Income Tax Appeal No. 261 of 2005 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH --- Income Tax Appeal No. 261 of 2005 Date of decision: 8.11.2010 Ramesh Chander Gupta --- Appellant Versus Income Tax Appellate Tribunal, Amritsar and others --- Respondents CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL. --- PRESENT:Mr. Akshay Bhan, Advocate for the appellant. Ms. Savita Saxena, Govt. Standing Counsel for the respondents. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-tax Act, 1961 (for short “the Act’”) has been filed by the assessee against the order dated 31.8.2004, passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar, (SMC) (in short “the Tribunal”) in ITA No. 332/ASR/1999 relating to the assessment year 1995-96. Income Tax Appeal No. 261 of 2005 2 The point for consideration in this appeal is, whether the Tribunal was justified in sustaining penalty under Section 271(1)(c) of the Act on the ground that there had been concealment of income by the assessee? Briefly stated the facts of the case as narrated in the appeal are that on 5.8.1994, a survey was carried out under Section 133-A of the Act at the business premises of the assessee-appellant. The surveying authority found the stock of Ist and 2nd Class bricks in excess to the tune of 28750 and 45280 respectively whereas the 3rd class tiles were found short to the extent of 63400. The Income Tax Officer, on the basis of the above, vide order dated 24.11.1997, made addition of Rs. 44,380/- on account of shortage in stock of 3rd class tiles and Rs.44,383/- were added on account of excess stock of bricks of Ist and 2nd Classes. Appeal of the assessee against the order of the Income Tax Officer was dismissed by the Commissioner of Income-tax (Appeals) {in short “the CIT(A)”}, vide order dated 1.7.1998. Even the application moved by the assessee for rectification of the order dated 1.7.1998 was also dismissed. The assessee preferred appeal before the Tribunal. The Tribunal partly accepted the appeal by holding that in the case of short stock of 63400 tiles of 3rd Class, G.P. rate was to be applied but the addition having been made on the entire amount was wrong to that extent. The Tribunal, thus, directed to adopt the profit rate with respect to short stock of 3rd class tiles found at the time of survey and restricted the addition to Rs. 7163/- instead of Rs. 44,380/- made by the assessing officer. While passing assessment, the assessing officer also Income Tax Appeal No. 261 of 2005 3 ordered for initiation of proceedings under Section 271(1)(c) of the Act and in pursuance of the said proceedings, a penalty of Rs. 23,740/- was imposed on the appellant, vide order dated 23.12.1998, Annexure A-1. The CIT(A) on appeal by the assessee deleted the penalty vide order dated 18.3.1999, Annexure A-2, against which the Revenue went in appeal before the Tribunal. The Tribunal, vide order dated 31.8.2004, reversed the order passed by the CIT(A) and held that the deletion of penalty was not justified. It was ordered that the penalty be calculated on the basis of the amount of addition finally sustained by the Tribunal. It is how the assessee is in appeal before us. We have heard learned counsel for the parties and have perused the record. The Tribunal had set aside the order of the CIT(A) and directed the assessing officer to re-compute the amount of penalty on the basis of the amount which was finally sustained by it. The Tribunal while reversing the order of the CIT(A) cancelling the penalty had categorically held that the addition had not been made on the basis of estimate as recorded by the CIT(A) but on actual physical verification of stock by the assessing officer during survey on 5.8.1994. The findings recorded by the Tribunal in para 5 of its order read thus: “We have considered the rival submissions in the light of material placed before us and precedents relied upon. In so far as the question of recording satisfaction by the AO is concerned, we find that the same has been duly recorded in the assessment order in last para of page 2 by observing “the assessee has either sold bricks outside the books of account or manufactured bricks outside the books of Income Tax Appeal No. 261 of 2005 4 account. Hence, the value of this difference is added back in the income of the assessee as concealed income.” These observations of the AO in addition to the initiation of penalty at the end of the assessment order clearly demonstrate that the satisfaction was duly recorded at the assessment stage. Coming to the merits of the case, we note that the assessee was found to be having excess stock of first and second class bricks at the time of survey. Inventory was prepared and duly signed by the assessee. This is not the case where some stock was found in excess by the Survey party and the assessee settled the dispute by agreeing for certain additions subject to no penalty. On the contrary, the tribunal being the final fact finding authority, vide para 6 of its order in quantum has recorded a categorical finding as under: “Since stock with respect to first class and second class bricks has been found in excess and inventory prepared at the time of survey had duly been signed by the assessee, therefore, the addition in this regard is called for and the same has rightly been made by the AO at Rs. 43,483/- by adopting the sale rate of Rs. 725/- and 500/- per thousand bricks with respect to first and second class bricks respectively.” In view of the foregoing finding, it becomes crystal clear that the assessee was having excess stock of first and second class bricks which was not accounted for in the books of account. It is true, as contended by the ld. AR that penalty proceedings are different from assessment proceedings and Income Tax Appeal No. 261 of 2005 5 the confirmation of addition in question does not lead to automatic conformation of penalty. In such circumstances, the onus is on the assessee to prove that the mischief of Section 271(1)(c) is not attracted. In view of the finding given by the Tribunal, in the present case, the inescapable conclusion that follows is that there was actual difference in stocks and the assessee has not succeeded in bringing out its case from the ambit of the penal provision. In so far as the contention of the learned A.R. regarding the addition made on estimate is concerned, we are satisfied that the same is not correct because a specific quantity of bricks was found to be available outside the books of account and by simply applying the sale rate of such specific quantity, it cannot be said that the very basis of the addition is making of the estimate. Similar is the case regarding the shortage in stock of third class tiles where the addition was made at Rs. 44380/- on the basis of the value of the stock but the tribunal restricted the addition to Rs. 7,163/- by holding that only the GP rate of such sales be applied. In such circumstances, we hold that the deletion of penalty by the first appellate authority was not justified. We order accordingly and direct the AO to recompute the quantum of penalty on the basis of the amount of addition finally sustained by the Tribunal.” Further, in Income Tax Appeal No. 102 of 2006, filed by the present assessee, addition made by the assessing officer has been upheld and the appeal dismissed. Income Tax Appeal No. 261 of 2005 6 No error could be pointed out by the counsel for the assessee in the findings recorded by the Tribunal as noticed above. An attempt was made by the counsel for the appellant for re-appreciation of material on record, but the same does not fall within the domain of Section 260A of the Act. In view of the above, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) November 08, 2010 JUDGE *rkmalik*