SHREE PRITHVI IRON MILLS PRIVATE LIMITED,JAIPUR V. ACIT, CIRCLE 4, JAIPUR, JAIPUR

ITA 3/JPR/2025

AI Insights

The case involves Shree Prithvi Iron Mills Private Ltd., which appealed against the penalty imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act, 1961, following a survey under section 133A that revealed excess stock. The AO added the value of the excess stock as undisclosed income and levied a penalty. The Commissioner of Income Tax (Appeals) upheld the penalty, leading to the present appeal before the Income Tax Appellate Tribunal. The Tribunal examined the circumstances of the stock discrepancy and the legal precedents regarding penalties for concealment of income, ultimately deciding in favor of the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 469909 (ITAT-JAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Other Referred Cases: Commissioner of Income-tax v. Md. Warasat Hussain, Roshan Di Hatti v. Commissioner of Income-tax, Kale Khan Mohammad Hanif v. Commissioner of Income-tax, CIT v. M. Ganapathi Mudaliar, CIT v. Mussadilal Ram Bharose, CIT v. Atul Mohan Bindal, CIT vs. Reliance Petro Products Pvt. Ltd., CIT vs. Ashok Kumar Raut, CIT vs. Sahib Chand Sohan Lal, CIT vs. Ram Singh, M.K. Ahmed vs. ITO, CIT vs. Bhima Sankar Soni, CIT vs. Reliance Petro Products Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAUTAM SINGH CHOUDHARY
• Assessee Lawyers: DILEEP SHIVPURI
• Keywords: Revised return; Reasonable cause; Question of law; Unexplained investment; Income from undisclosed sources; Onus to prove; Charitable institution; Liquidation
• Section: 143(3); 250; 271(1)(c); 22; 69; 13; 73; 133A; 72

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 03/JP/2025 fu/kZkj.k o\"kZ@Assessment Year : 2015-16 Shree Prithvi Iron Mills Private Ltd., B-190 (A), Road No. 9 V.K.I. Area, Jaipur cuke Vs. ACIT, Circle-04, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAACY0881C vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Dileep Shivpuri, Adv. jktLo dh vksj ls@ Revenue by : Sh. Gautam Singh Choudhary, Addl. CIT lquokbZ dh rkjh[k@ Date of Hearing : 18/02/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement: 26/03/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM The present appeal is because the assessee dissatisfied with the order of the Commissioner of Income Tax (Appeals), Jaipur -4 dated 05/11/2024 [ for short CIT(A) ] for assessment year 2015-16 in accordance with provision of section 250 of the Income Tax Act, 1961 [ for short Act]. The said order of the ld. CIT(A) arises as against the order dated 06.03.2020 passed under section 271(1)(c) of the Act, by ACIT, Circle-04, Jaipur [ for short AO]. 2 ITA No. 03/JP/2025 Shree Prithvi Iron Mills Private Ltd. vs. ACIT 2. In this appeal, the assessee has raised following grounds: - “1. That the Ld. CIT(A) has erred in both facts and circumstances of the case in law in passing the impugned Appellate Order dated 05.11.2024. 2. That the Ld. CIT(A) has erred on facts and in law in Levying the penalty of Rs. 1,17,670/- u/s 271(1)(c) of Income Tax Act on account of undisclosed investment under section 69 of the IT. Act, and dismissing the appeal on this issue; 3. The Appellant craves leave to add, to alter, amend or modify substitute delete and/or rescind all or any ground of Appeal on or before the final hearing, if necessary so arises. 3. Succinctly, the fact as culled out from the record is that assessee had e-filed her Income Tax Return for the A.Y 2015-16 on 28.11.2015 declaring total income of Rs. 2,82,19,510/-. Thereafter, the case was completed u/s 143(3) of the IT Act, 1961 on 20.12.2017 at assessed income of Rs. 2,85,82,171/- making a addition u/s 69 of the IT Act 1961 for an amount of Rs. 3,62,661/-. That order of the assessment was challenged in an appeal which was disposed off on 25.01.2019 confirming the addition by the ld. CIT(A)-2, Jaipur. Since, the penalty proceeding were initiated in the assessment proceeding and upon confirmation of that addition by ld. CIT(A) ld. AO proceeded for levy of penalty as per provision of section 271(1)(c) of the Act. In that proceeding the ld. AO issued notices which were not attended except for seeking the adjournment. 3 ITA No. 03/JP/2025 Shree Prithvi Iron Mills Private Ltd. vs. ACIT As is evident from the record that for the year under consideration a survey u/s 133A was conducted on the business premises of the assessee and during the survey proceedings excess stock worth Rs. 3,62,661/- was found. The same was added as income of the assessee and even when challenged before ld. CIT(A) the said addition was confirmed in the hands of the assessee. Ld. AO thus noted that for that addition so sustained the penalty proceedings being separate & independent proceedings and since the assessee failed to file any defense in the penalty proceeding and thereby ld. AO noted that the assessee has concealed income to the tune of Rs. 3,62,661/- and thereby ordered to levy the penalty of Rs. 1,17,670/- as per provision of section 271(1)(c) of the Act. 4. Aggrieved from the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below: “4.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the penalty order for the year under consideration. As noted in the impugned order under appeal, during the year under consideration a survey u/s 133A was conducted on the business premises of the assessee and during the survey proceedings excess stock of Rs. 3.62.661/- was found and during the course of scrutiny proceedings the assessee has failed to produce any documentary evidence in support of its claim. Hence, assessee failed to get stock verified from its books of accounts. The AO initiated the penalty proceedings u/s 4 ITA No. 03/JP/2025 Shree Prithvi Iron Mills Private Ltd. vs. ACIT 271(1)(c) of the IT Act, 1961 on 20.12.2017 for Rs. 3,62,661/- Further this addition has been confirmed by the Ld. CIT(A) The appellant has submitted that the Assessee is a manufacturing and trading company mainly manufacture iron & steel rolling products. That during the survey u/s 133A of IT Act, 1961 of the assessee company, survey team has recorded excess stock of 8.399 MT of Iron Channel. Angle, Section and 0.250 MT of MS Billet and Scrap at the time of stock taken physically as compared to stock as per book of accounts, which was valued of Rs.3.62.661. Survey team has calculated physical stock by calculation standard weight given in Weighing Chart. They have not taken the same on actual weighing, whereas the assessee is maintaining stock on actual weigh basis. The appellant has made this claim regarding the/valuation during the course of survey however the appellant has not furnished any documents. The appellant has also not furnished the order of the learned CIT Appeal by which the quantum appeal of the appellant was dismissed. The appellant has also not submitted the survey statements and the assessment order etc. It was specifically requested from the appellant during the appellate proceedings to furnish the submissions made before the assessing authority however the same are also not been furnished. On the basis of material available on record of the appeal, it is undisputed that excess stock of Rs. 3,62,661 was found and the appellant failed to substantiate and explain the difference during the survey proceedings and also during the assessment proceedings and also during the quantum appeal proceedings. Further the appellant has apparently not filed appeal before the honourable Tribunal in the quantum proceedings. In the case of Commissioner of Income-tax v. Md. Warasat Hussain [1987] 35 Taxman 227 (Patna)/[1988] 171 ITR 405 (Patna)/[1988] 67 CTR 75 (Patna) [10-09- 1987] it was held by Hon'ble Patna High Court as under- \"This was a matter with the special knowledge of the assessee. The Tribunal could not be expected to produce the sale deed. The learned counsel for the assessee submitted that even if the assessee did not produce the original sale deed, the revenue could have obtained certified copy of the sale deed from the registration office and disproved the stand of the assessee that the land had been sold really for a sum higher than Rs. 49,500. This does not lie in the mouth of the assessee. No Court or the Tribunal should countenance an assessee the attitude of failure to produce relevant material and ask the adversary to disprove it. This attitude was decried by Chinnappa Reddy, J. in McDowell & Co. Ltd. v. CTO [1985] 154 ITR 148 (SC).\" In view of the above discussion, excess quantitiy of stock was found during the survey and the appellant could not explain the same and addition was made in the 5 ITA No. 03/JP/2025 Shree Prithvi Iron Mills Private Ltd. vs. ACIT assessment order and quantum appeal was dismissed. As per the position as on date, excess unexplained stock was found during the course of survey. In the above factual background, the appellant could not produce any evidence which could lead to the conclusion that there was no concealment of income. The source of acquisition of unexplained stock is the unexplained income of the appellant In the case of Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC) [08-03-1977] it is held by the Hon'ble Supreme Court as under- \"Now, the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him. If he disputes the liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the revenue is entitled to treat it as taxable income. This was laid down as far back as 1958 when this court pointed out in A. Govindarajulu Mudaliar v. Commisioner of Income-tax [1958] 34 ITR 807 810 (SC) that; \"There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipts are of an assessable nature.\" To put it differently, where the nature and source of a receipt, whether it be of money or of other property, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that that income is from any particular source. vide Commissioner of Income-tax v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 (SC) Here, in the present case, the assessee introduced in the books of account of its business on 30th March, 1948, capital of Rs. 3,33,414 which consisted of gold rawa, gold ornaments, stones and cash. The burden of accounting for the receipt of these assets was clearly on the assessee and if the assessee failed to prove satisfactorily the nature and source of these assets, the revenue could legitimately hold that these assets represented the undisclosed income of the assessee.....” (emphasis supplied) In the case of Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC)[08-02-1963] it is held by the Hon'ble Supreme Court as under- \"It seems to us that the answer to this question must be in the affirmative and that is how it was answered by the High Court. It is well established that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that 6 ITA No. 03/JP/2025 Shree Prithvi Iron Mills Private Ltd. vs. ACIT the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the Income-tax Officer is entitled to treat it as taxable income see A Govindarajulu Mudaliar v. Commissioner of Income-tax [1958] 34 ITR 807 (SC). As per judgements of Hon'ble Supreme Court in the case of CIT v. M. Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC), where the assessee has failed to prove satisfactorily the source and nature of a credit entry in his books, and it is held that the relevant amount is the income of the assessee, it is not necessary for the department to locate its exact source In view of the above, I am not finding the explanation/challenge made by the assesse in the appeal to be satisfactory. The appeal of the assesse and his submissions in appeal have been carefully considered. The same are in no way able to prove the opinion and findings of the Ld. AO wrong. Onus in the present case to show that the difference between the assessed income and the returned income arose only and only due to a \"reasonable cause\" (refer section 273) lay entirely on the assessee. In AIR 1989 Supreme Court 973 [Gujarat Water Supply & Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd.], in Para 11. the Hon'ble Supreme Court was pleased to hold inter alia as under- \"It is difficult to give an exact definition of the word, reasonable. Reason varies in its conclusions according to the idiosyncrasy of the individual and the times and the circumstances of which the actor, called upon to act reasonably, knows or ought to know\" In AIR 1996 Patna 58 (Commissioner of Wealth-tax v. Jagdish Prasad Choudhary), full bench of the Hon'ble Patna High Court, in Paragraph 31, inter alia held as under- \"Therefore, in the context of penalty provision, the word, reasonable cause' would mean a cause which beyond the control of the as-sessee. 'Reasonable cause' obviously means a cause which prevents a reasonable man of an ordinary prudence acting under normal circumstances, without negligence or inaction or want of bona fide from furnishing the return in time.\" The assessee is required to \"prove\" the reasonable cause. This onus has not been discharged by the assessee by leading any cogent evidence. Despite of the opportunities provided, it is evidently clear that the assessee failed to furnish any evidence supported explanation substantiating and justifying the circumstances and reasons leading to application of incorrect facts and law as applied by the assessee. In [2002] 255 ITR 258 (SC) Assistant Director of Inspection v. Kum. A.B. Shanthi, regarding the onus on the assesse to \"prove the reasonable cause, the Hon'ble Supreme Court has held as under- 7 ITA No. 03/JP/2025 Shree Prithvi Iron Mills Private Ltd. vs. ACIT 19. It is important to note that another provision, namely, section 2738 of the Act was also incorporated which provides that notwithstanding anything contained in the provisions of section 271D, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provision if he proves that there was reasonable cause for such failure and if the assessee proves that there was reasonable cause for failure to take a loan otherwise than by account payee cheque or account payee demand draft, then the penalty may not be levied. Further, following case laws are relevant to the facts of the case If assessee makes a claim which is not only incorrect in law, but is also wholly without any basis and explanation furnished by him for making such a claim is not found to be bona fide, Explanation-1 to section 271(1)(c) would come into play and assessee will be liable to penalty. [CIT v Zoom Communication (P) Ltd, 327 ITR 510(Del)] Further, if the assessee is not able to substantiate his explanation and such explanation is not bonafide, then also deeming provision of concealment will come into picture. Mens rea not essential for civil liability of penalty- penalties under fiscal statues are for breach of civil liabilities willful concealment is not an essential ingredient for attracting civil liability as is the case in the matter or prosecution u/s 276C. (Union of India Vs. Dharmendra Textile processors (SC) 306 ITR 277). (Guljag Industries Ltd. Vs CTO (SC) 293 ITR 584). (CIT vs Atul Mohan Bindal (SC) 317 ITR 1) Once it was shown that additional income was surrendered and a revised return was filed, it was up to the assessee to establish that, in fact, the omission was bona fide or that there was a cogent and reasonable explanation. In this respect, learned counsel relied upon the explanation inserted by the Finance Act. 1964 to Section 271(1)(c) and also cited the judgment reported as Addl. CIT v. Jeevan Lal Shah [1994] 73 Taxman 182/205 ITR 244 (SC). It was highlighted that the object of omitting the expression \"deliberately\" from the provision i.e. Section 271(1)(c) was to remove the requirement of a mental state and shifting the burden of proof to the assessee. In support, the Revenue relied upon CIT v. Mussadilal Ram Bharose [1987] 30 Taxman 546H/165 ITR 14 (SC) When there is no proper explanation from the assessee except surrendering certain amount for taxation to buy peace and avoid further litigation, it was held that levy of penalty u/s 271(1)(c) was justified. KAMAL CHAND JAIN v ITO (2005) 277 ITR 429 (DEL) Further reliance is placed on the order of Hon'ble Supreme Court in the case of N.G. Technologies (In Liquidation) v. Commissioner of Income-tax [2016] 70 8 ITA No. 03/JP/2025 Shree Prithvi Iron Mills Private Ltd. vs. ACIT taxmann.com 37 (SC). In this case the SLP against the order of Hon'ble Delhi High Court in the case of Commissioner of Income-tax v. NG Technologies Ltd. [2015] 57 taxmann.com 389 (Delhi) was dismissed by Hon'ble Supreme Court. In this regard relevant para of the order of Hon'ble Delhi High Court in the case of Commissioner of Income-tax v. NG Technologies Ltd. [2015] 57 taxmann.com 389 (Delhi) is extracted below:- \"20. Therefore, it is clear to us that the assessee had not filed revised return voluntarily but had filed the revised return after the Assessing Officer confronted the assessee and they were asked to explain how and why the loss on account of sale of fixed assets was claimed in the profit and loss account. The said loss, capital in nature and could not have been claimed in the profit and loss account. 21. In view of the aforesaid discussion, we answer the substantial question of law in favour of the Revenue and against the respondent-assessee. We uphold levy of penalty by the Assessing Officer under section 271(1)(c) of the Act. The appeal is disposed of. No costs.\" (Emphasis Supplied) The above judgements are applicable to the facts of the case. In the given facts and circumstances, the AO was justified in levying the penalty u/s 271(1)(c) of the Act on the issue. The order of the Ld. AO of levying penalty is upheld. Accordingly the appeal of the assesse on these grounds is dismissed. 5. Ground of Appeal No. 3 is as under: Ground No. 3: That the appellant craves leave to add, to alter, amend modify, substitute, delete and/or rescind all or any ground of appeal on or before the final hearing, if necessary so arises. 5.1 The appellant has not added and altered any of the above mentioned ground of appeal. Accordingly such mention by the appellant in its ground is treated as general in nature, not needing any specific adjudication and is accordingly treated as disposed off. 6. In the result, the appeal of the appellant is dismissed.” 5. Feeling aggrieved from that finding so recorded by the ld. CIT(A), the assessee preferred the present appeal before this tribunal on the grounds as reiterated here in above. To support the grounds raised by the assessee, 9 ITA No. 03/JP/2025 Shree Prithvi Iron Mills Private Ltd. vs. ACIT ld. AR of the assessee while arguing the appeal of the assessee has relied upon the following written submission: “M/s Shri Prithvi Iron & Steel Mills Pvt. Ltd. Has challenged , in the present Appeal , the order of the CIT(A), Jaipur 04 dated 05.11.2024 by which he has confirmed the order of the ACIT, Circle-04 levying a penalty u/s 271 (1) (c) of the Income-Tax Act (henceforth called as “the Act” )of Rs. 1,17,670/-. A copy of the order of the CIT(A)-04,Jaipur dated 05.11.2024 is enclosed herewith and marked as Annexure A. Brief Facts: The brief facts relevant to the present case are that a survey u/s 133A of the Act was conducted on the factory premises of the assessee at B-190A, Road No. 9F, VKI Area, Jaipur on 09.10.2014. During the course of the survey, some allegedly incriminating documents were found which showed the following (reproduced from the assessment order): 1. Excess cash of Rs. 2,34,127/- was found which was accepted by the assessee during the course of survey proceedings as undisclosed income for the financial year 2014-15 relevant to A.Y. 2015-16; 2. Cash advances of Rs. 2,99,35,000/- were found which was accepted by the assessee during the course of survey proceedings as undisclosed income for the financial year 2014-15 and surrendered for taxation for the F.Y. 2014-15, relevant to A.Y. 2015-16; 3. Discrepancy found in the valuation of stock during the course of survey proceedings of 8.399 MT excess stock which was valued at Rs. 3,62,661/- (approximate) at the time of stock taken physically as compared to stock as per books of account. In response to the queries raised vide order sheet noting dated 11.12.2017, the assessee filed a detailed reply which is reproduced starting from page 2 of the assessment order. The Assessing Officer then went on to state in the assessment order as under: “9. Thus in view of the elaborate factual and legal matrix amount of Rs. 3,62,661/- on account of excess stock found during the course of survey proceedings is held as undisclosed investment of the assessee and an addition of Rs. 3,62,661/- is made to the total income of the assessee u/s 69 of the I.T. Act, 1961. 10. Since I am satisfied that the assessee has concealed his income , penalty proceedings under section 271(1) (c ) are being initiated separately. 11. With these remarks income of the assessee is computed as under:- Returned Income as disclosed by the assessee: Rs. 2,82,19,510/- Add: Addition u/s 69 as discussed above: Rs. 3,62,661/- This assessment order was passed on 20.12.2017 and a copy thereof is annexed herewith and marked as Annexure B. 10 ITA No. 03/JP/2025 Shree Prithvi Iron Mills Private Ltd. vs. ACIT Thereafter, the assessing officer, passed an order of penalty u/s 271 (1) (c) on 06.03.2020 levying a penalty of Rs.1,17,670/-. A copy of the said order is enclosed herewith and marked as Annexure C. This order of the assessing officer was challenged in appeal but the penalty was confirmed by the CIT(A)-04 ,Jaipur. Detailed submissions were made , a copy of which is enclosed herewith and marked as Annexure D. However, the CIT(A) rejected the contentions of the assessee and confirmed the said penalty vide the impugned order dated 05.11.2024. Submissions in Appeal: Ground No. 1 : “That the Ld. CIT(A) has erred in both facts and circumstances of the case in law in passing the impugned Appellate Order dated 05.11.2024.” This Ground of Appeal is general and need no dilation. Ground No. 2: “That the Ld. CIT(A) has erred on facts and in law in levying the penalty of Rs. 1,17,670/- u/s 271(1) (c) of the Income-Tax Act on account of undisclosed investment under section 69 of the I.T. Act and dismissing the appeal on this issue.” It may, at the very outset be stated that penalty proceedings are proceedings independent of assessment proceedings. In a penalty proceedings, law allows fresh evaluation and analysis of the facts of the case, which may be different from the conclusion drawn during assessment proceedings. Hence, facts cannot be automatically be extrapolated from the assessment proceedings to penalty proceedings, they are capable of a fresh analysis and conclusion. It is in this light that the facts of the case leading upto the levy of penalty need to be examined. As stated above, penalty u/s 271(1) (c ) was levied allegedly because of excess stock found during survey conducted on the factory premises of the assessee. According to the AO, the excess stock, being difference between the stock as per books and the physical stock found during survey, was calculated as under in the assessment order: Particulars As per books(MT) Physical Taken(MT) Difference(MT) % difference Angle 1839.315 1844.97 5.655 0.306 Channel 30.115 31.2015 1.100 3.52 Section 93.480 95.124 1.644 1.72 Total 1962.910 1971.309 8.399 0.426 Therefore, the difference in weight based on which the addition was made, and penalty has been levied is a mere 0.426% of the total weight. It is widely known , and even the accounting world states so, that valuation of a closing stock is an approximation especially since valuation can be arrived at in the following 4 ways: 1. FIFO method; 11 ITA No. 03/JP/2025 Shree Prithvi Iron Mills Private Ltd. vs. ACIT 2. LIFO method; 3. Weighted Average method; and 4. Specific Identification method. In fact, the assessee in his written submissions, reproduced at page 3 of the assessment order ,has very categorically pointed this out , in these words: “You have asked reason for difference in finished goods of 8.399 MT , it is submitted that you have taken physical stock on standard weigh, where as in physical stock there are difference in std. size, due mouth cutting for making goods marketable, which reduce actual size in length. Hence, the std. weight of finished goods is higher from actual weight recorded in books. At the time of physical stocking weight was calculated at sectional weight whereas in the records weight was recorded on actual weight.Further, at that time of physical stocking weight was taken on ransom (random?) basis for multiple size stock ( Mixed stock/cut size stock). Thus there is minor difference occurred in the book stock and physical taken at the time of survey , which was actually not exist in actually…” In addition thereto, it is common knowledge that: 1. No two weighing scales give exactly the same weight. In fact, the same weighing scale may differ slightly even for the same goods; 2. The difference of 0.426% is so minor that it can easily be overlooked as because of human error; 3. The AO himself, in the assessment order says that the value of the excess stock is an approximation. Attention is drawn to para 3 ,first page of the assessment order where it has been stated that: “3. Discrepancy found in the valuation of stock during the course of survey proceedings. 8.399 MT excess stock as been valued which worth Rs. 3,62,661/- (approximate) at the time of stock taken physically as compared to stock as per books of account. Therefore, if the value of stock is an estimation, then , it follows , as a consequence, that the addition is based on an estimation. 4. A perusal of the statement of the assessee recorded during the course of survey proceedings , on 09.10.2014 , shows in the answer to Q.25, that the assessee said that there is no difference in stock. A copy of the statement so recorded is enclosed and marked as Annexure E. We place reliance on the following judgements to state that there is no reason for levying a penalty u/s 271(1)(c): (i) Excess Stock Evaluation The excess stock identified during the survey may not necessarily indicate concealment of income. As held in the case of CIT vs. Suresh Chand Gupta (2002), 254 ITR 243 (Delhi), mere discrepancies in stock cannot be treated as undisclosed income unless there is evidence suggesting concealment or misrepresentation. (ii) Lack of Evidence for Additions: The addition of Rs. 3,62,661/ was made after due consideration to the nature of assessee business operations. In CIT vs. A.J.S.H. Charitable Trust (2008), 169 Taxman 131 (Bombay), the Hon'ble Court held that the burden lies on the 12 ITA No. 03/JP/2025 Shree Prithvi Iron Mills Private Ltd. vs. ACIT Assessing Officer to substantiate the addition made, failing which, the addition cannot be sustained. (iii) Imposition of Penalty: The penalty u/s 271(1)(c) is premised on the perception of concealment. In the case of CIT vs. Reliance Petro Products Pvt. Ltd. (2010), 322 ITR 158 (SC). The Supreme Court ruled that mere making of an incorrect claim in the return does not, by itself, amount to concealment of income. Assessee failure to maintain documentary evidence was inadvertent and not intentional, and thus, does not warrant imposition of penalty. (iv) Cooperation with the Assessing Officer: Throughout the assessment proceedings, assessee has cooperated with the Assessing officer and have provided all the information available to him. The decision of CIT vs. Rajesh Kumar (2007), 288 ITR 519 (Delhi), emphasizes the need for assessing officers to show reasonable grounds for dismissal of an explanation provided by the taxpayer. (v) CIT vs. Ashok Kumar Raut (2006) 281 ITR 93 (Gauhati) The Hon'ble High court held that merely because the assessing officer finds discrepancies or misstatements doesn't automatically lead to an assumption of concealed income. The onus is on the department to prove that the discrepancies amount to concealment or an understatement of income. (vi) CIT vs. Sahib Chand Sohan Lal (2000) 245 ITR 327 (P&H) In this case, the Punjab and Haryana High Court observe that the penalty under section 271(1)(c) cannot be levied simply on the basis of discrepancies found during the assessment. There must be clear evidence or intent to conceal income, and if the taxpayer provides reasonable explanations, the penalty should not be imposed. (vii) CIT vs. Ram Singh (2008) 299 ITR 22 (Raj.) The Rajasthan High Court ruled that additions made without providing an opportunity for the taxpayer to explain themselves, or without concrete evidence of unaccounted income cannot be treated as concealment attracting penalty. (viii) M.K. Ahmed vs. ITO (2014) 49 SOT 11 (Delhi) In this decision, the Delhi Tribunal held that for imposing a penalty under section 271(1)(c), there must be clear evidence of wilful concealment or misrepresentation of facts. If the taxpayer offers an explanation that is plausible, the burden may not have been met to justify the penalty (xi) CIT vs. Bhima Sankar Soni (2018) 85 taxmann.com 127 (Gujarat) The Gujarat High Court observed that when discrepancies arise from genuine mistake or oversights rather than intentional concealment, the imposition of penalty should be reconsidered. (x) CIT vs. Reliance Petro Products Pvt. Ltd. (2010) 322 ITR 158 (SC) The Supreme Court laid down the principle that an addition or disallowance does not automatically lead to the levy of penalty. There must be clear evidence of concealment or furnishing of inaccurate particulars of income. 13 ITA No. 03/JP/2025 Shree Prithvi Iron Mills Private Ltd. vs. ACIT \"In the light of judgment in CIT vs Reliance Petro products Pvt Ltd., the Supreme Court reinforced the principle that merely because an addition is made does not result in automatic levy of penalty for concealment of income. There must be clear evidence of intent to conceal, which was not established in my case.\" To sum up, it is clear from the analysis of the facts of the case and judgements cited above, that the alleged difference between the weight as per books of account and as per physical stock-taking was so minute that it should not have been taken cognizance of by the assessing officer. This difference could have been because of human error, or error in the weighing process, or natural difference in different weighing scales. Moreover, there is no mens rea or deliberate attempt to suppress profits, and no evidence has been placed on record to prove so, by the Assessing Officer. In the absence of deliberate & wilful attempt to conceal income, penalty u/s 271(1)(c) is not justified. The penalty, therefore, deserves to be deleted/quashed. 6. The contention so raised in the written submission were supported by a paper book having following evidence / records: Sr. No. Particular Page No. 1 Written submissions 1-8 2 Documents:- Annexure-A- Copy of the order dated 05.11.2024 passed by Ld. CIT(A)-04, Jaipur 9-23 3 Annexure-B Assessment order dated 20.12.2017 24-28 4 Annexure-C Order of penalty u/s 271(1)(c) dated 06.03.2020 29-34 5 Annexure-D- written submissions before CIT(A) 35-38 6 Annexure-E- Statement of assessee dated 09.10.2014 39-53 7. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee there was stock of around 1962.910 MT stock which was taken by the survey team. Looking 14 ITA No. 03/JP/2025 Shree Prithvi Iron Mills Private Ltd. vs. ACIT to the volume it was possible to have found minor error of recording the weight and even the assessee has explained that alleged difference in the assessment proceeding which was reproduced vide para 6 of the assessment order wherein the assessee contended that difference is very nominal and was on account of error and omission while taking the stock by the survey team. In terms of percentage the difference comes to 0.42 % which very nominal and considering the amount being small the assessee has not further disputed that addition before the ITAT the quantum addition. Based on that argument and the decision relied upon in the written submission he submitted that the penalty confirmed is required to be deleted. 8. The ld DR is heard who relied on the findings of the lower authorities and more particularly advanced the similar contentions as stated in the order of the ld. CIT(A). He vehemently argued that the assessee has not challenged the stock working and even when the sum added in the income the same has not been disputed by the assessee and therefore it is clear that there was an unexplained investment made by the assessee. This aspect of the matter is clear at para 1 on page 9 of the order of the ld. CIT(A) and therefore, levy of penalty in the case of the assessee is in accordance with the law and is required to be sustained. 15 ITA No. 03/JP/2025 Shree Prithvi Iron Mills Private Ltd. vs. ACIT 9. We have heard the rival contentions and perused the material placed on record. We note that there are three grounds of appeal but ground no. 1 and 3 being general does not require any findings. Thus, effective ground no. 2 which the assessee challenges relate to the levy of penalty of Rs. 1,17,670/- u/s 271(1)(c) of Income Tax Act on account of undisclosed investment under section 69 of the IT. Act. The brief facts of the dispute are that there was a survey u/s 133A of the Act at the factory premises of the assessee at B-190A, Road No. 9F, VKI Area, Jaipur on 09.10.2014. In that proceeding stock was physical taken and the survey team found discrepancy in the valuation of stock during the course of survey proceedings of 8.399 MT excess stock which was valued at Rs. 3,62,661/- (approximate) at the time of stock taken physically as compared to stock as per books of account. In response the assessee submitted that there is minor difference occurred in the book stock and physical taken at the time of survey , which was actually not exist in actually. In addition thereto, it is common knowledge that no two weighing scales give exactly the same weight. In fact, the same weighing scale may differ slightly even for the same goods. The difference of 0.426% is so minor that it can easily be overlooked as because of human error. The AO himself, in the assessment order says that the value of the excess stock is an approximation. 16 ITA No. 03/JP/2025 Shree Prithvi Iron Mills Private Ltd. vs. ACIT Therefore, if the value of stock is an estimation, then, it follows , as a consequence, that the addition is based on an estimation. Even when the statement recorded during survey proceedings on 09.10.2014 vide answering to Q.25, the assessee stated that there is no difference in stock. Thus, we are of the considered view that there is no clear finding that the in fact the assessee accepted that there exist a excess stock. The bench noted that the survey proceeding the stock quantity taken within the short time and the considering the quantity measure the difference of 0.426 % cannot establish that there exist an unexplained excess stock in the hands of the assessee. Merely the assessee has not challenged that addition it cannot be reason to levy the penalty. Penalty proceedings are quasi criminal proceedings and are separate from the assessment proceedings. Merely the assessee has accepted the alleged difference and offered the tax on that small difference in stock cannot be conclusive evidence that in fact there exist a excess stock investment by the assessee. Even the assessee holds stock of 1962.10 MT the difference to the extent of 0.426 % can happen because of recording the quantity weight in the survey proceeding. Thus, considering the possibility of the difference in scale and recording the quantity there must exist some error or omission which gives the minor difference in quantity which the assessee even in the statement 17 ITA No. 03/JP/2025 Shree Prithvi Iron Mills Private Ltd. vs. ACIT recorded has not accepted be considered as unexplained investment in the hands of the assessee when the assessee has already recorded huge stock the allegation of excess stock to the extent of Rs. 3,63,661/- and that too on account of stock taking process cannot be said to be unexplained investment of the assessee and therefore, we do not find any reason sustain the penalty on such minor difference in quantity as concealment of income and thereby liable for penalty as per provision of section 271(1)(c) of the Act. We get strength of our view from the decision of apex court in the case of CIT Vs. Reliance Petro Products Private Limited [ 322 ITR 158 ] wherein the highest court has observed that “Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature.” Here in this case the explanation of the difference in stock was not accepted by the revenue, which was the reasons for difference in stock automatically cannot be considered as an attempt the conceal the income by the assessee. Thus, considering that set of facts do not see any reason 18 ITA No. 03/JP/2025 Shree Prithvi Iron Mills Private Ltd. vs. ACIT to sustain the penalty levied and thereby direct the ld. AO to delete the penalty levied for an amount of Rs. 1,17,670/- thereby allowing the ground no. 2 raised by the assessee. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 26/03/2025. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 26/03/2025 *Ganesh Kumar, Sr. PS vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Shree Prithvi Iron Mills Private Ltd., Jaipur 2. izR;FkhZ@ The Respondent- ACIT, Circle-04, Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 6. xkMZ QkbZy@ Guard File (ITA No. 03/JP/2025) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar "