Income Tax Appellate Tribunal - Pune
Shri Rajan H. Shinde vs Dy. Commissioner Of It, Sr 1 on 11 May, 2006
ORDER
C.L. Sethi, Judicial Member
1. In this case, these two appeals, one by the assessee and the other by the Revenue, were heard by the Division Bench of this Tribunal. As a result of difference of opinion between the Accountant Member and the Judicial Member in regard to the following questions, the issues were referred to a Third Member by the Hon'ble President, ITAT, Under Section 255(4) of the Act:
ITA No. 423/PN/94Whether on the facts and in the circumstances of the case, the CIT (A) is justified in confirming the penalty levied by AO Under Section 27l(J)(c) of the Act in respect of the amount of Rs. 3,00,704/- on account of alleged undisclosed investment by the assessee in Balaji Apartments?ITA No. 455/PN/94
Whether on the facts and circumstances of the case, the CIT (A) is justified in deleting the penalty levied by the AO Under Section 271(1)(c) of the Act in respect of the following additions:
(i) Addition on account of GP Rs. 7,36,323/- (ii) Unexplained investment in deposit Rs. 40,000/- (iii) Disallowance of depreciation Rs. 2,30,374/
2. With regard to the question referred to in appeal filed by the assessee ITA 423/PN/94, the Id Accountant Member of the Bench came to the conclusion that no penalty Under Section 271(1)(c) is leviable for the reasons discussed in detail in Tribunal's order in ITA No. 850/PN/97 relating to the assessment year 88-89 and accordingly, penalty sustained by the CIT (A) in respect of the amount of Rs. 3,00,704/- was not justified, whereas the Id Judicial Member held otherwise that penalty Under Section 271(1)(c) was imposable with respect to the said amount.
3. With regard to the question referred to in appeal filed by the Revenue ITA No. 455/PN/94, the Id Accountant Member of the Bench came to the conclusion that the CIT (A) was justified in holding that no penalty is leviable in respect of the gross profit addition, disallowance of depreciation and as well with regard to the deposit, whereas the Id Judicial Member held otherwise that the CIT (A) was unjustified in deleting the penalty with respect to these amounts.
4. The Hon'ble Vice-President (M2), Shri K.P.T. Thangal, as a Third Member, vide his order dt 11th May, 2006, agreed with the view of the Id Accountant Member on the issues referred to him.
5. Thus, by majority view, we hold that the CIT (A) was not justified in confirming the penalty levied by the AO Under Section 271(1)(c) of the Act in respect of the amount of Rs. 3,00,074/- on account of alleged undisclosed investment by the assessee in Balaji Apartments, and the CIT (A) was justified in deleting the penalty levied by the AO Under Section 271(1)(c) in respect of the addition on account of gross profit of Rs. 7,36,323/-, unexplained investment in deposit of Rs. 40,000/-and disallowance of depreciation of Rs. 2,30,374/-.
6. No other issues were involved in these appeals filed by the assessee as well as by the Revenue.
7. In the result, the appeal filed by the assessee is allowed and the appeal filed by the Revenue is dismissed.
8. This confirmatory order was announced in the open Court on 25.5.06.
ORDER
1. As there arose a difference of opinion between the Members, the Hon'ble President referred the following questions Under Section 255(4) of the Income Tax Act, 1961, for my opinion as Third Member:
ITA No. 423/PN/1994Whether on the facts and in the circumstances of the case, the CIT(A) is justified in confirming the penalty levied by AO under Section 271(1)(c) of the Act in respect of the amount of Rs. 3,00,704/- on account of alleged undisclosed investment by the assessee in Balaji Apartments?ITA No. 455/PN/1994
Whether on the facts and circumstances of the case, the CIT(A) is justified in deleting the penalty levied by the AO Under Section 271(1)(c) of the Act in respect of the following additions:
(i) Addition on account of GP Rs. 7,36,323/- (ii) Unexplained investment in deposit Rs. 40,000/- (iii) Disallowance of depreciation Rs. 2,30,3 74/- 2. Facts, briefly, is as under:
Assessee filed the return for the assessment year 1989-90 on 28.08.1990 declaring Nil income. The income declared was share profit from Venkateshwara Bulk Carriers, income from proprietary concern M/s Shree Balaji Traders and from plying of trucks. Subsequently, the assessee revised the return on 09.07.1991 again declaring Nil income but assessee claimed carried forward depreciation. According to the assessee, the revised return was necessary because assessee had not shown the share of profit of Rs. 10,850/- from M/s Kolhapur Ice & Cold Storage.
3. The business of M/s Shree Balaji Traders was newly commenced by the assessee in November 1987 and the period is up to 31.03.1989. AO made an addition of Rs. 7,36,323/- and penalty proceedings were also initiated.
4. AO also brought to tax a further amount of Rs. 40,000/- being cash deposit by the assessee in November 1987, which was not reflected in the books of account. Again penalty proceedings initiated on this count as well.
5. The third addition was depreciation claimed but disallowed amounting to Rs. 2,30,374/- in respect of vehicle No. CRA 5402. The truck was registered with RTA on 30.03.1989 but there was no evidence that the truck was used for business purposes. Penalty proceedings were initiated.
6. Minimum penalty leviable on these three counts was Rs. 5,24,756/- but the AO imposed penalty of Rs. 10.00 lakhs.
7. Assessee appealed before the CIT(A). He held that no penalty could be levied in respect of GP addition for the reason that in fact there was no evidence, and no case for the AO even that there was suppression of sales. According to the CIT(A), the notings of the AO was indicative of the fact that there was neither suppression of sales nor inflation of purchases, because the AO himself has made a specific reference in Para 13 of his order that sales were supported by vouchers. It was further noted that the trading account seized during the course of search and seizure action did not correctly incorporate the actual figures of sales and expenses. It was noticed, in fact the assessee himself shown more sales in the fair books than the seized papers. Similarly, in recasting the accounts, transportation charges were assumed by the AO, on estimate basis, was less than actually reflected in the transport charges account. Processing charges also estimated on a lesser figure whereas the actual shown by the assessee was more. Hence, it was contended and accepted that the GP addition made on estimate basis is without any basis. Relying upon the decision of the jurisdictional High Court in the case of CIT v. Devandas Perumal & Co., reported in 140 ITR 943 (Bom), CIT(A) held that no penalty could be levied on account of estimate of profit, where suppression of sales or inflation of purchases not detected. He also taken note of the decision of the Hon'ble Punjab & Haryana High Court in the case of CIT v. Metal Products of India, reported in 150 ITR 714 (P & H). He distinguished the decision of the Hon'ble Madras High Court in the case of Addl. CIT v. E Bhoopathy, reported in 113 ITR 188 (Mad) and held that in that case sales were found to be not correctly shown and sales were enhanced; whereas in the case of the assessee, sales are accepted. He held, there cannot be penalty on the GP addition of Rs. 7,36,323/-, but for the remaining amount of Rs.3,00,704/-, which was claimed to be capitalised by the assessee himself being investment in Balaji Apartments, penalty was justified.
8. Coming to the other addition of Rs. 40,000/-, CIT(A) observed that the deposit was made in November 1987 and therefore addition could be made in the assessment year 1988-89 and not in the assessment year 1989-90. Hence the CIT(A) cancelled the penalty levied on this amount as well.
9. Coming to the third addition of Rs. 2,30,374/-, CIT(A) observed that penalty was imposed on Rs. 2,30,374/-, which was cost of the asset itself and not on depreciation. He held, there was no dispute that the truck was registered on 30.03.1989 and was owned by the assessee. Assessee owned five trucks and the moment new truck was registered by the RTO, it was ready for use. Hence the assessee's claim that depreciation is allowable was favourably considered and accepted by the CIT(A), relying upon the decision of the Hon'ble Madras High Court in the case of CIT v. Vayithri Plantations Ltd., reported in 128 ITR 675 (Mad) and also decision of the Hon'ble Delhi High Court in the case of capital Bus Service P. Ltd. v. CIT, reported in 123 ITR 404 (Del).
10. Revenue appealed against the cancellation items whereas the assessee objected confirmation of minimum penalty on Rs. 3,00,704/-.
11. Revenue relied upon the decision of the Hon'ble Supreme Court in the case of B A Balasubramaniam & Bros. v. CIT, reported in 157 CTR 556 (SC), in support of the contention that where the difference between the assessed income and returned income was more than 20%, Explanation to Section 271(1)(c) as applicable and it was for the assessee to discharge the onus as contemplated in the said Explanation and the onus had not been properly discharged. Revenue also relied upon the decision of the Hon'ble Allahabad High Court in the case of Sushil Kumar Sarad Kumar v. CIT, reported in 232 ITR 588 (All), wherein penalty was confirmed in a case where additions were made to the income based on estimate. Revenue also relied upon the decision of the Hon'ble Kerala High Court in the case of CIT v. Gates Foam & rubber Co., reported in 91 ITR 467 (Ker).
12. On the other hand, in regard to GP addition, assessee relied upon the decisions of the jurisdictional High Court in the case of CIT v. Mohammed Yaqub Mohamad Ibrahim & Co., reported in 143 ITR 67 (Bom) and in the case of CIT v. B D Ramachandra, reported in 150 ITR 242 (Bom). Assessee also relied upon the decisions of the Tribunal reported in 10 ITD 348 (Del) and 63 ITD 364 (Mum). In regard to the addition of Rs. 40,000/- representing deposit made, assessee relied upon the decision of the jurisdictional High Court in the case of Jai Narain Babulal v. CIT, reported in 170 ITR 399 (Bom). Coming to the penalty on account of disallowance of depreciation, assessee relied upon the decision of the Pune Bench of the Tribunal in the case of Mirje Brothers v. ACIT in ITA No; 1620/PN/1991 dated 17.05.1999, which in turn followed the decision of the jurisdictional High Court in the case of Whittle Anderson Ltd. v. CIT, reported in 79 ITR 613 (Bom) and the decision of the Hon'ble Madras High Court in the case of CIT v. Vayithri Plantations Ltd. (supra).
13. The learned AM confirmed the deletion of the addition made on account of unexplained investment in deposit and disallowance of depreciation. Coming to the GP addition, he noted that in the earlier year, i.e. 1988-89, the CIT(A) himself had taken a view that there was nothing on record to suggest that the investment in Balaji Apartments was made by the assessee, except assessee's own voluntary statement, that too based on the settlement with Shri Banne, the ostensible owner of the property.
14. However, the learned JM differed on all these points with the proposed order of the AM. Placing reliance upon the decision of the Hon'ble Kerala High Court in the case of CIT v. Gates Foam and Rubber Company, reported in 91 ITR 467 (Ker), wherein the Hon'ble High Court observed "the presumption provided for in Section 271(1)(c) applied to the facts of the case and penalty had to be imposed", learned JM held, the same decision is applicable in the instant case of the assessee also. Again he agreed with the learned CIT DR and placed reliance upon the decision of the Hon'ble Allahabad High Court in the case of Sushil Kumar Sarad Kumar v. CIT, reported in 232 ITR 588 (All), wherein the Hon'ble High Court held that addition made to the income based on estimate, considering the evidences, penalty proceedings initiated should be upheld. The relevant observation of the Hon'ble High Court has been reproduced at Page 11 and 12 of the order of JM. He also placed reliance upon the decision of the Hon'ble Supreme Court in the case in 157 CTR 556 (SC) supra.
15. Learned JM held, since on the basis of search material and after detailed enquiry/investigation AO reached the conclusion that there was non-maintenance of bills/vouchers for en-route purchases to the extent of Rs. 2,23,49,616/-, non- maintenance of day-to-day stock register, admission of the assessee himself that the undisclosed income has been invested in the construction of Balaji Apartments and GP declared was too low, the penalty on estimated addition was justified and validly imposed. He held, therefore, the restriction on penalty imposable onRs.3,00,704/- was not justified.
16. Coming to revenue's appeal, deleting the penalty on Rs. 40,000/-, learned JM held, the accounting period involved is transitional period and the month of November falls in this transitional period and also close to the relevant financial year covered within the previous year of the assessee. Assessee was unable to explain the source of deposit for obtaining the bank guarantee. Hence the addition was rightly mad and therefore penalty, he held, was aITRacted and order of the CIT(A) was reversed on this point.
17. Coming to the addition of Rs. 2,30,374/-, i.e. made on account of disallowance of depreciation on truck, learned JM noted, the case of the assessee is that it was registered on 30.03.1989 but there was no evidence of use and no evidence of even kept ready for use. He further noted, nothing found to have been shown spent as per the books of account either for obtaining a permit or any expenditure on account of diesel, oil or any other related expenditure. Hence, he held penalty was aITRacted.
18. Learned Counsel for the assessee, inviting my attention to Para 16 of the proposed order of the AM, submitted that the GP addition was made on estimate basis and therefore the learned AM came to the conclusion that penalty Under Section 271(1)(c) is not leviable in respect of estimated additions. Learned Counsel relied upon the decisions of the jurisdictional High Court in the case of CIT v. Mohammed Yaqub Mohamed Ibrahim & Co. (supra) and in the case of CIT v. Devandas Perumal & Co. (supra). He also relied upon the decision of the decision of the jurisdictional High Court in the case of CIT v. BD Ramachandra (supra). Learned Counsel submitted, if no suppression/inflation of sales or purchase is detected, mere estimation of profits does not follow that there was a failure to return correct income due to fraud or gross or willful neglect. Learned Counsel further submitted, the decision relied upon by the revenue in the case of AK Bashu Sahib v. CIT, reported in 108 ITR 736 (Mad) was considered by the Hon'ble Madras High Court again in the case of CIT v. Smt K Meenakshi Kutty, reported in 258 ITR 494 (Mad) and thereafter it was held that the estimation made does not lead to the conclusion that there was concealment of income or gross or willful neglect in estimating the income. Learned Counsel, again relying upon the decision of the Hon'ble Rajasthan High Court in the case of Shiv Lal Tak v. CIT, reported in 251 ITR 373 (Raj) submitted, mere addition to returned income by applying flat gross profit rate agreed to by the assessee is not sufficient ground to levy the penalty, even if the assessee is not in a position to vouch each and every detail of expenses entered in the books of account. He also relied upon the decision of the Hon'ble Punjab & Haryana High Court in the case of CIT v. MM Rice Mills, reported in 253 ITR 17(P&H).
19. Coming to the revenue's appeal against the cancellation of penalty, learned Counsel for the assessee submitted, relying upon the decision of the jurisdictional High Court in the case of Jai Narain Babulal v. CIT (supra), mere addition of an amount from undisclosed source in a particular year will not ipso facto lead to penalty in that year. The issue can still be considered. Learned Counsel submitted, previous year for income from undisclosed source is financial year, Hence he supported the order of the CIT(A) on this point. For the same proposition, he also relied upon the Third Member decision of the Tribunal in the case of ITO v. Patil Automobiles, reported in 79 TTJ (Pune) (TM) 359. In this case the Third Member held, mere offering of an additional income because the assessee could not explain the credits owing to adverse circumstances, in the absence of any detailed enquiries regarding these credits by the revenue authorities, and also in the absence of any incriminating evidence against the assessee, is not sufficient to levy the penalty Under Section 271(1)(c).
20. Coming to the depreciation point, wherein the revenue is in appeal, learned Counsel for the assessee supported the order of the CIT(A) and submitted, even if the addition is made correctly, penalty cannot survive and it was rightly deleted by the CIT(A).
21. As against this, the learned Departmental Representative submitted, the additions were made on account of seized materials; particularly, he brought my attention to Para 3 of the assessment order. There was building construction going on and undisputedly the assessee made the investment, which was claimed to be made from certain income offered under voluntary disclosure, vide letter dated 08.03.19991, addressed to CIT, Kolhapur. In other words, assessee himself admits undeclared income. This fact has been rightly taken note of by the AO while levying the penalty. Learned DR particularly submitted, the GP disclosed by the assessee was too low. The evidences were collected during the search and seizure action. Even according to the assessee there were unexplained investments and these investments are reflected in the books of account of the assessee, i.e. M/s Shree Balaji Traders. As per the seized material for the period November 1987 to June 1988, the profit works out to Rs. 12,09,266/-. The total sale for the period was Rs. 1,92,20,768/-. The milk processing charges were not considered. On this basis, AO noticed that the total sale of milk for the year was Rs. 6,75,81,784/-. So the proportionate milk processing charges comes to Rs. 4,68,812/-. From the above, the profit after considering the proportionate milk processing charges for the period comes to Rs. 7,40,454/-. Learned DR submitted, the gross profit was calculated after taking note of transport charges and proportionate milk processing charges at 3.85%. Hence the learned DR submitted, higher gross profit estimated by the AO was on the basis of seized materials and was not mere guesswork. He submitted, even the assessee himself has admitted that he had made investment in the building "Balaji Apartment" at Rs. 2,67,704/- and Rs. 33,000/- in residential premises. There is no justification in cancelling penalty levied on this count. Hence the learned DR submitted, penalty was rightly held as leviable on the entire amount of Rs. 7,36,323/- by the learned JM.
22. The learned DR also submitted that the unexplained investment in deposit amounting to Rs. 40,000/- was not explained by the assessee and hence this amount was rightly considered by the AO while levying the penalty and upheld by the learned JM.
23. Coming to the other addition of Rs. 2,30,374/- being the disallowance of depreciation, which was considered for levy of penalty, learned DR submitted, there was no evidence that the truck was put to use in the year under consideration. The truck was registered only on 30.03.1989. Assessee had not claimed any expenses for petrol, diesel, etc. Learned DR submitted that the learned JM rightly noted that there was no evidence to come to the conclusion that the vehicle was kept ready for use after registration.
24. The learned DR further submitted, the assessee has not preferred any appeal on quantum, which itself tacitly an admission that the additions were rightly made. He brought my attention to the decision of the Hon'ble Madras High Court in the case of P Govindaswamy v. CIT, reported in 244 ITR 510 (Mad) and submitted, admission by the assessee that certain amounts added to his income, constitute concealed income and penalty is leviable. Relying upon the decision of the Hon'ble Karnataka High Court in the case of CIT v. Aboo Mohmed, reported in 250 ITR 313 (Kar), learned DR submitted, assessee cannot claim immunity under amnesty scheme in respect of the amount detected as a result of search. Again the learned DR relied upon the decision of the Hon'ble High Court in the case of Sushil Kumar Sarad Kumar v. CIT (supra), wherein their Lordships upheld the penalty levied Under Section 271(1)(c) on an estimated addition. Relying upon the decision of the Hon'ble Rajasthan High Court in the case of Yashwant Singh v. CIT, reported in 212 ITR 207 (Raj), learned DR submitted that in the instant case the additions were made after detailed enquiry and confronting the assessee with the evidences. Assessee could not rebut the factual position; hence, the penalty was rightly levied by the AO. On this point also the learned DR supported the order of the learned JM. Learned DR, supporting the order of the learned JM and the decision relied upon in the case of CIT v. Jeevanlal Sah, reported in 205 ITR 244 (SC), submitted that in the instant case of the assesses, assessee has not been able to discharge the onus which was on him under the Explanation notwithstanding the fact that income was assessed on estimate basis.
25. Replying to the above, learned Counsel for the assessee submitted, Section 3 of the Income Tax Act, 1961, has been amended and now the previous year means financial year and this is applicable for the pending appeals as well.
26. Replying to the contention of the learned DR that the additions were made on the basis of seized material, learned Counsel submitted, as far as the assessee is concerned, there is no suppression. Assessee has shown more sales and less expenses than the paper seized indicate. One of the points noted by the AO against the assessee is that the assessee has not kept stock register. This alone is not sufficient to vitiate the assessee with adverse consequences. In fact, Balaji Apartments does not belong to the assessee. Learned Counsel distinguished the decisions relied upon by the learned DR reported in 244 ITR 510 (Mad), 250 ITR 313 (Kar) and 232 ITR 588 (All) cited supra. He submitted, it is true that Anwar All's case is no more a good law but the assessee's explanations were bona fide and on facts, therefore, even under the Explanation, penalty cannot be levied upon the assessee. Mere absence of supporting evidence, is not sufficient and equal to say that the expenses are inflated. Learned Counsel produced a copy of the order of the Tribunal in ITA No: 943, 944 and 945/PN/1994 dated 30.05.2005 in the case of Illumination India v. ACIT, wherein the Tribunal deleted the penalties holding that the offer of higher income to avoid protracted litigation and to buy peace alone is not sufficient to aITRact the penalty. In such a case, Tribunal held, the burden is on the Department to prove that the income had actually been concealed in the original return. This is particularly so, where in the assessment order no specific finding on discrepancies are brought out. Hence, the learned Counsel submitted that the penalty is liable to be deleted even on the portion, i.e. to say Rs. 3,00,704/-retained by the CIT(A).
27. Considering the rival submissions and going through the orders of the revenue authorities, I am of the opinion that the view taken by the learned AM is to be accepted as the correct view. As rightly noted by the learned AM, jurisdictional High Court has taken clear view in the case of CIT v. Mohammed Yaqub Mhd. Ibrahim & Co. and in the case of CIT v. BD Ramachandra, cited supra, that there cannot be penalty Under Section 271(1)(c) in respect of GP addition made on estimate basis. The learned JM, on the other hand, held that the decision of the Hon'ble Supreme Court is to be preferred over the decision of the High Court or of the Tribunal. On this proposition there cannot be any controversy. The decision of the Hon'ble Supreme Court in the case of B A Balasubramaniam & Bros. v. CIT, reported in 236 ITR 977 (SC) is clearly distinguishable on facts. This was a case wherein the Hon'ble Supreme Court held, invoking Explanation to Section 271(1)(c), that the assessee had not been able to discharge the onus, which was on it under the Explanation. Coming to the instant case of the assessee, the distinguishing facts can be summed up as under:
At Para 13 of the assessment order, AO himself records that assessee was asked to produce vouchers for sale and purchases. He found that the sales are supported by vouchers whereas the purchases are not supported by vouchers. From the above, it is clear that the purchase and sales, indirectly, are not disputed. There cannot be any sale without purchases. If the sales are vouched, consequences naturally follow. Only for en-route purchases, there were no vouchers. In the nature of purchase, this is not possible either. These were from various parties and the assessee himself was in the first year of his business. Secondly, assessee had shown more sales in the fair book than the seized material. While recasting the accounts in the assessment order, the transportation charges are assumed on estimate basis by the AO whereas actual transportation charges reflected are much less in the fair book. Even the milk processing charges estimated by the AO is a lower figure than the actual processing charges shown by the assessee. All these indicate that the estimation was not completely and clearly on the basis of seized material.
28. Coming to the second addition of Rs. 40,000/-, the learned AM had taken the view that this addition could be made only in the assessment year 1988-89 and not in the assessment year 1989-90 since the deposit was made in November 1987 and rightly so.
29. Coming to the third addition of Rs. 2,30,374/-, which was also one of the components for imposing the penalty, I am of the view that the learned CIT(A) rightly held that this cannot be treated for levy of penalty and the learned AM rightly accepted this view for the reason that the truck was registered on 30.03.1989 and it was kept ready for use. I am of the view that the learned JM's reasoning that no expenditure on petrol, diesel, etc. has been claimed and therefore inspite the fact that the vehicle has been registered in the name of the assessee the truck cannot be treated as kept ready for use, is without merit.
Mere non-filling of petrol, diesel, etc. does not lead to a conclusion that the vehicle was not ready. It only indicates that it was not on actual use. At that point of time the jurisdictional High Court was taking the view that if the vehicles were kept ready for use; that was sufficient to claim depreciation.
30. The decisions relied by the learned DR are distinguishable on facts. In the case reported in 232 ITR 588 (All) supra, the Hon'ble Allahabad High Court held that under what circumstances penalty can be levied, where the additions were made on estimate basis. The relevant portion reads as under:
The findings recorded in the assessment order constitute good evidence in the penalty proceedings but those findings cannot be regarded as conclusive for the purposes of the penalty proceedings. In deciding whether penalty can be imposed in a given case, the entirety of the circumstances must be taken into account. There may be cases where additions may be made purely on estimate without reference to any evidence/materials being on record. In such a case, it could be argued with same force that penalty cannot be levied on the figures which are merely based on guess work or estimate. But in a case where after detailed investigation, the assessee was confronted with evidence and materials and he failed to dislodge the factual position on the basis of which additions were made, the case stands on a different footing. In such a case, it is always open to draw an inference of concealment or of furnishing inaccurate particulars of income, resulting from deliberate underestimate of income. In other words, the income-tax authorities must be satisfied on examination of the cumulative effect or the entirety of the circumstances that the only reasonable inference from such factors or material that could be drawn was that the disputed amount added as a result of estimate, represented income and that the assessee had concealed particulars of income or had furnished inaccurate particulars thereof.
31. Offering of income by the assessee ipso facto, does not tantamount to admission of suppression and does not lead to penalty. From the decisions cited and quoted, it is clear that in addition to the offer by the assessee, the revenue has to analyse the seized material to come to an independent finding to that effect. Coming to the facts in the case of the assessee, addition is made on account of GP. The discrepancy in the calculation of GP and enhancement by the AO has been clearly brought out hereinabove in Para 27. In short, I am of the view that this is not a fit case to levy the penalty and therefore I concur with the order of the learned AM.
32. The matter will now go before the regular Bench for deciding the appeals in accordance with the opinion of the majority.
ORDER B.L. Chhibber, Accountant Member
1. As there is a difference of opinion beetween the Accountant Member and the Judicial Member, the matter is being referred to the President of the Income -tax Appellate Tribunal with a request that the fellowing questions may be the President may desire:
I.T.A No. 423/PN/94 Whether on the facts and in the circumstances of the case, the CIT(A)is justified in confirming the penalty levied by A.O.Under Section 271(1)(c) of the Act in respect of the amount of Rs-3,00,704/-on account of alleged andiselosed by the assessee in Balaji Apartments?
I.T.A No. 455/PN/94 Whether on the facts and circumstances of the case. The CIT(A) is justified in deleting the penalty levied by the A.O. Under Section 271(1)(c) of the Act in respect of the following additions:
i) Addition on account of G.P Rs. 7,36,323/- ii) Unexplained investment in Rs. 40,000/- deposit iii) Disallowance of depreciation Rs. 2,30,374/- ORDER B.L. Chhibber, Accountant Member
1. There cross appeals arise out of the order of the C.I.T.(A), Kolhapur, giving partial relief in the quantum of penalty levied by the A. O. Under Section 271(1)(c) of the Income-tax Act. Both the parties are aggrieved by the order of the ld. CIT(A).
2. The return for the assessment year 1989-90 was filed on 23.8.1990 declaring income at Rs NTL. The income shown in the return was share profit from M/s Venkateshwara Bulk Carriers, profit from the proprietary concern M/s Sharee Balaji Traders and income from plying of trucks. Subsequently, revised return was filed on 9.7.1991 again declaring NIL income, but after the revised claim of carried forward depreciation. The revised revised return was necessary because the assessee had not shown his share of profit of Rs. 10,850/- from M/s Kolhapur Ice & Cold Storage.
3. During the course of assessment proceedings. The A.O dealt with the proprietary business of M/s Shree Traders. This business was newly started by the assessee from November, 1987 to 31.3.1989, For the detailed reasons given by him and also based on certain diaries found during the course of search, the A.O made a G.P. addition of Rs. 7,36,323/-. For this addition, penalty proceedings were initiated.
4. The A.O brought to tax an amount of Rs. 40,000/-which represented the cash deposited by the assessee in November, 1987 which deposit was not reflected in the books of account. For this addition also, penalty was initiated. The third addition was on account of disallowance of depreciation Rs. 2,30,374/-in respect of vehicle No. CRA 5402. According to the A.O. though the truck was registered with the R.T. authorities as on 30.3.89 there was no evidence that the said truck was used for the purpose of business. For this addition also, penalty proceedings were initiated.
5. Subsequently, the A.O levied penalty Under Section 271(1)(c) of the Act in respect of the following additions:
i) Addition on account of G.P, Rs. 7,36,323/- ii) Unexplained investment in deposit Rs. 40,000/- iii) Disallowance of depreciation Rs. 2,30,374/- While the minimum penalty was leviable at Rs. 5,24,756/- the A.O imposed a penalty of Rs. 10 lakhs,
6. In appeal, the ld. CIT(A) for the reasons discussed in detail in paras 5 & 6 of his order, held that no penalty was leviable in respect of G.P. addition. This conclusion of the CIT(A) was based mainly on account of the fact that there was no evidence that there was any suppression of sales. In fact, ho gave reference to the specific finding of the A.O in para 13 of the assessment order that sales were supported by vouchers. According to the CIT(a) that action of the A.O itself indicated that there was neither suppression of sales nor inflation of purchases nor was there any finding during the course of search and seizure or during the course of scrutiny that some suppression of sales or inflation of purchases had taken place. In fact, it was pointed out by the assessee that the trading account which was seized during the course of the search did not correctly incorporate the actual figures of sales and expenses. In fact, the assessee himself had shown more sales in the fair books. In recasting the accounts in the assessment order transportation charges were assumed by the A.O on estimate basis, whereas actual transport charges were much less. On the other hand, processing charges were estimated by the A.O at a lower figure than actual processing charges shown by the assessee which were more. Thus, the working made by the A.O for supporting the estimate of G.P. itself was based on estimated figures. The CIT(A), relying on the decision of the Bombay High Court in the case of CIT v. Devandas Perumal & Co. 140 ITR 943 held that no penalty was leviable merely on account of estimate of profit where no suppression of sales or inflation of purchases was detected. To the same effect was the decision Punjab & Haryana of the Hon'ble High Court reported in 150 ITR 714. Referring to the decision of the Madras High Court in Add1.CIT v. E. Bhoopathy 113 ITR 188, the CIT(A) held that in that case sales wore found to be not correctly shown and they were enhanced, In the case under consideration, however, sales have been accepted.
7. After observing that no penalty was justified on the G.P. addition of Rs. 7,36,323/- the CIT(A) held that as far as the amount of Rs. 3,00,704/- was concerned which was claimed to be capitalised by the assessee with reference to his investment in Balaji Apartments in the year under appeal, penalty was justified. Ho therefore upheld penalty in respect of the amount of Rs. 3,00,704/-.
8. In regard to the. addition of Rs. 40,000/-, the CIT(A) observed that the said cash was deposited in November 1987 and the addition Under Section 69 should have been made in the assessment year 1983-89 and not in the assessment year 1989-90 which was under appeal. He therefore held that if addition itself not could/have been made for the year under appeal, penalty was not leviable with reference to the sum of Bs 40,000/-.
9. In regard to the third addition of Rs. 2,30,374/-the CIT(A) observed that penalty was imposed on Rs. 2,30,374/- which was cost of the asset itself and not on depreciation. Secondly, he held that there was no dispute that the truck was registered on 30.3.1989 and it was owned by the assessee. The assessee owned 5 trucks in his name and the moment the new truck was passed by the R.T.O. it was an asset ready to use. If the machinery was kept ready for use, it would be considered to have been used for the purpose of depreciation. Reliance was placed by the assessee on the decision of the Madras High Court in CIT v. Vayithri Plantations Ltd. l28 ITR 675 Mad. and decision of the Delhi High Court in the case of Capital Bus Service P. Ltd. v. CIT 123 ITR 404. The CIT(A) accepted this claim of the assessee and held that no penalty was leviable.
10. Thus, out of the three additions, the CIT(A) confirmed penalty with reference to the addition of Rs. 1,00,704/- on which he directed that penalty should be calculated at the minimum level.
11. The said order of the CIT(A) is subject to challenge by the Revenue as well as by the assessee. In Revenue's appeal ITA No. 455/PN/94 the ld. CIT (DR) relied on the order of the A.0 in levying penalty. He submitted that it is not rule of law that merely because income is estimated no penalty is leviable. The additions made had become final and this certainly warranted levy of penalty. The ld. CIT (DR) relied on the decision of the Hon'ble Supreme Court in the case of B.A. Balasubramanya & Bros. v. CIT 157 CTR 556 where the Supreme Court has held that where the difference between the assessed income and returned income was more than 20%, Explanation to Section 27l(1)(c) as applicable in those years applied and it was for the assessee to discharge the onus as contemplated in the said Explanation and since this onus was not discharged, the High Court order confirming penalty was justified. The ld. CIT (DR) als relied on the decision of the Allahabad High Court in Sushil Kumar Sarad Kumar v. CIT 232 ITR 588 where the Hon'ble High Court had confirmed the penalty in a case where additions were made to the income based on estimate. He also relied upon the decision of the Kerala High Court in CIT v. Gates Foam & Rubber Co. 91 ITR 467.
12. Shri K. A. Sathe, the learned Counsel for the assessee, on the. other hand, relied on the order of the CIT(A).In regard to the G.P. addition; apart from the decisions Deferred to by the CIT(a), he pointed out two more decisions of the Bombay High Court, viz. CIT v. Mohammed Yaqub Mhd. Ibrahim & Co. v. CIT 143 ITR 67 and CIT v. B. J. Ramachandra l50 ITR 242. He also relied on the decision of the Delhi Tribunal in 10 ITD 348 for the proposition that merely because estimate by the A.O was not challenged in appeal was not the reason for sustaining the penalty. He relied on the decision of the Bombay Bench in 63 ITD 364. In regard to the addition of Rs. 10,000/- representing the deposit made by the assessee, he submitted that the CIT(A) was right in cancelling the penalty in view of the fact that the said addition did not pertain to assessment year 1909-90. He referred to the decision of the Bombay High Court in this behalf in Jai Narain Babulal v. CIT 170 ITR 399 in which case on similar facts, the Bombay High Court had upheld cancellation of penalty.
13. With reference to the disallowance of depreciation, Shri Sathe submitted that in view of the decision of this Bench in the case of Mirje Brothers, the CIT(A)'s finding that depreciation was allowable to the assessee because the concerned truck was registered with the R.T. authorities during the year under consideration and therefore the same was ready for use. He therefore submitted that for the disallowance of depreciation no penalty was justified.
14. In the assessee's appeal ITA No. 423/PN/94 Shri K. A. Sathe submitted that since in the year for 1988-39 the CIT(a) had taken a correct view that there was nothing on record to suggest that the investment in Balaji Apartments was made by the assessee, except his own voluntary statement, that too based on the settlement made by the assessee with Shri Banne, the ostensible owner of the property, no penalty was leviable. He therefore requested deletion of penalty with reference to the addition of Rs. 1,00,704/-.
15. Shri Rajkumar, the ld. CIT (DR) relied upon his arguments advanced during the course of hearing relating to assessee's appeal ITA No. 423/P/94
16. We have considered the rival submissions and perused the facts on record. In our opinion, the CIT(A) has rightly deleted the penalty in respect of G.P. addition because the same was based on estimate and penalty Under Section 27l(1)(c) is not leviable in respect of estimated additions as held by the Bombay High Court in CIT v. Mohd. Yakub Mhd, Ibrahim & Co (supra) and CIT v. B.D. Ramachandra (supra). 'Accordingly we concur with the findings of the CIT(A). In regard to the addition of Rs. 10,000/- representing deposit made by the assessee, the same did not pertain to the assessment year 1989-90 and accordingly, the CIT(A) is justified in holding that no penalty is leviable on this amount during the year under appeal. With reference to the disallowance of depreciation also, the view taken by the CIT(a) is correct and no interference is called for. Accordingly, we dismiss the department's appeal.
17. As regards the appeal of the assessee, we find that in the earlier year, i.e. 1988-89 the CIT(A) has taken a correct view and there was nothing on record to suggest that the investment in Balaji Apartments was made by the assessee, except his own voluntary statement, that too, based on the settlement with Shri Banne, the ostensible owner of the property, and therefore, no penalty is leviable for the reasons discussed in detail in our order in ITA No. 850/PN/97 relating to the assessment year 1938-89. Accordingly, the penalty sustained by the CIT(a) in respect of the amount of Rs. 1,00,704/- is deleted.
18. In the result, Revenue's appeal is dismissed and the assessee' s appeal is allowed.
U.B.S. Bedi, Judicial Member
19. After having gone through the proposed order of the learned Accountant Member I do not find myself to be in agreement with any of findings and conclusions arrived at by him with respect to assessee's appeal as well as department's appeal and my reasons for being so, are given hereunder.
20. So far as the facts of the case and arguments of both the sides are concerned, I find that those have been appropriately recorded and hence not repeated far the sake of brevity.
21. The A.O made the following three additions:
(a) Addition on account of G.P. Rs. 7,36,323/- (b) Unexplained investment in deposit Rs. 40,000/- (c) Disallowance of depreciation Rs. 2,30,374/-
The AO also initiated penalty proceedings after due opportunity to the assesses and penalty of Rs. 10.00 lakhs has been imposed on the asuessse against the minimum penalty leviable at Rs. 5,24,756/- Under Section 271(1)(c) of the Act.
22. The assessee took up the matter in appeal and the learned CIT (A) while holding that no penalty is leviable in respect of gross profit addition, unexplained investments in deposits and depreciation but restricted such penalty with relation to the amount of Rs. 3,00,704/-being the amount which was capitalized by the assesaee with respect to the investments made in Balaji Apartments in the year under appeal and the same reduced to minimum imposable penalty amount.
23. The assessee is in further appeal against the amount in relation to which, the relief in penalty has not been given by the learned CIT (A) whereas the department is in appeal against the relief allowed.
24. As regards the penalty leviable on the gross profit addition is concerned, the AO made discussion in paras 4, 4.1,4.2 and concluded in para 4.3 of the penalty order. The relevant observations at para 4.1,4.2 and conclusion in 4.3 are reproduced as under:
4.1 There was a search and seizure action at the premises of the assessee. One of the seized documents showed the working of profit for the period from November 1987 to June, 1988 at Rs. 12,09,266/-. While calculating the above profit, the milk processing charges were not considered. On total sales of Rs. 1,92,20,768/- profit of Rs. 12,09,266/- is worked out for the above period of 8 months. The proportionate milk processing charges on the sales amounting to Rs. 1,92,20,768/-, works out to Ra. 4,68,812/-. So the gross profit after considering the proportionate milk processing charges for the above period of 8 months, on the basis of seized register should be Rs. 12,09,2667- minus Rs. 4,68,812/- = Rs. 7,40,454/-. After considering both the transport charges and milk processing charges, the percentage of G.P works out to 3.85%,. As this percentage was for the initial period and the sales picked up in the subsequent period due to overall increase in performance, the G.P for the year, as per the assessing officer, should not be less than 4%. The A.O also pointed out in para 13 of the assessment order that the purchases are not supported by vouchers and bills and no quantity account is maintained. In para 15 the A.O has pointed out that in the petition before the CIT Kolhapur, on 8-3-1991 out of the total investment as construction expenses of Balaji Apartment of Rs. 2,50,000/- admitted for the A/.Y 1989-90, Rs. 1,76,974/- are shown as made from the additional net profit of proprietary concern M/s. Shree Balaji Traders, not disclosed in the books of accounts as per cash flow statements filed. Considering the above facts and the basis mentioned below the books of accounts were rejected on the following grounds:
i) Non-maintenance of bills/vouchers for enroute purchases to the extent of Rs. 2,23,49,616/-.
ii) Non-maintenance of day to day stock registers;
iii) Admission of asseasee himself of profits undisclosed in M/s. Shree Balaji Traders as utilized for construction of Balaji Apartment; iv) Evidence collected during search and seizure action; v) Further unexplained investment seen from books of M/s. Shree Balaji Traders, discussed in detail in para 18 of the assessment order dated 29-11-1991. vi) Too low of G.P declared.
In view of the above discussion, the A.O estimated the G.P of 4% on total sales of Rs. 6,74,14,018/- which works out to Rs. 27,04,360/-. As the G.P declared by the assessee was Rs. 19,68,237/-, an addition of Rs. 7,36,323/- was made. It was in this background that the A.O initiated the penalty proceeding Under Section 271(1)(c).
4.2 The assessee in his explanation dated 14-5-1992 stales:
This addition is made on account of law Q.P declared as per books of accounts. The Q.P as per books of accounts was 2.91%. The addition is made taking the Q.P ratio of 4%. The addition on this ground is intangible one. Out of this addition, the assesses has claimed the investment to the extent of Rs. 2,67,704/- being the investment in Balaji Apartment and Rs. 33,000/- being the investment in T.B.V. Freeze etc. In this connection your kind attention is invited to Explanation 2 of Section 271(1)(c) of the IT. Act, 1961. The penalty Under Section 271(1)(c) if aITRacted, it will be leviable on, to the extent of investment claim out of intangible additions.
4.3 I have carefully considered the submissions of the assessee. It is clear that the assessee is making contradictory statements. On one hand, the assessee claims the additions to be intangible additions. On the other hand, the asseesee himself claims capitalization out of these intangible additions. In fact, as stated by the A.O in para 25 of the assessment order dated 29-11-1991. Under Section 143(3) for me A Y 1989-90, separate addition on account of various valuable items valued at Rs. 33,000/-and found in the residential premises was made. Since the assessee claimed to have made these expenses out of the undisclosed income earned from W/s. Shree Balaji Traders. Also as per para 26 of the said assessment order, no separate addition on account of investment in the building 'Balaji Apartment" amounting to Ra. 2,67,704/- was made on the same reasoning. This proves that out of undisclosed income of Rs. 7,36,323/-, the assesses had utilized at least amount of Rs. 3,00,704/- (being Rs. 2,67,704/- Re. 33,900/-). Thus, it is undisputed that the Q.P addition of Rs. 7,36,323/- made in the assessment order and not disclosed by the assessee in his return of income, represents the real income of the assessee."
The learned CIT (A) restricted the penalty with respect to the addition relatable to a sum of Rs. 3,00,704/- as per para 6 of his order us under:
I have considered the case as relied upon by the appellant, i.e. reported in 140 ITR 943 where the Hon'ble Bombay High Court held that no penalty would be sustained merely on account of estimate of profit where no suppression of sales or inflation of purchases was detected As held in 106 ITR 720 (All) and 110 ITR 532 (Gauh) a finding has to be reached and recorded that the difference between the income returned and the income assessed was due to the fraud or gross or willful neglect on the part of the asseaaee. In 150 ITR 714 (Punj), it has been held that merely because the addition has been made on estimate under the first proviso to Section 145(1) by udopting be view that the gross profit shown in the books of account was too low as there were defects in the method of accounting employed cannot automatically lead to the conclusion that there was failure to return the correct income by means of fraud or gross or willful neglect In the case as relied upon by the A. O., the sates were found as not correctly shown and they were enhanced. However, in the case under consideration, the sales have been accepted as such. Therefore, the A.O was not justified in levying the penalty on the entire sum of Rs. 7,36,323/-. However, the appellant's contention that no penalty can be levied on the sum of Rs. 3,00,704/- (being Rs. 2,67,014/- + Rs. 33,000/-) cannot be accepted. He has claimed capitalization against the tangible investment out of the addition made on account of intangible estimate. Therefore, in terms of Explanation (2) to Section 271(1)(c), penalty has to be levied to the extent of this sum. The A.O., is therefore, directed to levy minimum penalty on the amount of Rs. 3,00,704/-.
25. After hearing both the sides and considering the material on record and the case law, I find that as regards the penalty on the estimated addition is concerned, the Hon'ble Kerala High Court in the case of C.I.T. v. Gates Foam and Rubber Company 91 ITR 467 has opined that as under:
The presumption provided for in Section 271(1)(c) applied to the facts of the case and penalty had to be imposed.
Yet, in another case, the hoadnotce appended to decision of the Allahabad High Court (sic) Sushil Kumar Sarad Kumar v. CIT 232 ITR 588, reads as under:
PENALTY - OCONCEALMENT OF INCOME - ADDITION MADE TO INCOME BASED ON ESTIMATE - TRIBUNAL CONSIDERING EVIDENCE IN PENALTY PROCEEDINGS AND FINDING THAT ASSESSES HAD CONCEALED HIS INCOME - IMPOSITION OF PENALTY WAS VALID -I.T.A ACT, 1961 Section 271(1)(c) While arriving at the above conclusion, the Hon'ble High Court in the above case has held as under:
...But in a case where after detailed investigntion the nssessee was confronted with evidence and materials and he fuiled to dislodge the factual position on the basis of which additions were made, the case stands on a different footing. In such a case, it is always open to draw an inference of concealment or of furnishing inaccurate particulars of income, resulting from deliberate underestimate of income. In other words, the income-tax authorities must be satisfied on examination of the cumulative effect or the entirety of the circumstances that the only reasonable inference from such factors or material that could be drawn was that the disputed amount added as a result of estimate, represented income and that the aseessee bad concealed particulars of income or had furnished inaccurate particulars thereof.
The Hon'ble Supreme Court in the case of B.A. Balasubramaniam and Bros. Co. v. CIT (1999) 157 CIR 556, while following 152 ITR 529, 60 CTR 34 (SC) 185 ITR 49 (SC)and 205 ITR 244(SC), has held as under:
Difference between the income assessed and the income returned being more than 20%, the Explanation to Section 271(1)(o) became applicable and the ITO was justified in imposing penalty because the assesses had not been able to discharge the onus which was on it under the said Explanation notwithstanding the fact that income was assessed on estimate basis.
In recently pronounced judgment, on the point of applying precedents, in the case of State Financial Corporation v. Jagdamba Oil Mills the Hon'ble Supreme Court of India has held as under:
Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper.
26. Since on the basis of search and seizure operation conducted, documents seized and detailed investigation made in this case, A.O has reached to the conclusion that there is non-maintenance of bills/vouchers for en-route purchases to the extent of Rs. 2,23,49,616/-, non-maintenance of day to day stock register, admission of the assessee himself of the profits undisclosed in M/s. Shree Balaji Traderss having been utilized for construction of Balaji Apartment, and further unexplained investments seen from books of M/s. Shree Balaji Traders and too low G.P. declared as discussed in detail and addition made in this regard having been coufined I am of the view that ratio of the above decisions is fully applicable to the facts of the present case and the impugned penalty on estimated addition, in view of the facts and circumstances could validly be imposed. Therefore, action of the learned CIT(A) in restricting such penalty imposable on the amount of Rs. 3,00,704/- is not proper. Bui so far as restricting of such penalty at minimum imposnble amount is concerned, that part of |the order of the learned CIT(A) is found to be justified. As such, while modifying the order of the leaned CIT(A), I hold that the penalty Under Section 271(1)(c) is imposnble with respect to entiro amount of Rs. 7,36,323/- being G.P. addition, and not with respect to Rs. 3,00,740/- as considered by the learned CIT(A). So, his order to this extent gets reversed, but as regards other part of the order is concerned, I confirm his action to restrict such penaity to minimum imposable amount i.e. 100% of the tax sought to be evaded with respect to this addition. 26. So far as the decisions as relied upon by the learned Counsel for the aasessee are concerned, these are not found to be on the point at issue and moreover in the light of the Supreme Court decision B.A. Balasubramaniam & Bros v. CIT 157 CTR 556, preference cannot be given to either the High Court decision or Tribunal decision.
27. As regards penalty on addition of Rs. 40,000/- is concerned, the same is found to have been deposited in cash in November, 1987 which remained unexplained and the CIT (A) deleted the same on the plea that the addition should be made in the year 1988-89 and not in 1989-90 as per Section 69 of the Act.
28. After hearing both the patties and considering the material on record, I find that the accounting period of the assessee is transitional period and that the month November not only falls in the said period but close to the relevant financial year covered within the previous year of the assesses. Since the period falls in he previous year relevant to the assessment year under consideration and the assessee was unable to explain the source of the deposit for obtaining a bank guarantee therefore, the addition has properly been made and the penally in this regard is aITRacted.. Therefore, the action of the A.O is found to be proper and the CIT (A) is unjustified in deletiug the penalty with respect to this amount Therefore, while upholding the penalty in this regard, I restore the order of the A.O on thin issue but restrict such penalty to minimum imposeable.
29. As regards the penally relatable to addition of Rs. 2,30,374/- is concerned, the addition in this regard is made for claiming depreciation on the truck, which was not put to use in the year under consideration. It is the case of the assessee that since the truck was regisatered on 30-3-1959 therefore, it was ready for use and the assesses is entitled to depreciation and even if it is not allowed, penalty cannot be imposed on the amount relatable to disallowance on account of depreciation, where as the learned D.R has taken a stand that the assessee has not been able to show as to how the vehicle can be considered to be ready for use when alter registration, the assessee is required to obtain permit and certain other the amount is required to be incurred for making the vehicle ready for use. Nothing is found to have been shown to have been spent as par books of accounts either for obtaining a permit or other expenditure diesel, oil and other related expenditure. Therefore, the A.O. rejected the claim of the assessee for depreciation and for making a wrong claim the penalty is aITRacted.
30. After hearing both the sides and considering the material, I find that except the plea that the vehicle was registered on 30-3-1989 no other evidence or material has been produced to show that even the vehicle was ready to use. There is no mention about incurring of expenditure on obtaining the permit or having made any other expenditure for oil, diesel etc. or any salary was paid to the drive. Therefore, in the absence of these items, in my considered view, the action of the A.O in not allowing the claim of the assessee on depreciation is justified and for making a wrong claim, the penalty Under Section 271(1)(c) is aITRacted So far as reliance on the decision reported in 123 ITR 404 (Bom), 128 ITR 675 (Mad), the assesses baa not been able to show as to how the vehicle can be said to be ready for use when it has not been shown that the road permit has either been obtained or any expenditure on diesel oil and other material necessary for making the vehicle ready to use has been inenrred. So in my considered view, action of the A.O is proper and the CIT (A) is unjustified in deleting the pentally with respect to this amount His action being not in conformity with law is set aside and that of the A.O. is restored but so far as the quantum of penalty is concerned, it is directed to be restricted to minimum impossable amount.
31. As a result the appeal of the ussessee is dismissed and that of the revenue is partly accepted.