TaxTMI 
TaxTMI 
2013 (6) TMI 158
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....s Ltd. was engaged in the business of manufacturing Brass Rods, Brass Tubes, Brass Wires, etc. by utilising the raw material such as Brass Billets, Brass Ingots, etc. On 01.10.1993 a search was carried out at the business premises of the assessee by the Excise Department wherein they found certain excess stock on which duty has not been paid. As per the Panchanama dated 30.09.1993/01.10.1993 the excess stock was to the tune of Rs. 17,29,340/- whereas the shortage was to the tune of Rs. 13,59,120/-. Stock taking was done in the presence of one of the Directors of the assessee company by the Investigation Authorities. Based on the investigation, conducted by the Excise Authority, duty was collected by the Central Excise Department. Though it was noticed by the Central Excise Department that the assessee has not maintained proper Registers, which resulted in excess stock and shortage of stock, at the time of filing the return of income under the Income Tax Act assessee has not furnished any details with regard to the search conducted by the Central Excise Authorities and merely filed the return of income declaring total income of Rs. 27,16,859/- on 30.11.1994. The return was also acco....
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....me to the total income declared by the assessee. Simultaneously penalty proceedings were initiated. 6. Assessees challenged the orders passed by the AO by preferring an appeal before the CIT(A) XX, Mumbai wherein it was contended that the excess and shortage of stock found by the Excise Authority was due to the fact that they had erred in classifying the goods properly and they have not verified the stock properly. Further, the search proceedings were carried on for nearly three days and during this period various products were manufactured; the excess/shortage was found because the Excise Authority had not taken into account the products manufactured or under manufacturing process and also the scrap generated. It was also submitted that burning losses, etc. were not properly taken into account. 7. The learned CIT(A) partly accepted the contention of the assessees. The learned CIT(A) observed that the Excise Authority carried out stock taking process properly in the presence of the Directors as well as the Panchas who have signed the Panchanama. If the assessees herein noticed any shortage or discrepancy, the same could have been pointed out during the time of stock taking it....
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....ation. Acceptance by the assessees of the excess stock under KVSS before the Central Excise Authorities clearly establishes that the assessees have deliberately concealed particulars of income by suppressing the value of stock and hence he levied penalty @100% on the tax sought to be evaded with reference to the additions made in the respective assessment years. 11. Aggrieved, assessees contended before the first appellate authority that the estimate of undisclosed stock was without any basis and this plea of the assessee was accepted by the learned CIT(A) while restricting the addition to the difference between the value of excess stock and shortage of stock. Thus the explanation of the assessees is not found to be false and the addition is only based on estimate on which penalty is not leviable. 12. The CIT(A) was not convinced with the submissions made on behalf of the assessees. By relying upon the decision of the Hon'ble Apex Court in the case of Dharmendra Textile Processors 306 ITR 277 the learned CIT(A) concluded that in the light of Explanation 1 to section 271(1)(c) of the Act Revenue need not prove mens rea to initiate penalty proceedings. Since the assessees have ....
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.... of the Hon'ble Apex Court in the case of Reliance Petroproducts Pvt. Ltd. (supra) to submit that where an addition is made on estimate basis penalty should not be levied under section 271(1)(c) of the Act since assessees have tendered explanation, supported with sufficient material, which was not found to be false. It was also contended that the search was conducted by the Central Excise Authorities in 1993 and application under KVSS was filed by the assessees herein only on 30.01.1999 and prior to the said date the assessees having challenged the additions, they could not have offered the impugned amount to tax in the respective income tax returns. The assessments in the case of both the assessees were completed prior to the filing of applications under KVSS. It cannot therefore be stated that the assessees accepted the addition but at the same time did not offer the same in their income tax returns. 14. On the other hand, the learned D.R. strongly relied upon the orders passed by the tax authorities. The case of the learned D.R. is that the search was carried out by the Central Excise Authorities for three days and they have listed out in the Panchanama the value of excess go....