TaxTMI 
TaxTMI 
2014 (9) TMI 1150
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....ear. Applying the yield of 22.70% mentioned by the assessee, learned AO worked out the quantity of cashew kernels produced by the assessee as 13,21,721 Kg. Assessee had measured the manufacture in number of packed tins and had reported that 1,16,943 tins of cashew kernels were produced. As per the assessee each tin contained 11.34 Kg of kernels. This in terms of weight came to 13,21,597/-Kilograms. As to the odd figure 11.34 Kg per tin, explanation was that it translated to 25 pounds, which was the measure followed in international market. 3. Assessing Officer thereupon, verified the sales bills and found that the version given by the assessee was correct insofar as it related to exports and sales to armed forces. However, sales in India were made in tins having both 11.34 Kg and 10 Kg. When AO sought explanation on this assessee vide its letter dated 05-12-2011 stated that sale of 31,178 tins were of ten kilogram weight each though in the stock register it was mentioned as tins of 11.34 Kg. Assessing Officer made further verification and found that actual number of tins having cashew kernels of 10Kg each came to 38,185. Accordingly, he reworked quantity particulars of stock and....
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.... was showing a stable gross profit ratio for previous years ending 31-03-2006,31-03-2007 and 31-03-2008, and these compared well with the rate for the relevant previous year. (iii) Quantity of sales were ascertained from purchasers, whereas quantities mentioned in stock register were ignored. (iv) AO had taken a wrong presumption that excess closing stock worked out by him represented unaccounted income or suppression of income. (v) Letter dated 13-12-2011 filed by the assessee, accepting the proposed addition was drafted without proper application of facts. Vis-à-vis the addition made for interest, the argument taken by the assessee before the learned CIT(A) were as under; (i) Assessee had huge own funds, which did not entail any interest outgo and there was nothing to show that any borrowed funds were used for giving loans to Smt.B.Priyamvada Kamath and Smt.B.Vasundhara Kamath; (ii) No nexus was established between interest bearing funds and the advances given. (iii) The offer for disallowing interest 11.75% was made by the authorized representative without consulting the assessee 6. However, the CIT(A) was not impre....
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.... rival contentions. First taking up the issue of additional evidence, we find that what has been brought in the guise of such evidence is a month-wise break-up of the stock movement. Assessee has itself admitted that it was maintaining a stock register with quantities mentioned in tin numbers and had never made any bifurcation based on Kilograms herein. Nothing stopped the assessee from bringing such a work-out before the AO or the CIT(A). What is being attempted by the assessee is a type of reverse engineering, whereby it is trying to justify its claim of closing stock by making a bifurcation which fits its purpose. In our opinion, no substantial cause has been shown by the assessee for admitting such evidence. Ample opportunities were given by the lower authorities to adduce evidence. Hence, we are not inclined to admit the additional evidence filed. 12. Coming to merits, AO had issued notices to various purchasers of kernels from assessee in India, and they had stated that the purchases were made in 10 Kg tins. This position has not been assailed by the assessee. Assessee itself had clarified in letter dated 05-12-2011 that sales of 37,178 tins were of 10 Kgs each, which it c....
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....ed. Ordered accordingly. 15. Vis-avis the addition made for interest, the balance sheet as on 31-03-2009 of the assessee placed at PB page-54 show partners capital at Rs. 3,77,48,105/-. As against this the interest free advances given by the assessee came to Rs. 34,02,118/- only. When mixed kitty of funds are available, it is for the AO to show that the advances were given from interest bearing funds. Here the AO had simply went by an offer made by the assessee, without considering the own funds available with it. We are therefore, of the opinion that this issue requires a fresh look by the AO. We therefore, set aside the orders of the authorities below on the issue of addition for interest and remit it back to the file of the AO for consideration afresh in accordance with law. Ground number 3 of the assessee is allowed for statistical purposes. 16. Now we take up the appeal of the assessee against levy of penalty. 17. AO on the addition made for difference in closing stock issued a notice to the assessee requiring it to explain why a penalty under section 271(1)(c ) should not be levied. Reply of the assessee that mistake was due to arithmetical error was not accepted. He....
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....essential ingredient as is case in matter of prosecution under section 276C". 18. Assessee's appeal before the CIT(A) was not successful. According to the learned CIT(A), suppression of stock was not only admitted by the assessee, but also demonstrated by the AO. 19. Now before us learned AR submitted that quantity of closing stock was arrived at by the AO based on certain presumptions. According to her, assessee had no intention to conceal ay income nor had it furnished any inaccurate particulars. As per learned AR levy of penalty was unfair. Per contra, learned DR supported the orders of the authorities below. 20. We have perused the orders and heard the rival contentions. Work-out of the closing stock done by the AO has been reproduced at para three above. Production for the year has been arrived at applying the yield of 22.70% on total processed quantity viz.5822563 Kg of raw cashew. AO has assiduously worked out the quantity sold in Kilogram by going through each and every invoice of the assessee. In other words, assessee made the AO sweat, to compile the correct quantity of production, sale and closing stock, while all along it gave only workings based on tin numbers....
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....Appeals and the Commissioner. i) The imposition of penalty is not automatic. j) Imposition of penalty even if the tax liability is admitted is not automatic. k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the assessing officer in the assessment order. 1) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bonafide, an order imposing penalty could be passed. m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by him,....