TaxTMI 
TaxTMI 
2011 (8) TMI 1341
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.... 2.1 The Ld. CIT(A) has erred in law and/or on facts in upholding that the appellant had concealed income by not showing the value of excess stock, though in fact it was specifically credited in the P&LA/c., copy of which was filed before him. 2.2 That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) has erred in upholding the penalty levied by AO by observing that the appellant had concealed the value of excess stock found during the survey. 2.3 The Ld. CIT(A) has erred in relying upon the decision of Fakir Mohd. Haji Hasan (supra), though it was distinguishable both on facts and in law. 3.1 The Ld. CIT(A) has failed to appreciate that it was a matter of dispute and difference of opinion as to whether the income disclosed during the course of survey was assessable under any of the heads of income or was it a headless income. Similarly, the disallowance of partners remuneration on such income was a consequential one. It is therefore prayed that the penalty of Rs. 5,75,000 may please be cancelled. 2 Facts, in brief, as per relevant orders are that return declaring income of Rs. 27,9....
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....e assessee, the AO relying upon the decisions mentioned in para-9 of the penalty order, imposed a penalty of Rs. 5,75,000/- @ 100% of the tax sought to be evaded on the income of Rs. 15,56,370/-[43,55,340-27,98,970]. 4. On appeal, the learned CIT(A) upheld the levy of penalty in the following terms:- "2.3 I have considered the facts of the case, assessment order, first quantum appeal order and the submission filed along with case laws relied upon by the Id. Counsel of the appellant and the Assessing Officer. In this case, the excess stock of Rs. 35,70,518/- detected by the survey party which was admitted by the appellant and who also agreed to declare in its return of income and to pay tax thereon. But when the appellant filed the return for the year under consideration, he had declared net profit of Rs. 18,14,587/- inspite of the fact that the disclosure of Rs. 35,70,518/- was credited to the trading and profit and loss account. Though the appellant had admitted and declared the unrecorded stock of Rs. 35,70,518/- during survey and promised to show in the return of income, the same has not been shown independently by the appellant knowingly to evade the t....
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....t, the learned AR pointed out that the matter has been restored to the file of the AO for fresh decision in accordance with law. In these circumstances, the learned AR argued that no penalty could be imposed. He added that the AO did not specifically initiate penalty proceedings u/s 271(1)(c) of the Act in relation to amount added u/s 68 of the Act in the assessment order nor discussed the issue in the penalty order. Even there is no discussion in the impugned order in respect of levy of penalty u/s 271(1)(c) of the Act in relation to the addition u/s 68 of the Act, the ld. AR pointed out . The learned DR, on the other hand, relied upon the findings of the learned CIT(A). 6. We have heard both the parties and gone through the facts of the case. Indisputably, the penalty in this case has been imposed on an amount of Rs. 15,56,370/-/-[43,55,340-27,98,970] comprising disallowance of remuneration to partners on account of treatment of the amount of Rs. 35,75,518/- disclosed on account of excess stock u/s 69B of the Act and the amount of Rs. 1,05,000/- added u/s 68 of the Act. In quantum appeal, the Tribunal vide their order dated 2101-2011 in ITA No.486/Ahd/2008 concluded on ....
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....xpression in terms of value and not a separate independent identifiable asset. Therefore, it cannot be said that, there is an undisclosed asset existed independently. Once this is so then what is not declared to the department is receipt from business and not any investment as it cannot be co-related with any specific asset. 13. Thus in a. case where source of investment/expenditure is clearly identifiable and alleged undisclosed asset has no independent existence of its own or there is no separate physical identity of such investment / expenditure then first 'what is to be taxed is the undisclosed business receipt invested in unidentifiable unaccounted asset and only on failure it should be considered to be taxed under section 69 on the premises that such excess investment is not recorded in the books of account and its nature and source is not identifiable. Once such excess investment is taxed as undeclared business receipt then taxing it further as deemed, income under section 69 would not be necessary. Therefore, the first attempt of the assessing authority should be to find out link of undeclared investment/expenditure with, the known head, give opportunity....
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....has not laid down the law that unexplained investment in an asset found during the course of search/survey cannot be taxed under section 69A, 69B & 69C. If the arguments of the Id. AR is accepted that any unexplained income of the nature as described in section 69, 69A, 69B & 69C and sought to be taxed has to be necessarily brought under any one head as enumerated in section 14 then the opening words of that section "Save as otherwise provided by this Act.......... " will become otios and meaningless. No words of the Statute can be read as meaningless, irrelevant or otiose. Therefore, this interpretation sought to be advanced by the Id. AR is not acceptable. Hon. Gujarat High Court in Fakir Mohmed Haji Has an (supra) has only said that if assessee is found to be owner of an asset which is not disclosed and in which unaccounted investment has been made then such unexplained investment has to be taxed as deemed income and any other expenditure which relates to business cannot be allowed as deduction against such deemed income as the two heads are different, one is business for adjusting expenditure and the other is for deemed .income as covered u/s 69, 69A, 69B & 69C. It is also not ....
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....estore the matter to the file of AO for correctly examining the issue and taking a fresh decision as per law after providing a reasonable opportunity of being heard to the assessee. This ground is allowed but for statistical purposes." 6.1 As is apparent from the aforesaid findings, the Tribunal have accepted the claim of the assessee that excess stock has to be treated as business income, entitled to deduction of a higher amount of remuneration to partners in terms of provisions of section 40(b) of the Act. As regards the amount added u/s 68, the matter has been restored to the file of the AO for fresh decision in accordance with law. Hon'ble Supreme Court in the case of K.C.Builders Vs. ACIT,265 ITR 562(SC) held that ordinarily, penalty cannot stand if the assessment itself is set aside. Where an order of assessment or reassessment on the basis of which penalty has been levied on the assessee, has itself been finally set aside or cancelled by the Tribunal or otherwise, the penalty cannot stand by itself and the same is liable to be cancelled. Hon'ble Delhi High Court in the case of CIT Vs. R.Dalmia,(1992)107 Taxation 107, held that no penalty survives after deletion of ....