IN INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S. S. GODARA, JUDICIAL MEMBER) ITA. No: 2927/AHD/2013 (Assessment Year: 1993-94) M/s. Ramdev Food V/S Asstt. CIT, Circle-5, Products Pvt. Ltd. Spice Ahmedabad World, Sarkhej Bawla Highway, Changodar, Ahmedabad (Appellant) (Respondent) PAN: AABCR2887G Appellant by : Ms. Urvashi Shodhan, AR Respondent by : Shri Pradip kumarMajumdar,Sr. D.R. ORDER Date of hearing : 17-10-2016 Date of Pronouncement : 20 -10-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. This appeal by assessee is preferred against order of Ld. CIT(A)-XI, Ahmedabad dated 14.10.2013 pertaining to A.Y. 1993-94. 2 ITA No2927/Ahd/2013 . A.Y.1993-94 2. sole grievance of assessee relates to levy of penalty u/s. 271(1)(c) of Act amounting to Rs. 4,07,780/-. 3. roots for levy of penalty lie in assessment order dated 29.03.1996 made u/s. 143(3) of Act. business loss of Rs. 1,70,900/- was assessed at total income of Rs. 58,28,470/-. quantum additions travelled up to Tribunal and Tribunal in ITA Nos. 1603, 1547, 1637, 1688, 1780/Ahd/2001 and 226/Ahd/2002 held as under:- 24.4 second addition on basis of lesser production shown in books of accounts, Assessing Officer taken actual production as per seized note book. After comparing production as per seized note book and production recorded in books of account, Assessing Officer found that only 60% of production was recorded in books of account. Assessing Officer, after considering mistakes pointed out by assessee and after considering other aspects including unaccounted purchases and others, calculated G.P. of Rs. 59,44,970/- for both concern of assessee as well as Ramdev Masala. Assessing Officer bifurcated proportionately and made addition of Rs. 46,12,109/- in hands of assessee after allowing 10% benefit of reprocessing of grinding of goods. ld. CIT(A) confirmed action of Assessing Officer in respect of addition on account of excess shortage Rs. 39,90,835/-. However, he reduced addition from Rs. 39,90,835/- to Rs. 36,82,723/- after allowing relief on account of calculation of regrinding process. ld. CIT(A) while dealing with issue in respect of addition of Rs. 46,12,109/- sustained addition to extent of Rs. 7,09,183/- applying G.P. rate of 19.28% considering suppressed production of Rs. 36,78,336/-. 24.5. On consideration of nature of both additions, we find that both additions are of same nature. When it is found that assessee has recorded lesser production by adopting lesser yield of production, for example, in case of mirchi in assessee's case at page no.44, Assessing Officer given table where it 3 ITA No2927/Ahd/2013 . A.Y.1993-94 is stated that on basis of seized record, production yield ought to be 89.64% whereas assessee has shown yield 84.10. On other hand, Assessing Officer calculated addition of Rs. 46,12,109/- in case of mirchi by comparing total production recorded in books of accounts and production as per seized record. Thus, it is admitted position of fact that when assessee recorded production by showing lesser yield in books of accounts, consequently production shown in seized note book on basis of actual production must have been in excess than production recorded in books of accounts. In other words, it can be said that Assessing Officer has made addition two vice on same set of facts. ld.CIT(A) while dealing addition of Rs. 46,12,109/- on account of excess production rightly appreciated facts and found that addition to extent of G.P. on sale which was not accounted for in books of accounts, addition to that extent is only warranted. CIT(A) accordingly confirmed addition of Rs. 7 ,09,1 83/- suppressed production on which CIT(A) confirmed addition of Rs. 7,09,183/- also covers unrecorded turnover on account of low yield. CIT(A) while confirming addition to extent of Rs. 3 6, 82, 723/- failed to appreciate this fact. Therefore, order of CIT(A) in sustaining addition of Rs. 36,82,723/- cannot be upheld. calculation of Assessing Officer on two grounds namely showing low yield in books of accounts and excess production found in seized record only support to fact that there was only one type of suppressed production which has been sold out of books of account. Under circumstances, addition on both grounds cannot be sustained as both calculation supports as stated above only one type of suppressed production and sale. At this stage, we are aware that in such type of cases, for calculation of suppressed production and sales some guess work is bound to be there, however, Assessing Officer has tried to support this guess work by seized record. To put end of litigation, we are of considered view that addition to extent of income i.e. profit on account of suppressed production and sales only can be taxed. We, therefore, find that ld. CIT(A), after considering facts of case, has rightly sustained addition of Rs. 7,09,183/-. However, ld. CIT(A) wrongly sustained addition to extent 4 ITA No2927/Ahd/2013 . A.Y.1993-94 of Rs. 36,82,723/- which is calculation of suppressed production on same set of material supporting fact that there was excess production but same was lesser recorded in books of account. addition of Rs. 7,09,183/- sustained by CIT(A) is confirmed and addition of Rs. 36,82,723/- sustained by CIT(A) is deleted in light of above discussion. Thus, ground no.5 of assessee's appeal is dismissed and ground no.4 of assessee's appeal is allowed. 4. Taking leaf out of this, A.O. proceeded by levying penalty u/s. 271(1)(c) of Act at Rs. 4,07,780/-. 5. assessee carried matter before ld. CIT(A) but without any success. 6. ld. CIT(A) was convinced that fact of concealment of particulars of income has been proved by Assessing Officer and concealment penalty have been rightly levied. 7. Aggrieved by this, assessee is before us. ld. counsel for assessee vehemently stated that entire assessment has been made on estimate basis and Tribunal also had confirmed addition on estimate basis. Therefore, this is not fit case for levy of penalty. Per contra, ld. D.R. strongly supported findings of revenue authorities. 8. We have carefully perused orders of authorities below and have given thoughtful consideration to assessment order. We find that 5 ITA No2927/Ahd/2013 . A.Y.1993-94 additions made by A.O. and partly confirmed by Tribunal were purely on estimate basis. We find that assessment has been made after processing seized material wherefrom A.O. further estimated income. In our understanding of law, addition made and sustained on basis of such estimate could not be said to result in situation where it would be possible to ascribe failure to return correct income to assessee on account of fraud or any gross or willful neglect. Our view is fortified by decision of Hon ble Jurisdictional High Court of Gujarat in case of Navjivan Oil Mills 252 ITR 417. 9. Considering facts in totality, in light of aforementioned judgment of Hon ble Jurisdictional High Court, levy of penalty is not justified. We, therefore, set aside findings of ld. CIT(A) and direct A.O. to delete penalty of Rs. 4,07,780/-. 10.In result, appeal filed by Assessee is allowed. Order pronounced in Open Court on 20 - 10- 2016. Sd/- Sd/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: True Copy Rajesh Copy of Order forwarded to:- 1. Appellant. 2. Respondent. 3. CIT (Appeals) 4. CIT concerned. M/s. Ramdev Food Products Pvt. Ltd. v. Asstt. CIT, Circle-5, Ahmedabad