Joginder Pall, A.M. - (1.) BY this order we shall dispose of these two appeals filed by the Revenue against two orders of CIT(A), Chandigarh for asst. yrs. 1994-95 and 1995-96 as the issue involved in both the appeals is common.
(2.) The only effective issue raised in both the appeals is that the CIT(A) was not justified in cancelling the penalty amounting to Rs. 1,03,822 and Rs. 4,34,648 imposed by the AO under Section 271(1)(c) for asst. yrs. 1994-95 and 1995-96 respectively. The facts of the case are that the assessee had filed the return of income for asst. yr. 1994-95 declaring therein income of Rs. 1,41,300. The IT Department had carried out search and seizure action under Section 132(1) at the business premises of the assessee and residential premises of the partners. During the course of such action, unaccounted stock and other incriminating material and documents were found and seized. Such seizure also included documents mentioned in items A-10 and A-11 in the shape of loose bundles. The same indicated that the assessee had made purchases aggregating to Rs. 20,35,500 outside the books of accounts. Out of these, purchases to the extent of Rs. 19,06,788 related to asst. yr, 1995-96 and purchases to the tune of Rs. 1,31,742 related to asst. yr. 1994-95. When the assessee was confronted with these facts, the assessee admitted that it had made purchases outside the regular books of accounts. The facts on record further show that for asst. yrs. 1995-96 the value of stock which should have been available with the assessee worked out to Rs. 33,87,099. But the stock available with the assessee, as per books, was of the value of Rs. 55,24,858. Thus, stock was found deficient by Rs. 20.00 lakhs. The position of availability of stock was worked out by taking into account the unaccounted purchases. When the assessee was confronted with these facts, the assessee disclosed income of Rs. 28.00 lakhs under Section 132(4) in the hands of the firm. 2.1 As regards unaccounted purchases of Rs. 1,31,742 for asst. yr. 1994-95, Shri Vinod Kumar, partner admitted that these purchases were unaccounted, for which he disclosed an income of Rs. 1,50,000 in his individual capacity for asst. yr. 1994-95. The relevant extract of Shri Vinod Kumar's statement as reproduced at p. 3 of the assessment order is as under: "Those transactions are mostly unaccounted for peak amount of which will work out to Rs. 1,50,000 which is also hereby surrendered." It appears that the income of Rs. 1,50,000 was duly reflected in the return of Shri Vinod Kumar and assessed as such. But while completing the assessment for asst. yr. 1994-95 in the case of the partnership firm, the AO held that these transactions actually belonged to the partnership firm. Since these were unaccounted purchases, entire addition of the same amount was again made in the hands of the partnership firm. Though the additions of the same amount were made at both places yet these additions were accepted by Shri Vinod Kumar and the assessee. No appeals were filed against the orders of the AO. In addition to above, the AO also referred to pp. 10, 11, 12 and 25 of item No. 11 found at the residence of the assessee which were in the form of loose papers. It appears from para 4 of the assessment order that rate difference and cash commission at 1 per cent from seller was mentioned therein. The assessee was asked to explain. It was submitted that no such commission and rate difference was earned on the transactions mentioned in these papers. In fact, it is clear from para 3 of assessment order for asst. yr. 1995-96 that the assessee had submitted that till asst. yr. 1994-95, there was no such commission and rate difference earned by the assessee. It was only in the asst. yr. 1995-96 that the assessee had earned commission income of Rs. 2,81,281 which was duly accounted for in the books of accounts of the assessee. However, the AO was not satisfied with the explanation of the assessee that it had not earned any such commission of rate difference in the Asst. yr. 1994-95 and accordingly an addition of Rs. 50,000 was made. The same was also accepted by the assessee and no appeal was filed. 3.1 At the time of completing assessment for asst. yr. 1994-95, the AO also initiated penalty proceedings under Section 271(1)(c) in respect of two additions of Rs. 1,31,742 being unaccounted purchases and Rs. 50,000 being undisclosed commission income. Since the assessee did not furnish any reply to the show cause notice, the AO imposed a penalty of Rs. 1,03,822.
(3.) AGGRIEVED, the assessee impugned the penalty in appeal before the CIT(A). It was submitted before the CIT(A) that Shri Vinod Kumar, partner bad also owned transactions of purchases of Rs. 1,31,742 and had disclosed income of Rs. 1,50,000 in his hands. Therefore, there was no justification for imposing the penalty in respect of the same income under Section 271(1)(c) irrespective of the fact that addition was also made in the hands of the firm and the assessee had not filed any appeal against the said order. As regards addition of Rs. 50,000, the assessee had submitted that addition made by the AO was totally uncalled for as the assessee had not earned any such income in assessment year under reference. The assessee had accepted the addition merely to buy peace but there was no justification for imposing the penalty. The CIT(A) accepted the submissions of the assessee in regard to addition of Rs. 50,000 that no specific charge of concealment was made out. As regards addition of Rs. 1,31,742 the CIT(A) accepted the submission of the assessee that the addition for the same amount having been made and accepted in the hands of Shri Vinod Kumar, no penalty could be imposed in respect of same addition made in the case of the firm. Relevant finding of the CIT(A) as recorded in paras 10, 11 and 13 of the impugned order are extracted below : "10. As regards the penalty on the addition of Rs. 50,000 as per para. 4 also no specific concealment has been established at the stage of assessment in the course of the penalty proceedings. 11. At the time of search on 21st Oct., 1994, the relevant portion of the statement of Shri Vinod Aggarwal is reproduced below : Question : In bundle Nos. 10 & 11 i.e., documents seized, I am showing you the various slips on which some transactions have been recorded. Please explain their accountability and nature. Answer : These transactions are mostly unaccounted for the peak amount of which will work out to Rs. 1.5 lakhs, which is also hereby surrendered. Question : I am explaining you the provisions of Section 132(4) read with Expln. 5 to Section 271(1)(c) of IT Act, 1961. Please state whether you want to avail of this opportunity. Answer: Yes, I want to avail of this opportunity. Keeping in view all the facts of unaccounted transactions which are out of my undisclosed sources, I hereby in my individual capacity, make a surrender of Rs. 12.50 lakhs (Rupees twelve lakhs fifty thousand only) for asst. yr. 1994-95, the return for which is yet to be filed. This would cover all the transactions and investments questioned by you in my statement recorded. 12. The above would indicate that the assessee had made a surrender as regards bundle No. 10 & 11 in his individual capacity under Section 132(4). The peak of Rs. 1.5 lakhs was surrendered. Again the AO has made addition in para 3 and para 4 of his order on the basis of the same papers in the case of the assessee-firm. The surrender in the case of Shri Vinod Aggarwal in his individual capacity has been accepted and assessment framed under Section 143(3) on 3rd May, 1995. It is not legal to tax both the individual and the firm for the same transactions. Even if they do not dispute the addition so as to purchase peace, it does not follow that penalty for concealment can be imposed without brining material on file to show that the assessee-firm is guilty of concealment. The penalty is, therefore, deleted and the appeal succeeds." The Revenue is aggrieved by the order of CIT(A). Hence, this appeal before us.;