ALLOWED RELIEF OF RS.12,55,994 /- AS PER PARA 2.2.6 ABOVE WHILE DECIDING THE QUANTUM APPEAL OF THE ASSE SSEE. REGARDING THE REMAINING TWO ISSUES, WE HAVE RESTORED THE MATTER B ACK TO THE FILE OF THE A.O. FOR A FRESH DECISION IN QUANTUM PROCEEDINGS. HENCE, IF IT IS FOUND THAT DEDUCTION IN RESPECT OF AMOUNT DEBITED UNDER T HE HEAD DEBTORS OF I.T.A.NO. 73,92 /AHD/2007 18 RS.2,49,30,205/- IS AVAILABLE, THEN THERE WILL BE N O UNDISCLOSED INCOME LEFT ON WHICH PENALTY CAN BE IMPOSED. REGARDING TH IS ASPECT, THE FINDING OF THE TRIBUNAL IN QUANTUM PROCEEDINGS IS AS UNDER: WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE ANNEXURE A-15 IS RECEIPT AND PAYMENT ACCOUNT PREPAR ED EVERY SIX MONTHS. ON THE RECEIPT SIDE THERE IS OPENING CASH/ BANK BALANCE, SALES, LOAN RECEIVED, SHARE APPLICATION MONEY RECEI VED ETC. SIMILARLY, AT THE PAYMENT SIDE, THERE IS A PAYMENT FOR LIABILITIES, EXPENSES ETC. IN THE PAPER ITSELF ON THE RECEIPT S IDE, IT IS MENTIONED AS RECEIPT WHILE ON THE PAYMENT SIDE, IT IS MENTI ONED AS PAYMENT. THEREFORE, WE AGREE WITH THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE HAT THE AMOUNT DEBITED UND ER THE HEAD DEBTORS AT THE PAYMENT SIDE IS PAYMENT TO THE DEB TORS AND NOT THE CLOSING BALANCE OF DEBTORS. HOWEVER, EVERY OUTGOIN G IS NOT EXPENDITURE. THEREFORE, IT HAS TO BE FURTHER EXAMI NED WHETHER THE PAYMENT WAS FOR AN EXPENDITURE INCURRED FOR THE PUR POSE OF BUSINESS IT WAS CLAIMED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES AS WELL AS BEFORE US THAT THE DEBIT UNDER THE HEAD DEBTORS IN ANNEXURE A-15 IS FOR DISCOUNT AND COMMISSION ALLOWE D TO THE DEBTORS AND ALSO FOR BAD DEBTS. SO FAR AS THE ASSE SSEES CONTENTION FOR BAD DEBT IS CONCERNED, IT HAS TO BE REJECTED OU TRIGHT BECAUSE IN THE CASE OF BAD DEBT, NO PAYMENT IS MADE TO THE DEB TORS BUT THE OUTSTANDING AMOUNT AGAINST THE SALE PROCEEDS BECOME S IRRECOVERABLE. THEREFORE, THE QUESTION OF BAD DEBT BEING DEBITED IN THE PAYMENT SIDE OF RECEIPT AND PAYMENT ACCOUNT DOE S NOT ARISE. COMING TO THE ASSESSEES CONTENTION THAT THE DEBIT UNDER THE HEAD DEBTORS REFLECTS THE DISCOUNT AND COMMISSION IS A LSO NOT ACCEPTABLE BECAUSE IN THE PAYMENT SIDE FOR SEVERAL PERIODS THERE IS A DEBIT SEPARATELY UNDER THE HEAD DISCOUNT AND COM MISSION AS UNDER: 1.4.1996 TO 30 TH SEP. 1996 RS. 81,500 1.10.1996 TO 31.3.1997 RS.1,95,000 1.4.1997 TO 31.10.1997 RS.2,27,720 1.11.1997 TO 31.3.1998 RS.1,62,250 1.4.1998 TO 30 TH JUNE 1998 RS.1,14,526 1.7.1998 TO 31.12.1998 RS.2,15,815 1.1.1999 TO 30.6.1999 RS.1,85,760 1.7.1999 TO 31.12.1999 RS.1,98,261 I.T.A.NO. 73,92 /AHD/2007 19 ONCE THE ASSESSEE IS MAINTAINING SEPARATE HEAD FOR DEBITING DISCOUNT AND COMMISSION THE QUESTION OF DEBITING THE SAME UNDER THE HEAD DEBTORS DOES NOT ARISE. WHATEVER DISCOU NT AND COMMISSION IS PAID BY THE ASSESSEE WOULD BE DEBITED UNDER THE HEAD DISCOUNT AND COMMISSION. IT WAS VEHEMENTLY CONTENDED BY THE LD. COUNSEL THAT THERE IS A GENERAL PRACTICE IN THIS LINE OF TRADE TO ALLOW 30 TO 40% DISCOUNT TO THE TRADERS. HOWEVE R, IF THE CONTENTION OF THE ASSESSEE IS CORRECT, THEN IN RESP ECT OF THE RECORDED SALES ALSO THE DISCOUNT SHOULD HAVE BEEN PAID AND W HICH SHOULD HAVE BEEN DEBITED IN THE REGULAR BOOKS OF ACCOUNTS. THE LD. COUNSEL FAIRLY ADMITTED THAT IN THE AUDITED PROFIT AND LOSS ACCOUNT, THERE IS NO DEBIT UNDER THE HEAD DISCOUNT AND COMM ISSION TO THE TRADERS. MOREOVER, IN THE ANNEXURE A-15 ALSO, THE DEBIT UNDER THE HEAD DEBTORS IS ONLY FOR SOME PERIOD AND NOT IN A LL THE PERIODS. FROM 1.1.1999 TO 30.6.1999 AND ALSO 1.7.1999 TO 31. 12.1999, THERE IS NO PAYMENT TO DEBTORS. IT WAS EXPLAINED BY THE LD. COUNSEL THAT IN THIS PERIOD SALES RECORDED MIGHT BE NET I.E. AFT ER ALLOWING THE DISCOUNT TO THE CUSTOMERS. IN SUPPORT OF THIS CONT ENTION, HE POINTED OUT THAT FOR THE PERIOD 1.7.1999 TO 31.12.1999, THE GROSS SALE WAS RS.2,62,13,554/- WHILE ON THE RECEIPT AND PAYMENT A CCOUNT NET SALES IS RS.2,33,50,266/- WAS RECORDED. HOWEVER, W E FIND THAT A PAGE NO.8 OF THE ASSESSEES PAPER BOOK WHICH IS PAG E 110 OF THE BUNCH OF LOOSE PAPERS, THERE IS DETAILS OF MONTH-WI SE SALES FOR THE PERIOD JULY,1999 TO DECEMBER 1999 WHICH READS AS UN DER: SALES: BOXES AMOUNT (RS.) JULY, 1999 33125 44,70,513 AUGUST, 1999 31783 41,46,428 SEPTEMBER, 1999 33641 40,87,963 OCTOBER, 1999 23887 35,57,248 NOVEMBER, 1999 27372 34,48,872 DECEMBER, 1999 26009 35,89,242 1,75,817 2,33,50,266 AT PAVE 11 OF THE ASSESSEES PAPER BOOK WHICH IS PA GE 107 OF THE BUNCH OF LOOSE PAPERS, THE DETAILS OF SALE OF RS.2, 62,13,554/- IS THERE. THE SAME READS AS UNDER: I.T.A.NO. 73,92 /AHD/2007 20 BOXES AMOUNT (RS.) 33125 44,70,513 JULY,99 31783 41,46,428 AUGUST, 99 33641 40,87,963 SEPTEMBER, 99 33887 42,97,248 OCTOBER, 99 32272 41,03,845 NOVEMBER, 99 37009 51,07,557 DECEMBER, 99 2,01,817 2,62,13,554 FROM THE COMPARISON OF ABOVE, IT IS EVIDENT THAT TH E LESS SALES AT PAGE 8 IS BECAUSE OF LESS NUMBER OF BOXES HAVING BE EN SOLD AND NOT BECAUSE OF ANY DISCOUNT OR COMMISSION BEING RED UCED FROM THE GROSS SALES. THE LEARNED COUNSEL HAS NOT BROUGHT O N RECORD ANY EVIDENCE TO SUPPORT THE CONTENTION THAT THERE IS GE NERAL TRADE PRACTICE IN THIS LINE OF BUSINESS OF ALLOWING CASH DISCOUNT TO TRADES AND WHICH IS SEPARATELY PAID TO THEM. ON THE OTHER HAND, THE ASSESSEE HAS OWN REGULAR BOOKS PROVE TO THE CONTRAR Y. IN VIEW OF ABOVE, WE ARE UNABLE TO ACCEPT THE ASSESSEES CONTE NTION THAT DEBIT UNDER THE HEAD DEBTORS IN THE RECEIPT AND PAYMENT ACCOUNT REFLECTS PAYMENT OF DISCOUNT AND COMMISSION BY THE ASSESSEE ON THE SALES. WE MAY ALSO MENTION THAT EVERY OUTGOING IS NOT AN EXPENDITURE AND BURDEN IS UPON THE ASSESSEE TO ESTA BLISH THAT ANY OUTGOING IS IN THE NATURE OF AN EXPENDITURE INCURRE D FOR THE PURPOSE OF BUSINESS. THE ASSESSEE EXCEPT MAKING A CLAIM TH AT DEBIT UNDER THE HEAD DEBTORS IS IN THE NATURE OF DISCOUNT AND COMMISSION HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO SUPPORT THIS CLAIM. ON THE OTHER HAND, THE OTHER MATERIAL ON RECORD CLEARLY ES TABLISHES THAT THE DEBIT UNDER THE HEAD DEBTORS IS NOT IN THE NATURE OF DISCOUNTS AND COMMISSION. IN VIEW OF ABOVE, WE REVERSE THE ORDER OF THE CIT(A) ON THIS POINT AND RESTORE THAT OF THE A.O. AND HOLD THAT THE DEBIT UNDER THE HEAD DEBTORS ION ANNEXURE A-15 IS NOT A N ALLOWABLE EXPENDITURE. 3.2.7 FROM THE ABOVE PARAS OF THE TRIBUNAL ORDER, I T IS SEEN THAT IT IS HELD BY THE TRIBUNAL THAT THE AMOUNT DEBITED IN THE RECE IPT AND PAYMENT ACCOUNT IS PAYMENT TO DEBTORS BUT IT IS NOT AN ALLO WABLE EXPENDITURE. NOW, THE RELEVANT QUESTION IS THAT IF THE PENALTY U /S 158BFA(2) IS NOT I.T.A.NO. 73,92 /AHD/2007 21 MANDATORY THEN IN THE WHAT CIRCUMSTANCES, IT CAN BE SAID THAT EVEN AFTER CONFIRMATION OF ADDITION BY THE TRIBUNAL, PENALTY U NDER THIS SECTION IS NOT JUSTIFIED. IN OUR CONSIDERED OPINION, THE PROVISIO N OF THIS SECTION IS FOR THIS PURPOSE THAT THE ASSESSEE SHOULD MAKE TRUE AND CORRECT DISCLOSURE OF HIS UNDISCLOSED INCOME IN THE BLOCK RETURN FILED BY HIM U/S158BC OF THE INCOME TAX ACT, 1961. THEREFORE, IF IT IS SEEN THA T IN A GIVEN CASE, THERE WAS SUCH CIRCUMSTANCES UNDER WHICH A PERSON OF ORDI NARY PRUDENCE CAN HAVE THIS POSSIBLE VIEW THAT ANY INCOME SUGGESTED A S PER THE SEIZED MATERIAL IS NOT REQUIRED TO BE INCLUDED IN THE UNDI SCLOSED INCOME, TO BE DECLARED IN THE BLOCK RETURN OR THERE WAS OTHER REA SONABLE CAUSE DUE TO WHICH SUCH UNDISCLOSED INCOME COULD NOT BE PROPERLY COMPUTED AND DISCLOSED BY A PERSON OF REASONABLE PRUDENCE, PENAL TY U/S 158 BFA(2) IS NOT JUSTIFIED. TO OUR MIND, ONE SUCH SITUATION CA N BE THAT COPY OF SEIZED MATERIAL WAS NOT MADE AVAILABLE TO THE ASSESSEE TIL L THE BLOCK RETURN WAS FILED BY THE ASSESSEE AS REQUIRED BY THE A.O. AS PE R THE NOTICE ISSUED BY HIM U/S 158BC. NATURALLY, IF THE COPY OF THE SEIZE D MATERIAL IS NOT AVAILABLE WITH THE ASSESSEE, HE CANNOT PROPERLY CAL CULATE/COMPUTE THE UNDISCLOSED INCOME BELONGING TO HIM FOR THE BLOCK P ERIOD AS PER THE SEIZED MATERIAL. SECOND SITUATION AS PER OUR CONSI DERED OPINION CAN BE THAT ALTHOUGH COPY OF SEIZED MATERIAL IS AVAILABLE WITH THE ASSESSEE BUT WHETHER ON THE BASIS OF SUCH SEIZED MATERIAL, THERE IS AN UNDISCLOSED INCOME OF THE ASSESSEE OR NOT, IS A DEBATABLE ISSUE AND A PERSON OF REASONABLE PRUDENCE CAN HAVE THIS POSSIBLE VIEW THA T THE UNDISCLOSED INCOME ON THE BASIS OF THE SEIZED MATERIAL IS NOT T HERE OR IS COMPUTED AT A LOWER AMOUNT BUT FINALLY THE A.O. HAS MADE ADDITION WHICH IS SUSTAINED BY THE TRIBUNAL ALSO BUT STILL IT CAN BE SAID THAT THERE WAS A GENUINE AND BONA FIDE REASON ON THE PART OF THE ASSESSEE FOR NO T INCLUDING SUCH INCOME I.T.A.NO. 73,92 /AHD/2007 22 IN THE UNDISCLOSED INCOME DECLARED BY HIM IN THE BL OCK RETURN. IN SUCH A SITUATION ALSO, IN OUR CONSIDERED OPINION, PENALTY U/S 158BFA(2) CAN BE SAID TO BE NOT JUSTIFIED IN A GIVEN CASE. 3.2.8 IN THE LIGHT OF OUR ABOVE DISCUSSION, NOW WE EXAMINE THE FACTS OF THE PRESENT CASE. IN THE PRESENT CASE, THE UNDISCL OSED INCOME HAS BEEN ASSESSED BY THE A.O. ON THE BASIS OF RECEIPT & PAYM ENT ACCOUNT FOUND AND SEIZED IN THE COURSE OF SEARCH AS PER ANNEXURE A-15. THE UNDISCLOSED SALE OF THE ASSESSEE WAS WORKED OUT ON THE BASIS OF SUCH SEIZED MATERIAL BEING RECEIPT AND PAYMENT ACCOUNT O N THE BASIS OF WHICH HAS BEEN COMPUTED TOTAL SALE AS PER THE SEIZED MATE RIAL AND FROM THIS, THE SALE ACCOUNTED FOR IN THE ASSESSEES BOOKS WAS REDU CED AND UNDISCLOSED SALE WAS WORKED OUT AND SIMILARLY DEDUCTION WAS ALL OWED ON ACCOUNT OF EXPENSES WHICH WERE MORE IN SUCH SEIZED MATERIAL AS COMPARED TO THE EXPENSES ACCOUNTED FOR IN THE BOOKS OF ACCOUNT. I N CONNECTION WITH COMPUTATION OF UNACCOUNTED SALE IT WAS THE CLAIM OF THE ASSESSEE THAT THE AMOUNT DEBITED IN THE RECEIPT & PAYMENT ACCOUNT UND ER THE HEAD DEBTORS SHOULD BE ALLOWED AS EXPENDITURE BECAUSE SUCH PAYMENT WAS ACTUALLY MADE TO THE DEBTORS AGAINST THE DISCOUNT C OMMISSION PAID TO DEBTORS. THIS CLAIM OF THE ASSESSEE WAS REJECTED B Y THE A.O. IN FULL BUT WHEN ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE L D. CIT(A), HE DIRECTED THE A.O. TO ALLOW 70% OF THE AMOUNT WRITTEN UNDER T HE HEAD DEBTORS. WHEN BOTH THE PARTIES CARRIED THE MATTER BEFORE THE TRIBUNAL, THE TRIBUNAL DECIDED THE ISSUE AGAINST THE ASSESSEE AND CONFIRME D THE TOTAL DISALLOWANCE MADE BY THE A.O. AGAINST SUCH ORDER O F THE TRIBUNAL IN QUANTUM PROCEEDINGS, THE ASSESSEE FILED APPEAL BEFO RE HONBLE GUJARAT HIGH COURT AND THE HONBLE GUJARAT HIGH COURT HAS A LREADY ADMITTED THE APPEAL OF THE ASSESSEE ASS PER ORDER DATED 26.12.20 06 AND TWO SUBSTANTIAL I.T.A.NO. 73,92 /AHD/2007 23 QUESTION OF LAW WERE ADMITTED BY HONBLE GUJARAT HI GH COURT AND SUCH SUBSTANTIAL QUESTION OF LAW ARE ALREADY REPRODUCED BY US IN THE ABOVE PARA. THIS GOES TO SHOW THAT THE QUESTION OF ALLO WABILITY OF THE AMOUNT DEBITED BY THE ASSESSEE IN THE SEIZED RECEIPT AND PAYMENT ACCOUNT UNDER THE HEAD DEBTORS HAS NOT YET ATTAINED FINALITY AND THE HONBLE GUJARAT HIGH COURT WAS SATISFIED THAT SUBSTANTIAL QUESTION OF LAW ARISES ON ACCOUNT OF THIS ISSUE. LD . CIT(A) HAS ALSO PARTIA LLY AGREED WITH THE ASSESSEES CONTENTION AND DIRECTED THE A.O. TO ALLO W DEDUCTION TO THE EXTENT OF 70% OF SUCH AMOUNT DEBITED UNDER THE HEAD DEBTORS. UNDER THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT ALTHOUGH THE QUANTUM ADDITION HAS ATTAINED FINALITY TILL THE STAGE OF TH E TRIBUNAL AND SUCH TRIBUNAL ORDER IS NOT YET REVERSED BY THE HONBLE G UJARAT HIGH COURT ALTHOUGH THE APPEAL OF THE ASSESSEE HAS BEEN ADMITT ED BY HONBLE GUJARAT HIGH COURT BUT STILL THE VERY FACT THAT THE APPEAL OF THE ASSESSEE WAS ADMITTED BY HONBLE GUJARAT HIGH COURT HOLDING THAT TWO SUBSTANTIAL QUESTION OF LAW ARISES OUT OF THIS TRIBUNAL ORDER, IT HAS TO BE ACCEPTED THAT THERE CAN BE A POSSIBLE VIEW OF A PERSON OF REASONA BLE PRUDENCE THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION IN RESPECT OF TH E AMOUNT DEBITED IN THE SEIZED RECEIPT & PAYMENT ACCOUNT UNDER THE HEAD DE BTORS AND, THEREFORE, PENALTY U/S 158BFA(2) NOT BEING MANDATORY AS PER TH ESE TWO JUDGMENTS OF HONBLE GUJARAT HIGH COURT CAN BE SAID TO BE UNJ USTIFIED IN THE FACTS OF THE PRESENT CASE ALTHOUGH THE ADDITION IS ALREADY C ONFIRMED BY THE TRIBUNAL. - IN THE CASE OF BECHARBHAI P PARMAR (SUPRA), THE P ENALTY WAS DELETED BY THE TRIBUNAL ON THIS BASIS THAT THE ADDITION WAS MADE ON THE BASIS OF MERE PRESUMPTION OR ON ESTIMATE BASIS AND, THEREFOR E, THE REVENUE FAILED TO PROVE THAT THE ASSESSEE IS GUILTY OF CONCEALMENT . UNDER THESE FACTS, IT I.T.A.NO. 73,92 /AHD/2007 24 WAS HELD BY HONBLE GUJARAT HIGH COURT IN THAT CASE THAT THE REQUIREMENT TO PROVE CONCEALMENT OF INCOME CAN NOWHERE BUT TRAC ED IN SECTION 158BFA(2) AND, THEREFORE, IT WAS HELD THAT THE TRIB UNAL ORDER IS NOT SUSTAINABLE. IN THE PRESENT CASE, THE ARGUMENT BEF ORE US IS NOT THIS THAT THE REVENUE HAS NOT ESTABLISHED THE FACTUM OF CONCEALME NT AND, THEREFORE, PENALTY IS NOT JUSTIFIED BUT IN THE PRESENT CASE, T HE ARGUMENT BEFORE US IS THIS THAT THERE WAS REASONABLE CAUSE DUE TO WHICH T HE ASSESSEE WAS UNDER BONA FIDE BELIEF THAT THERE IS NO UNDISCLOSED INCOM E ARISING TO THE ASSESSEE IN THE BLOCK PERIOD AS PER THE SEIZED MATERIAL BECA USE AS PER THE ASSESSEE, HE IS ELIGIBLE FOR DEDUCTION IN RESPECT OF THE AMOU NT DEBITED IN THE SEIZED RECEIPT AND PAYMENT ACCOUNT UNDER THE HEAD DEBTORS . ALTHOUGH THIS CONTENTION OF THE ASSESSEE IS NOT ACCEPTED BY THE A UTHORITIES BELOW AND BY THE TRIBUNAL IN THE QUANTUM PROCEEDINGS BUT STILL W E HAVE NOTED THAT THIS VERY FACT THAT HONBLE GUJARAT HIGH COURT HAS ADMIT TED THE APPEAL OF THE ASSESSEE IN QUANTUM PROCEEDINGS BY HOLDING THAT THE RE ARE TWO SUBSTANTIAL QUESTIONS OF LAW ARISING OUT OF THE TRIBUNAL ORDER IN QUANTUM PROCEEDINGS IN RESPECT OF THE ASSESSEES CLAIM ABOUT ALLOWABILI TY OF DEDUCTION IN RESPECT OF THE AMOUNT DEBITED UNDER THE HEAD DEBTOR S, THERE CAN BE A POSSIBLE VIEW OF A MAN OF REASONABLE PRUDENCE THAT THERE IS NO UNDISCLOSED INCOME ARISING OUT OF THE SEIZED MATERI AL BECAUSE IF THE DEDUCTION IS ALLOWED TO THE ASSESSEE IN RESPECT OF THE AMOUNT DEBITED UNDER THE HEAD DEBTORS, THEN NO UNDISCLOSED INCOME REMAINED TO BE TAXED. HONBLE GUJARAT HIGH COURT HAS ALREADY HELD THAT TH E PENALTY U/S 158BFA(2) IS NOT MANDATORY AND ALTHOUGH THIS SECTIO N DOES NOT FIND PLACE IN THE PROVISIONS OF SECTION 273B BUT STILL THIS PE NALTY IS NOT MANDATORY. MEANING THEREBY THAT IN A GIVEN CASE EVEN AFTER CON FIRMATION OF ADDITION, PENALTY MAY NOT BE JUSTIFIED U/S 158BFA(2) AND IN O UR CONSIDERED I.T.A.NO. 73,92 /AHD/2007 25 OPINION, IN THE LIGHT OF ABOVE DISCUSSION, THIS IS FIT CASE TO HOLD THAT IN THE FACTS OF THE PRESENT CASE AS DISCUSSED ABOVE, PENAL TY U/S 158BFA(2) IS NOT JUSTIFIED. WE HOLD ACCORDINGLY. - WE HAVE ALREADY DISCUSSED ABOUT TWO JUDGEMENTS OF HONBLE GUJARAT HIGH COURT CITED BY THE LD. D.R. AND AFTER CONSIDERING THESE TWO JUDGEMENTS AS PER ABOVE DISCUSSION, WE HAVE REACHED TO THIS CONCLUSION THAT IN THE FACTS OF THE PRESENT CASE, PENALTY IS N OT JUSTIFIED. IN ADDITION TO THESE TWO JUDGEMENTS OF HONBLE GUJARAT HIGH COURT, LD. D.R. HAS PLACED RELIANCE ON TWO TRIBUNAL DECISIONS ALSO HAVI NG BEEN RENDERED IN THE CASE OF JRD STOCK BROKERS (P) LTD. AND SMT. MADHUBE N R BAROT (SUPRA). IN THE CASE OF JRD STOCK BROKERS PVT. LTD. (SUPRA), PENALTY WAS CONFIRMED BY THE TRIBUNAL ON THIS BASIS THAT THE AS SESSEE HAS NOT FURNISHED PARTICULARS OF UNDISCLOSED INCOME ON THE BASIS OF S EIZED MATERIAL AND ONLY NIL INCOME WAS RETURNED AND, THEREFORE, PENALTY COU LD BE LEVIED ON INCREASED UNDISCLOSED INCOME EVEN IF IT WAS ON ACCO UNT OF ESTIMATION MADE BY THE REVENUE AUTHORITIES. IN THE PRESENT CA SE, THE FACTS ARE DIFFERENT. IN THE PRESENT CASE, WE HAVE NOTED AS PE R ABOVE DISCUSSION THAT IN THE FACTS OF THE PRESENT CASE, A PERSON OF REASO NABLE PRUDENCE CAN HAVE THIS POSSIBLE VIEW THAT NO UNDISCLOSED INCOME IS AR ISING OUT OF SEIZED MATERIAL AND ALTHOUGH THE CLAIM OF THE ASSESSEE WAS REJECTED BY THE AUTHORITIES BELOW AND THE TRIBUNAL IN THE QUANTUM P ROCEEDINGS BUT HONBLE GUJARAT HIGH COURT HAS ADMITTED THE APPEAL OF THE ASSESSEE BY HOLDING THAT TWO SUBSTANTIAL QUESTION OF LAW AROSE OUT OF THE DISPUTE REGARDING ALLOWABILITY OF DEDUCTION IN RESPECT OF T HE AMOUNT DEBITED IN THE SEIZED MATERIAL UNDER THE HEAD DEBTORS. THE FA CTS BEING DIFFERENT, THIS TRIBUNAL DECISION IS NOT APPLICABLE IN THE PRESENT CASE. I.T.A.NO. 73,92 /AHD/2007 26 - SIMILARLY, IN THE CASE OF SMT. MADHUBEN R BAROT ( SUPRA), IT IS NOTED BY THE TRIBUNAL IN PARA 6 THAT THE ASSESSEE HAD NOT MADE PAYMENT IN CASH OF RS.2.14 LACS BUT NO EVIDENCE WAS FILED TO SUBSTA NTIATE THE SOURCE OF PAYMENT OF ON MONEY AND, THEREFORE, THE ADDITION WA S MADE ON THE BASIS OF SEIZED MATERIAL. IN THAT CASE, THIS WAS NOT A C ASE OF THE ASSESSEE THAT THE PERSON OF REASONABLE PRUDENCE COULD HAVE A POSS IBLE VIEW THAT THIS AMOUNT WAS NOT GIVING RISE TO AN UNDISCLOSED INCOME IN THE HANDS OF THE ASSESSEE WHEREAS IN THE PRESENT CASE, WE HAVE SEEN THAT IN THE FACTS OF THE PRESENT CASE, A PERSON OF REASONABLE PRUDENCE CAN H AVE A POSSIBLE VIEW THAT THERE IS NO UNDISCLOSED INCOME ARISING AS PER SEIZED MATERIAL ALTHOUGH THE CLAIM OF THE ASSESSEE WAS REJECTED BY THE AUTHORITIES BELOW AND BY THE TRIBUNAL ALSO IN THE QUANTUM PROCEEDINGS GIVING RISE TO ADDITION OF INCOME BUT AGAINST SUCH TRIBUNAL ORDER IN QUANTUM PROCEEDINGS, APPEAL HAS BEEN ADMITTED BY HONBLE GU JARAT HIGH COURT BY HOLDING THAT TWO SUBSTANTIAL QUESTION OF LAW ARISE IN RESPECT OF THIS VERY ISSUE AND, THEREFORE, THIS TRIBUNAL DECISION IS ALS O NOT APPLICABLE IN THE PRESENT CASE BECAUSE THE FACTS ARE DIFFERENT. 3.2.9 IN VIEW OF THE ABOVE DISCUSSION, WE FIND THAT IN THE PRESENT CASE, PENALTY IS NOT JUSTIFIED AS PER THESE TWO JUDGEMENT S OF HONBLE GUJARAT HIGH COURT IN WHICH IT WAS HELD BY THE HONBLE GUJA RAT HIGH COURT THAT PENALTY U/S 158BFA(2) IS NOT MANDATORY. WE HAVE D ISCUSSED IN DETAIL AS PER ABOVE PARA THAT IN THE FACTS OF THE PRESENT CAS E, A PERSON OF REASONABLE PRUDENCE CAN HAVE THIS POSSIBLE VIEW THAT NO UNDISC LOSED INCOME IS ARISING ON THE BASIS OF SEIZED MATERIAL AND, THEREF ORE, EVEN THOUGH ADDITION IS CONFIRMED BY THE TRIBUNAL, PENALTY IS N OT JUSTIFIED BECAUSE THERE IS A REASONABLE AND BONA FIDE REASON DUE TO W HICH ASSESSEE WAS HAVING A POSSIBLE VIEW THAT NO UNDISCLOSED INCOME I S ARISING OUT OF THE I.T.A.NO. 73,92 /AHD/2007 27 SEIZED MATERIAL AND, THEREFORE, PENALTY U/S 158BFA( 2) IS NOT JUSTIFIED BECAUSE PENALTY UNDER THIS SECTION IS PROPOSED MAIN LY FOR THIS REASON THAT THE ASSESSEE SHOULD FILE A TRUE AND CORRECT BLOCK R ETURN U/S 158BC AND IF THE ASSESS WAS HAVING A POSSIBLE AND BONA FIDE VIEW THAT NO UNDISCLOSED INCOME IS TAXABLE AS PER THE SEIZED MATERIAL THEN P ENALTY UNDER THIS SECTION IS NOT JUSTIFIED. WE HOLD ACCORDINGLY AND PENALTY IS DELETED. 3.3 IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS A LLOWED. 4. IN THE COMBINED RESULT, QUANTUM APPEAL OF THE AS SESSEE STANDS ALLOWED IN TERMS INDICATED IN THE ORDER AND PENALTY APPEAL IS ALLOWED. 5. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SAD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 5/6 6/6 & 7/6 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 8/6.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S.12/6 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 15/6 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.15/6 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 15/6/12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER.