ACIT, NCRB BUILDING JAIPUR V. MAHIMA REAL ESTATE PVT LTD, JAIPUR

ITA 668/JPR/2024

AI Insights

The case revolves around the penalty imposed on Mahima Real Estate Pvt. Ltd. under section 271AAB of the Income Tax Act, 1961, following a search operation where the company surrendered additional income. The revenue appealed against the CIT (A)'s decision to delete the penalty, arguing that the surrendered income constituted undisclosed income. However, the Tribunal found that the income declared was based on the company's own records and admissions during the search, and did not meet the criteria of undisclosed income as defined under section 271AAB. The Tribunal's decision was influenced by precedents and the specific wording of the law, which emphasizes that mere admission of income does not automatically classify it as undisclosed income.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 469959 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-08-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 10-05-2024
• Other Referred Cases: CIT Vs Smt. P.K. Noorjahan, Hindustan Steel Ltd. v State of Orissa, DCIT Vs. Manish Agarwal, Sandeep Chandak v. CIT, ACIT Vs. Marval Associates, Ajay Sharma v. Dy. CIT, Padam Chand Pungalia Vs. ACIT CC-I, Jaipur, Ram Bhajo Vs. ACIT, CC-1, Jaipur, Shri Raja Ram Maheshwari Vs. DCIT CC-3, Jaipur, Dinesh Kumar Agarwal Vs. ACIT, CC-1, Jaipur, Suresh Chand Mittal Vs. DCIT, CC-2, Jaipur, Ravi Mathur Vs DCIT, CC-4, Jaipur, Silver and Art Palace Vs. DCIT, CC-4, Jaipur, Rajendra Kumar Gupta Vs. DCIT, CC-2, Jaipur
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND KUMAR; DR
• Assessee Lawyers: S.R. SHARMA; R.K. BHATRA
• Keywords: Business income; Opportunity of being heard; Document seized; Documents seized; Tax effect; Principle of natural justice; Search and seizure; Loose papers
• Section: 250; 132; 69; 69C; 69B; 139; 274; 44AB; 246A; 268A; 158BFA

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: HON’BLE SHRI SANDEEP GOSAIN, JM & HON’BLE SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 668/JP/2024 fu/kZkj.k o\"kZ@Assessment Year : 2015-16. Asstt. Commissioner of Income-tax, Room No. 212, NCRB Building, Jaipur. cuke Vs. Mahima Real Estate Pvt. Ltd. 8, Nikhil Apartment, 670, Adarsh Nagar, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AACCM 4491N vihykFkhZ@Appellant izR;FkhZ@Respondent C.O. No. 13/JP/2024 (Arising out of ITA No. 668/JP/2024) Assessment Year : 2015-16. Mahima Real Estate Pvt. Ltd. 8, Nikhil Apartment, 670, Adarsh Nagar, Jaipur. cuke Vs. Asstt. Commissioner of Income-tax, Room No. 212, NCRB Building, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AACCM 4491N vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri S.R. Sharma, CA & Shri R.K. Bhatra, CA jktLo dh vksj ls@ Revenue by : Shri Arvind Kumar, CIT D/R lquokbZ dh rkjh[k@ Date of Hearing : 08/08/2024 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement : 15/10/2024 vkns'k@ ORDER PER: SANDEEP GOSAIN, J.M. This appeal by the revenue is directed against the order dated 01.02.2024 of ld. CIT (Appeals)-4, Jaipur passed under section 250 of the Income Tax Act, 1961 for the assessment year 2015-16. The grounds raised in the appeal are reproduced as under :- 2 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. 1. Whether on the facts and in the circumstances of the case and in law, the LD. CIT (A) is justified in ignoring the fact that the assessee has disclosed the additional income of Rs. 19.95 cr. as outcome of search action only and constitute undisclosed income of the assessee for the purposes of section 271AAB of the Act as defined in the Explanation to section 271AAB of the Act. 2. Whether on the facts and in the circumstances of the case and in law, the LD. CIT (A) is justified in ignoring the fact that during the search, assessee has surrendered undisclosed income of Rs. 19.95 crores on the basis of incriminating documents found and seized material and the same also being admitted by assessed in his statement during the course of search. 3. Whether on the facts and in the circumstances of the case and in law, the LD. CIT (A) is justified in ignoring the fact that during the search, assessee has surrendered undisclosed income of Rs. 19.95 crores on the basis of seized material and the same also being admitted by assessee in his statement and that the assessee failed to offer any explanation regarding the Exhibit-6, Annexure-A containing details of out of books advances and construction expenses, both during and after search. 4. Whether on the facts and in the circumstances of the case and in law, the LD. CIT (A) is justified in ignoring the fact that the AO levied a penalty of Rs. 1,99,50,000/- u/s 271AAB on the undisclosed income of Rs. 19.95 crore after satisfying all the essential requirements of section 271AAB of the Act. 5. The appellant craves leave or reserves right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal. C.O. No. 13/JP/2024 (Assessee) : In the C.O. of assessee has taken following grounds: 1. That the Ld. CIT(A) is wrong and has erred in law in not accepting plea of the appellant that the proceedings initiated by the Ld. Assessing Officer by issue of notice for imposition of penalty u/s 271AAB of the I.T. Act, 1961 is not in accordance with law in as much as the default for which the Ld. A.O. sought to impose penalty u/s 271AAB has not been specified. 2. The respondent craves permission to add to or amend to any of grounds of appeal or to withdraw any of them. 3 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. All the grounds raised in the appeal are inter-linked hence they are clubbed together for adjudication as under : 2. The brief facts of the case are that the assessee is a company is engaged in business of real estate as builder/developer constructing residential/commercial complexes for sale/lease etc. A search u/s 132 took place at the business premises of the company Mahima Group, Jaipur & other group companies, residential premises of directors/others etc. on 30-10-2014 falling in the previous year to A.Y. 2015-16. In course of search books of accounts, documents, loose papers etc. were found and inventoried and seized. In course of search in statement u/s 132 (4) was recorded of Dhirendra Madan, Managing Director of assessee who on behalf of assessee company offered additional income of Rs. 9,95,00,000/- for the year on account of construction expenses of real estate projects found noted in pages of a diary and also admitted current year profits of the assessee company estimated to Rs. 10,00,00,000/- (Rs. Ten crores). The department treated the total sum of Rs. 19.95 crores as surrendered income by the assessee company for the year. The assessee at year end (31-3-2015) finalized the accounts and same were audited under section 44AB of I. T. Act, 1961. In books of accounts the said additional income of Rs. 9.95 crore were accounted and profits of assessee company from business activities and from Rental Receipts were arrived at. The total profit as per P & L A/c of assessee company resulted in profit of Rs. 20,30,09,217/- (including Rs. 9.95 crores income surrendered in course of search). The assessee, thereafter, computed total income as per provisions of I.T. Act, 1961 and 4 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. filed return of income on 28-11-2015 declaring total income of Rs. 19,58,89,965/-. The A.O. thereafter took up assessment proceedings and issued notice u/s 143 (2). The A.O. admitted in assessment order that assessee company included the surrendered income of Rs. 9.95 crores in return and also the admitted estimated current income of Rs. 10 crores. The A.O. examined the return of income, books of accounts and seized record etc. The A.O. found the books of accounts maintained by assessee company as correct and complete and no defect or deficiency in books of accounts or in seized record was found. The A.O. thus accepted books of accounts of assessee company. However, the A.O. in assessment order gave finding as under: - “During the search proceedings, the director of the company M/s Mahima Real Estate Pvt. Ltd., Shri Dhirendra Madan surrendered Rs. 19.95 crores of undisclosed income which included Rs. 10 crores as the income of the current AY. However, the assessee company has claimed certain expenses against this income also with the result that the return income has been shown to be Rs. 19,58,84,970/- which is less than Rs. 19.95 crores. Therefore, an adhoc disallowance of Rs. 36,15,030/- of expenses claimed by the assessee company is being made to assess the total income of the assessee company at Rs. 19,95,00,000/-.” Accordingly, the A.O. made an addition of Rs. 36,15,030/- in the declared income of Rs. 19,58,84,970/- and assessed the assessee company at Rs. 19,95,00,000/- u/s 143 (3) / 153 (1) (b) of the IT Act, 1961. The A.O. also initiated penalty proceedings u/s 271AAB and issued notice dated 30-12-2016 and a reminder show cause notice was issued on 01-06-2017 in response to which assessee stated that appeal before CIT (Appeal) is 5 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. pending and requested the A.O. to keep the proceedings in abeyance till disposal of appeal which was accepted. The ld. CIT (Appeal) while deciding the appeal of the assessee has since been deleted the said addition of Rs. 36,15,030/- vide appeal order dated 01-03-2018 (Appeal No. 435/2016-17). Aggrieved by the order of ld. CIT (A), the department filed appeal before the Jaipur Bench of the Tribunal but same was dismissed as of low tax effect in accordance with provisions of section 268A of the Act. Thus now assessment stands completed at income returned by assessee u/s 139 (1). 2.1. The A.O. thereafter took penalty proceedings initiated u/s 271AAB by issuing another show cause notice on 04-02-2019 to which the assessee filed its explanation. The explanation filed by assessee has been rejected by A.O. as discussed in penalty order and levied a penalty of Rs. 1,99,50,000/- u/s 271AAB of I. T. Act, 1961 vide impugned penalty order dated 28-02-2019. Aggrieved by the penalty order passed by the AO, the assessee company filed appeal before CIT (A). The ld. CIT (A) considering the written submissions of the assessee deleted the penalty vide his order dated 01.02.2024. Being aggrieved, the revenue has filed this appeal before us. 3. At the time of hearing before us, the ld. D/R submitted that the ld. CIT (A) was not justified in deleting the penalty and supported the order of the Assessing Officer. 4. On the other hand, the ld. A/R of the assessee submitted that the ld. CIT (A) has rightly deleted the addition on account of penalty and submitted his detailed written submissions on the issues involved, as under :- 6 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. “It is submitted that the Ld. Assessing officer was wrong in imposing penalty of Rs. 1,99,50,000/- u/s 271AAB of the Act simply on the basis that the assessee admitted/surrendered the income of Rs. 19,95,00,000/- and disclosed in the return without proving that the said income was ‘undisclosed income’ of assessee within the meaning of section 271AAB of I. T. Act, 1961. In this connection it is submitted that Section 271AAB starts with the phrase that ‘The Assessing officer may’ thus while “may” permits the assessing officer to give direction to impose penalty or not, the use of word “shall” does not leave any discretion relating to levy of penalty. In this respect reliance is placed on the judgement of Hon'ble Supreme Court in case of CIT Vs Smt. P.K. Noorjahan (1999) 237 ITR 0570 wherein Supreme Court held that word ‘may’ give discretion to A.O. in the matter and said discretion has to be exercised keeping in view the facts and circumstances of the particular case judicially. The fact that the minimum is prescribed does not mean that penalty must necessarily be imposed in every case falling within sub-s (1). Shah, acting CJ said in Hindustan Steel Ltd. v State of Orissa 83 ITR 26. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty. The discretion of the A.O. to levy or not to levy a penalty is still preserved by this section, it must be exercised judicially and on a consideration of all the relevant circumstances. Recently the ITAT Kolkata Bench in case of DCIT Vs. Manish Agarwal (2018) 92 taxmann.com 81 held “We agree with the said contention of Ld. AR because when a similar issue was adjudicated by ITAT Lucknow (the author of this order was a member of the Bench) in Sandeep Chandak v. CIT [2017] 55 ITR (Trib.) 209 (Luck.) while adjudicating a case where penalty was levied under section 271AAB of the Act it was held that the provisions of Sec. 271AAB of the Act are not mandatory, which means that penalty need not be levied in each and every case wherever the assessee has made default as stated in 7 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. clauses (a), (b) and (c) of the Act. Sub-section (1) of Sec. 271AAB of the Act uses the word “may” not “shall”. “May” cannot be equated with “shall” especially in penalty proceeding. Using the word “may” in our opinion, gives a discretion to the A.O. to levy the penalty or not to levy, even if the assessee has made the default under the said provision.” In case of ACIT Vs. Marval Associates the Visakhapatnam Tribunal (2018) 92 taxman.com 109/ (2018) 170 ITD 353 it was held “Careful reading of section 271AAB of the Act, the words used are ‘A.O. may direct’ and ‘the assessee shall pay by way of penalty’. Similar words are used in section 158BFA (2) of the Act. The word may direct indicates the discretion to the A.O. Further, sub section (3) of section 271AAB of the Act, fortifies this view. Sub section (3) of section 271AAB: The provisions of section 274 and 275 shall, as far as may be, apply in relation to the penalty referred to in this section. The legislature has included the provisions of section 274 and section 275 of the Act in 271AAB of the Act with clear intention to consider the imposition of penalty judicially. Section 274 deals with the procedure for levy of penalty, wherein, it directs that no order imposing penalty shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard. Therefore, from plain reading of section 271AAB of the Act, it is evident that the penalty cannot be imposed unless the assessee is given a reasonable opportunity and assessee is being heard. Once the opportunity is given to the assessee, the penalty cannot be mandatory and it is on the basis of the facts and merits placed before the A.O. Once the A.O. is bound by the Act to hear the assessee and to give reasonable opportunity to explain his case, there is no mandatory requirement of imposing penalty, because the opportunity of being heard and reasonable opportunity is not a mere formality but it is to adhere to the principles of natural justice. Plain reading of section 271AAB and 274 of the Act indicates that the imposition of penalty u/s 271AAB of the Act is not mandatory but directory. Accordingly we 8 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. hold that the penalty u/s 271AAB is not mandatory but to be imposed on merits of the each case.” The penalty order u/s 271AAB is an appealable order u/s 246A before CIT (A). If the penalty u/s 271AAB had been mandatory there would have not been provision of appeal u/s 246A. Further in the case search u/s 132 of the Act was carried out in assessee’s premises no incriminating evidence was found during the course of search except Exhibit – 6 Ann. A was found wherein from page No. – 1 to 3 certain figures, names and cryptic details were written. The search parties totaled those figures to be Rs. 9,95,00,000/- and took it amounts being Rupees are for fittings / material / expenses incurred by assessee company in its projects. Further the assessee company also confirmed that current year total income is to be filed for Rs. 10 Crore. Thus no incriminating material was found during the search and said Ex-6 was containing imaginary notings and some figures which was stated by director of assessee company in his statement u/s 132 (4) that it is details of expenses incurred in real estate projects of company. However a Bare perusal of the written entries will show that the notings cannot be taken as undisclosed income of assessee. Furthur the officers of search proceedings and Ld. A.O. also accepted that the same are dumb written notings as no further enquiry/investigation was made and they satisfied with the admission and surrender of the same by assessee as additional income for current year. The said project expenses noted in papers of seized diary shows only outflow of funds from assessee’s hand while income per se is inflow of funds. The Ld. A.O. has also not invoked any deeming provision of section 69, 69A, 69B or 69C etc. and accepted the declared income as additional business income in assessment completed and also there is no finding that there is any undisclosed income which has been declared by assessee. The surrender of 9 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. current year additional income by assessee of Rs. 9,95,00,000/- was just to buy peace by assessee which also he categorically stated in statement u/s 132(4). Thus it is only by admission of assessee on which the assessee included the said amount in return filed as his income of current year and paid tax thereon. There is no iota of evidence that surrendered income was undisclosed income. The reliance is placed on the judgement in case of ACIT Vs. Marval Associate (supra). In the said judgement it was held that Section 271AAB sub-clause (c) of the Act defines undisclosed income as under:- (c) “Undisclosed income” means- (i) Any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of accounts or other documents or transactions found in the course of a search under section 132, which has – (A) Not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) Otherwise not been disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of search; or (ii) Any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted. Penalty u/s 271AAB attracts on undisclosed income but not on admission made by the assessee u/s 132 (4). The A.O. must establish that there is undisclosed income on the basis of incriminating material. It is so specifically held by ITAT, Visakhapatnam Bench in ACIT Vs. Marval Associates supra. The Ld. A.O. taking the admission of income by assessee as undisclosed income of assessee. “There was no money, bullion, jewellery or valuable article or thing or 10 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. entry in the books of account or documents transactions were found during the course of search indicating the assets not recorded in the books of account or other documents maintained in the normal course, wholly or partly. In search authorities did not find any undisclosed asset, any other undisclosed income. The Hon'ble ITAT Delhi Bench in the case of Ajay Sharma v. Dy. CIT [2013] 30 taxmann.com 109 held that with respect to the addition on account of alleged receivables as per seized paper, there is no direct material which leads and establishes that any income received by the assessee which has not been declared by the assessee. The facts of the assessee’s case shows that there was no undisclosed income found during the course of search and no incriminating material was found, hence we hold that there is no case for imposing penalty u/s 271AB of the Act. The Hon'ble ITAT, Jaipur Bench, Jaipur in case of Padam Chand Pungalia Vs. ACIT CC-I, Jaipur (ITA No.112/JP/18) that in absence of any undisclosed income indicated or discovered on the basis seized material, disclosure made in the statement u/s 132 (4) is not sufficient to levy the penalty u/s 271AAB of the Act. It was further held that even if seized material discloses some outflow of funds from the assessee’s hands the same cannot be necessary be an income of the assessee. Therefore in absence of any other material or evidence to show undisclosed income of assessee, only the entries in seized material which is dumb and deaf document cannot be the basis of levy of penalty u/s 271AAB. In the case of assessee also Ld. A.O. has not established that the income disclosed by assessee in return filed is undisclosed income of assessee within the meaning of Section 271AAB and unless that is established by Ld. A.O. no penalty u/s 271AAB can be imposed on assessee. The Ld. A.O. has not determined it as income from other sources u/s 69 of Income Tax Act in the assessment but accepted as business income of current year. Therefore merely on the basis of surrender made in the search statement, this cannot be held as “Undisclosed Income” for the purpose of levy of penalty u/s 271AAB. Thus it is only by admission of assessee on which the assessee included the said amount in 11 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. return filed as his income of current year and paid tax thereon. There is no iota of evidence that surrendered income was undisclosed income. Further the department has carried out search and seizure operations on the assessee group and during the course of search the department has not found any evidence, which shows that the assessee was having any undisclosed income. The revenue authorities have exerted undue pressure and obtained the surrender of income from the assessee and the notings in diary appears just to facilitate said surrender of income. As for surrender of Rs. 10 crores as estimated current year income it is submitted that there could be no surrender of estimated current year profits/income as per books of accounts and the same cannot be said to be undisclosed income for which surrender could be made. The current year income/profit stated to be in statement u/s 132 (4) by director of company could only be taken as estimated as the same can be precisely finally determined as per audited accounts and taxable income can be arrived at by making computation of income as per provisions of the Act. The profits of assessee as per books of accounts are little above what was estimated. The Ld. A.O. examined books of accounts and other record as well as computation of income and found them correct and complete without any deficiency, defect and declared results were not disturbed at all but he isolately made an adhoc disallowance of Rs. 36,15,030/- of expenses claimed by assessee company which too has been deleted by CIT (A). The such current year income as per books of accounts by no imagination is undisclosed income it was just a estimated income of current year and no surrender of such income could have been said as having been made in course of search by assessee company. The CBDT in this regard issued a circular F.No. 286/2/2003-IT(Inv.) dated 10-03- 2003 and has expressed its concern about the practice of confession of additional income during the course of search and seizure proceedings and, therefore, clarified that the confession during the course of search and survey operation do not serve any useful purpose. There should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Department. For ready reference the said circular is reproduced herein below: GOVERNMENT OF INDIA 12 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. MINISTRY OF FINANCE & COMPANY AFFAIRS DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES Room No. 254/North Block, New Delhi, the 10th March, 2003 To All Chief Commissioners of Income Tax, (Cadre Contra) & All Directors General of Income Tax Inv. Subject: Confession of additional Income during the course of search & seizure and survey operation – regarding “Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search & seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders.” The Board has again issued a Circular dated 18th December, 2014 and advised the taxing authorities to avoid obtaining admission of undisclosed income under coercion /undue influence. Further in a recent judgement of Hon'ble jurisdictional ITAT, Jaipur Bench, Jaipur in case of Rajendra Kumar Gupta Vs. DCIT, CC-2, Jaipur (ITA No. 359/JP/2017 order dated 18-01-2019) wherein Hon'ble Bench held as under:- 13 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. “2.1 During the course of search, a note book (diary) has been found referred to as Ann. AS wherein there are certain notings relating to cash advances given to various persons totaling to Rs. 82,80,000. Referring to the statement of the assessee in respect of these notings recorded u/s 132 (4), Ld. CIT (A) has given a finding that the assessee has given a generalized statement without specifying the complete particulars of persons to whom loans were given and also failed to substantiate the same. The said findings have not been disputed by the Revenue and therefore, merely based on surrender and generalized statement of the assessee, in absence of anything specific to corroborate such entries, can it be said that such entries/notings represent undisclosed income of the assessee. As per the definition of undisclosed income u/s 271AAB, the said cash advances cannot be stated to be income which is represented by any money, bullion, jewellery or other valuable particle or thing. Whether it can then be said that such undisclosed cash represents income by way of any entry in books of account or other documents or transactions found in the course of a search under section 132. A cash advance per se represents an outflow of funds from the assessee’s hand and an income per se represents an inflow of funds in the hands of assessee. Therefore, once there is an inflow of funds by way of income, there can be subsequent outflow by way of an advance to any third party. Giving an advance and income thus cannotes different meaning and connotation and thus cannot be used inter-changeably. In the definition of undisclosed income, where it talks about “income by way of any entry in the books of account or other documents or transactions found in the course of a search under section 132”, what perhaps has been envisaged by the legislature is an inflow of funds in the hands of the assessee which has been found by way of any entry in the books of accounts or other documents, and which has not been recorded before the date of search in the books of accounts or other documents maintained by the assessee in the normal course and not vice-versa. We are also conscious of the fact that there are deeming provisions in terms of section 69 and 69B wherein such amounts may be deemed as income in absence of satisfactory explanation. In our view, the deeming fiction so envisaged under Section 69 and Section 69B cannot be extended and applied automatically in context of section 271AAB. It is a well- settled legal proposition that the deeming provisions are limited for the purposes that have been brought on the statue book and have therefore to be applied in the context of provisions wherein they have been brought on the statue book and not otherwise. In the instant case, the deeming provisions contained in section 69 and section 69B could have been applied in the context of bringing to tax such investments to tax in the quantum proceedings, though the fact of the matter is that the A.O. has not even invoked the said deeming provisions in the quantum proceedings. Therefore, even on this account, the deeming fiction cannot be extended to the penalty proceedings which are separate and distinct from the assessment proceedings and more so, where the provisions of section 271AAB 14 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. provide for a specific definition of undisclosed income. Where a specific definition of undisclosed income has been provided in Section 271AAB, being a penal provision, the same must be strictly construed and in light of satisfaction of conditions specified therein and it is not expected to examine other provisions where the same has been defined or deemed for the purposes of bringing the amount to tax. In light of the same, the undisclosed investment by way of advances can be subject matter of addition in the quantum proceedings, as the same has been surrendered during the course of search in the statement recorded u/s 132 (4) and offered in the return of income, however the same cannot be said to qualify as an undisclosed income in the context of section 271AAB read with the explanation thereto and penalty so levied thereon deserves to be set-aside.” It is further submitted that Hon’ble Jurisdictional ITAT, Jaipur Bench, Jaipur in its order passed in the case of director of appellant company Shri Nikhil Madan (117/JP/2018) Dated 27-07-2020 having very identical/similar facts of the case deleted the penalty levied by Ld. Assessing Officer on both grounds i.e. legal as well on merit. A copy of order of Hon’ble ITAT, Jaipur Bench, Jaipur is submitted herewith. For ready reference the relevant finding of the Hon’ble Bench is reproduced herein below:- On Legal Ground: - The Hon’ble ITAT in this order held that initiation of penalty is wrong and bad in law as notice issued for levy of penalty not specifically pointed out the default for which penalty u/s 271AAB is sought to be imposed. The Hon’ble Bench at page no. 23 of the order last para held that “Accordingly, in view of the facts and circumstances of the case as well as the order of this Tribunal wherein the decisions of the Hon’ble Jurisdictional High Court as well as the Hon’ble Karnataka High Court were followed, we hold that the initiation of penalty is not valid and consequently the order passed by the AO under section 271AAB is liable to be quashed.” On Merit :- Thus on identical facts, the Tribunal has held that entries in the seized documents representing the payment on account of land in the absence of other essential facts regarding the particulars of land as well as persons do not constitute undisclosed income of the assessee as defined in the explanation to section 271AAB of the Act. In the case in hand, on the analysis of facts and in the light of definition of ‘undisclosed income’ given in the explanation to section 271AAB of the Act, the entries in the seized material of 15 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. payment for land without any underlying assets being the land do not constitute undisclosed income of the assessee. Accordingly by following the earlier decision of this Tribunal, the penalty levied under section 271AAB is deleted. The assessee further place reliance on following judgements of Hon'ble Jurisdictional ITAT, Jaipur Bench, Jaipur:- a) Ram Bhajo Vs. ACIT, CC-1, Jaipur (ITA No. 991/JP/2017 dated 11-01-2019) b) Shri Raja Ram Maheshwari Vs. DCIT CC-3, Jaipur (ITA No. 992/JP/2017) dated 10-01-2019 c) Dinesh Kumar Agarwal Vs. ACIT, CC-1, Jaipur (ITA No. 855 & 856/JP/2017) dated 24-07-2018. d) Suresh Chand Mittal Vs. DCIT, CC-2, Jaipur (ITA No. 931/JP/2017) dated 02-07-2018. e) Ravi Mathur Vs DCIT, CC-4, Jaipur (ITA No. 969/JP/2017) dated 13-06- 2018. f) Silver and Art Palace Vs. DCIT, CC-4, Jaipur (ITA No. 236/JP/2018) dated 11-02-2019. g) Rajendra Kumar Gupta Vs. DCIT, CC-2, Jaipur (ITA No. 359/JP/2017) dated 18-01-2019. h) Padam Chand Pungalia Vs. ACIT CC-1, Jaipur (ITA No. 112/JP/2018) dated 05-04-2019. i) Suraj Mal Bansal (HUF) Vs. DCIT, CC-3, Jaipur (ITA No. 124/JP/2018) dated 08-04-2019. j) Shyam Sunder Khandelwal Vs. DCIT, CC-2, Jaipur (ITA No. 307/JP/2018) dated 11-04-2019. k) Vimal Chand Surana Vs. DCIT, CC-2, Jaipur (ITA No. 304/JP/2018) dated 30-05-2019. The assessee company thus prays that penalty levied on it of Rs. 1,99,50,000/- u/s 271AAB (1) (a) is wrong and bad in law which deserves to be deleted.” 16 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. 5. We have heard the rival contentions and perused the material available on record. Briefly stated the facts of the case are that the assessee company is engaged in business of real estate as builder/developer constructing residential/commercial complexes for sale/lease etc. A search u/s 132 took place at the business premises of the company Mahima Group, Jaipur & other group companies, residential premises of directors/others etc. on 30-10-2014. In course of search books of accounts, documents, loose papers etc. were found and inventoried and seized. In course of search in statement u/s 132 (4) recorded from Dhirendra Madan, Managing Director of assessee who on behalf of assessee company offered additional income of Rs. 9,95,00,000/- for the year on account of construction expenses of real estate projects found noted in pages of a diary and also admitted current year profits of the assessee company estimated to Rs. 10,00,00,000/- (Ten Crores). The department treated the total sum of Rs. 19.95 crores as surrendered income by the assessee company for the year. The assessee thereafter computed total income as per provisions of I.T. Act, 1961 and filed return of income on 28-11-2015 declaring total income of Rs. 19,58,84,970/- after claiming certain expenses against this income also with the result that the return income has been shown to be Rs. 19,58,84,970/- which is less than Rs. 19.95 crores. Thus the AO accordingly made an addition of Rs. 36,15,030/- on declared income of Rs. 19,58,84,970/- and assessed the assessee company at Rs. 19,95,00,000/- under section 143(3)/153(1)(b) of the IT Act. The AO simultaneously initiated penalty proceedings under section 271AAB of the Act by issuing fresh show cause notice(s) dated 30.12.2016 and 01.06.2017 to which the assessee filed its explanation. The AO held the 17 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. explanation of the assessee as not acceptable and levied a penalty of Rs. 1,99,50,000/- under section 271AAB of the IT Act, 1961 on the assessee vide impugned penalty order dated 28.02.2019. On appeal filed by the assessee before the ld. CIT (A) against the penalty order, the ld. CIT (A) after considering the detailed submissions filed by the assessee, which are reproduced in the appeal order of ld.CIT (A), deleted the penalty by observing in his order dated 01.02.2024 at page no. 34 as under :- “In view of the above discussion, there is no basis in terms of incriminating material unearthed during the search action w.r.t. the additional income of Rs. 10 Cr. and the same is a general surrender. Further considering the ratio of the judgements cited by the appellant w.r.t. the remaining additional income of Rs. 9.95 Cr. the seized entries in the seized documents representing amounts w.r.t. fitting and furnishings in the absence of other essential facts regarding the particulars as discussed above do not constitute undisclosed income of the assessee for the purposes of section 271AAB of the Act as defined in the Explanation to section 271AAB of the Act. Accordingly the penalty levied under section 271AAB is hereby deleted.” On perusal of record, it is noted that the Assessing Officer was not justified in imposing penalty of Rs. 1,99,50,000/- under section 271AAB of the Act simply on the basis that the assessee admitted/surrendered the income of Rs. 19,95,00,000/- and disclosed in the return without proving that the said income was “ undisclosed income “ of assessee within the meaning of section 271AAB of the IT Act, 1961. The definition of undisclosed income mentioned in provisions of section 271AAB Explanation (c) is reproduced hereunder :- “ (c) \"undisclosed income\" means— (i) any income of the specified previous year represented, either wholly or partly, by any money, bullion, jewellery or other valuable 18 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has— (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year; or (B) otherwise not been disclosed to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner before the date of search; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted.” The ld. A/R submitted that it is only by admission of assessee on which the assessee included the said amount in the return filed as his income of current year and paid tax thereon. There is no iota of evidence that surrendered income was undisclosed income. The ld. A/R submitted that the revenue authorities had exerted undue pressure and obtained surrender of income from the assessee. It is worthwhile to mention that CBDT Circular F.No.286/2/2003-IT(Inv.) dated 10-03-2003 indicates that practice of confession of additional income during search and seizure operation does not serve any useful purpose and there should be concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be 19 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. disclosed before the Income Tax Department. The Bench noted that the Board Circular dated 10-03-2003 (supra) submitted by the ld. A/R of the assesseee through his written submission has merit. We have taken into consideration the case laws cited by both the parties and also kept in mind the citations as mentioned by the ld. CIT(A) in his order. We find that the Coordinate Bench of the Jaipur Tribunal, recently, in the case of Shri Paras Mal Jain vs. DCIT in ITA No. 353/JP/2022 dated 22.06.2023 has decided the issue in favour of the assessee by placing reliance on the decision in the case of Rajendra Kumar Gupta vs. DCT in ITA No. 359/JP/2017 dated 18.01.2019 on similar issue, wherein the Bench has discussed the issue in its order very elaborately and judiciously. The relevant extract of the same is reproduced as under :- “2.1. During the course of search, a note book (diary) has been found referred to as Ann. AS wherein there are certain notings relating to cash advances given to various persons totaling to Rs. 82,80,000. Referring to the statement of the assessee in respect of these notings recorded u/s 132 (4), Ld. CIT (A) has given a finding that the assessee has given a generalized statement without specifying the complete particulars of persons to whom loans were given and also failed to substantiate the same. The said findings have not been disputed by the Revenue and therefore, merely based on surrender and generalized statement of the assessee, in absence of anything specific to corroborate such entries, can it be said that such entries/notings represent undisclosed income of the assessee. As per the definition of undisclosed income u/s 271AAB, the said cash advances cannot be stated to be income which is represented by any money, bullion, jewellery or other valuable particle or thing. Whether it can then be said that such undisclosed cash represents income by way of any entry in books of account or other documents or transactions found in the course of a search under section 132. A cash advance per se represents an outflow of funds from the assessee’s hand and an income per se represents an inflow of funds in the hands of assessee. Therefore, once there is an inflow of funds by way of income, there can be subsequent outflow by way of an advance to any third party. Giving an advance and income thus connotes different meaning and connotation and thus cannot be used inter-changeably. In the definition of 20 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. undisclosed income, where it talks about “income by way of any entry in the books of account or other documents or transactions found in the course of a search under section 132”, what perhaps has been envisaged by the legislature is an inflow of funds in the hands of the assessee which has been found by way of any entry in the books of accounts or other documents, and which has not been recorded before the date of search in the books of accounts or other documents maintained by the assessee in the normal course and not vice-versa. We are also conscious of the fact that there are deeming provisions in terms of section 69 and 69B wherein such amounts may be deemed as income in absence of satisfactory explanation. In our view, the deeming fiction so envisaged under Section 69 and Section 69B cannot be extended and applied automatically in context of section 271AAB. It is a well-settled legal proposition that the deeming provisions are limited for the purposes that have been brought on the statue book and have therefore to be applied in the context of provisions wherein they have been brought on the statue book and not otherwise. In the instant case, the deeming provisions contained in section 69 and section 69B could have been applied in the context of bringing to tax such investments to tax in the quantum proceedings, though the fact of the matter is that the A.O. has not even invoked the said deeming provisions in the quantum proceedings. Therefore, even on this account, the deeming fiction cannot be extended to the penalty proceedings which are separate and distinct from the assessment proceedings and more so, where the provisions of section 271AAB provide for a specific definition of undisclosed income. Where a specific definition of undisclosed income has been provided in Section 271AAB, being a penal provision, the same must be strictly construed and in light of satisfaction of conditions specified therein and it is not expected to examine other provisions where the same has been defined or deemed for the purposes of bringing the amount to tax. In light of the same, the undisclosed investment by way of advances can be subject matter of addition in the quantum proceedings, as the same has been surrendered during the course of search in the statement recorded u/s 132 (4) and offered in the return of income, however the same cannot be said to qualify as an undisclosed income in the context of section 271AAB read with the explanation thereto and penalty so levied thereon deserves to be set-aside.” We, therefore, respectfully following the above decisions of the coordinate bench of the Tribunal on identical issue, in the cases of Paras Mal Jain (supra) and Rajendra Kumar 21 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. Gupta (supra) and in view of the above deliberation that the income surrendered is not an undisclosed income as specified in Explanation (c) of Section 271AAB of the Act, we concur with the findings of the ld. CIT(A) by deleting the addition. The order of the ld. CIT (A) is upheld. Thus, the grounds of appeal raised by the revenue in its appeal are dismissed. C.O. No. 13/JP/2024 (Assessee) : 6. Since we have decided the issue in favour of the assessee by dismissing the appeal of the revenue, we do not feel to adjudicate the ground raised in the cross objection. Hence the cross objection of the assessee is dismissed. 7. In the result, the appeal of the revenue as well as cross objection of the assessee are dismissed . Order pronounced in the open court on 15/10/2024. Sd/- Sd/- ¼ jkBkSM+ deys'k t;arHkkbZ ½ ¼lanhi xkslkbZ½ (RATHOD KAMLESH JAYANTBHAI) (SANDEEP GOSAIN) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 15/10/2024. Das/ vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant- The ACIT, Circle-4, Jaipur. 2. izR;FkhZ@ The Respondent- Mahima Real Estate Pvt.Ltd., Jaipur. 3. vk;dj vk;qDr@ CIT 22 ITA No. 668/JP/2024 & CO No. 13/JP/2024 Mahima Real Estate Pvt. Ltd., Jaipur. 4. vk;dj vk;qDr@ CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur. 6. xkMZ QkbZy@ Guard File {ITA No. 668 & CO No. 13/JP/2024} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar "