1999 (8) TMI 103

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....f ₹ 1,75,064. The assessment was completed under s. 143(3) on 12th Dec, 1996, and the total income determined in the assessment comes to Rs. nil after setting off depreciation for the current year against the income computed. The following are the details of the computation appearing at the end of the assessment order. Rs. Rs. Net loss as per audited P&L a/c 1,75,064 Add: Disallowances (1) Shortage in stock of colours & chemicals (Para 5) 5,03,244 (2) Shortage in stock of cloth 3,31,360 (3) Depreciation (Para 10) 6,700 8,81,364 -------- -------- 7,06,300 Less: Depreciation for the asst. yr. 1995-96 to the extent of income available (28,30,905 - 7,06,300) 7,06,300 -------- Total income Nil The AO initiated the p....

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....ted out by the learned counsel that when the resultant income is a loss, no penalty can he levied under s. 271(1)(c) as laid down in the following decisions: (1) Panchratna Hotels (P) Ltd. vs. Dy. CIT (1993) 47 TTJ (And) 282 ; (2) Zaveri Paper & Board Mills vs. ITO (1993) 47 TTJ (Ahd) 170 ; (3) H.T. Power Structures (P) Ltd. vs. Asstt. CIT (1993) 47 TTJ (Ahd) 146; (4) CIT vs. Jaora Oil Mills (1981) 129 ITR 423 (MP); (5) CIT vs. Prithpal Singh & Co. (1990) 85 CTR (P&H) 26 : (1990) 183 ITR 69 (P&H). It is further pointed out that reference applications and SLPs. filed by the Department against the decision of the Tribunal have been rejected by the Hon'ble Gujarat High Court and Hon'ble Supreme Court as reported in (1994) 212 ITR....

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....ng reasons: (a) The stock on the date of survey was taken by the income-tax persons and the factory clerical staff was not taken by actual weight in all the cases. In most cases, actual weight was not made but approximate weight was noted. (b) That several bulk items and hazardous items which are kept in open space of the factory were also not taken in the list. Such as industrial salt which is used in water sorting plant is kept in open. Hydre is hazardous. So major quantity is kept in open field only. Limited quantity is kept in store for actual issue of hydre after weighting to the production shop. (c) That colours and chemicals duly mixed and prepared for use and lying in the different production centres, such as sprinting machines, ....

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....ion made in the assessment order and no appeal was filed against the assessment order. The learned CIT(A) has merely relied on the observations given by the AO in the penalty order while confirming the penalty. 6. It is well settled in law that assessment proceedings and penalty proceedings are distinct and separate. The additions made in the assessment order may be relevant for penalty proceedings but such addition does not necessarily lead to levy of penalty. The question to be considered is whether the assessee concealed the particulars of income or furnished inaccurate particulars of income while filing the return of income. When there was a difference in the stock valuation according to the AO, the assessee came forward with an explan....