M/S. SUMANGAL GEMS , JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX, JAIPUR

ITA 113/JPR/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4333 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 31-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Search and seizure; Principle of natural justice; Initiation of penalty proceedings; Fair market value; Valuation report
• Section: 132; 271(1)(c); 143(3); 274; 246A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC HES B JAIPUR BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SING H YADAV, AM ITA NO. 113/JP/2018 ASSESSMENT YEAR :2015-16 M/S SUMANGAL GEMS JAIPUR CUKE VS. DCIT, CENTRAL CIRCLE-02, JAIPUR PAN/GIR NO.: AAFFS8731B APPELLANT RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SH. S. R. SHARMA (CA) & SH. R. K. BHATRA (CA) JKTLO DH VKSJ LS @ REVENUE BY : SH. B. K. GUPTA (CIT) & SMT. R UNI PAL (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 22/01/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 24/02/2020 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-4, JAIPUR DATED 20.11.2017 WHEREIN THE ASSESSEE HAS TA KEN THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE NOTICE ISSUED BY ASSESSING OFFICER FOR INITIATING THE PENALTY U/S 271AAB OF THE I.T. ACT, 1961 IS NOT IN ACCORDAN CE WITH LAW NOT BEING SPECIFICALLY POINTING OUT THE DEFAULT FOR WHICH THE LD. AO SOUGHT TO IMPOSE PENALTY U/S 271AAB. 2. THAT WITHOUT PREJUDICE TO THE GROUND NO. (1) ABO VE ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS WRONG, UNJUST AND HAS ERRED IN LAW IN CONFIRMING PENALTY OF RS. 14,49 ,248/- IMPOSED BY THE LD. ASSESSING OFFICER U/S 271AAB OF THE I.T. ACT, 1 961. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE ACTION U/S 132 OF THE ACT WAS CARRIED OUT ON SURANA GROUP ON 15.10.2014 AND ITA NO. 113/JP/2018 M/S SUMANGAL GEMS, JAIPUR VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 2 ASSESSEE IS ONE OF THE MEMBERS OF THE SAID GROUP. DURING THE COURSE OF SEARCH, THE STATEMENT OF THE PARTNER OF THE ASSESSE E FIRM WAS RECORDED U/S 132(4) WHEREIN HE SURRENDERED ADDITIONAL BUSINESS I NCOME ON ACCOUNT OF STOCK AMOUNTING TO RS. 1,44,92,480/-. THEREAFTER, THE ASS ESSEE FIRM FILED ITS RETURN OF INCOME ON 20.09.2015 DECLARING TOTAL INCOME OF RS. 1,44,92,480/- WHICH REPRESENTS THE ADDITIONAL INCOME SURRENDERED DURING THE COURSE OF SEARCH. THE ASSESSMENT U/S 143(3) READ WITH SECTION 153B(1)(B) WAS COMPLETED ON 14.12.2016 ACCEPTING THE RETURNED INCOME. SEPARATEL Y, THE PENALTY PROCEEDINGS U/S 271AAB WERE INITIATED BY WAY OF ISSUANCE OF NOT ICE U/S 274 READ WITH SECTION 271AAB OF THE ACT AND THEREAFTER, THE AO LE VIED THE PENALTY U/S 271AAB VIDE HIS ORDER DATED 14.06.2017 @ 10% OF RS. 1,44,92,480/-, BEING THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YE AR. 3. IN THE AFORESAID PENALTY ORDER, THE ASSESSING OF FICER REFERRED TO THE ASSESSMENT ORDER AND STATED THAT THE ASSESSEE HAS N OT FILED ANY FURTHER APPEAL AGAINST THE SAID ORDER. FURTHER, THE ASSESSING OFFI CER HELD THAT IN VIEW OF THE PROVISIONS OF SECTION 271AAB, IT IS CLEAR THAT THER E IS NO SCOPE OF ESCAPEMENT FOR LEVY OF PENALTY RATHER THE PROVISIONS PROVIDES FOR THE QUANTUM FOR LEVY OF PENALTY DEPENDING UPON FACTS AND CIRCUMSTANCES OF T HE EACH CASE AND THE ASSESSEE CONTENTIONS THAT HE HAD MADE BONAFIDE DISC LOSURE WERE NOT FOUND ACCEPTABLE. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE LD. CIT(A) WHO NOTED THAT THE ASSESSEE HAS MADE DISCLOS URE OF ADDITIONAL INCOME AND SAME WAS ALSO OFFERED IN THE RETURN FILED U/S 1 53A OF THE ACT. IT WAS FURTHER STATED THAT INTENTION OF LEGISLATURE WAS VE RY CLEAR THAT SECTION 271AAB PROVIDES FOR MANDATORY LEVY OF PENALTY ON SURRENDER OF UNDISCLOSED INCOME THOUGH QUANTUM THEREOF MAY VARY SUBJECT TO FULFILLM ENT OF CERTAIN CONDITIONS AND THUS, UNLIKE SECTION 271AAA, WHEREIN IMMUNITY F ROM IMPOSITION OF PENALTY ITA NO. 113/JP/2018 M/S SUMANGAL GEMS, JAIPUR VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 3 IS POSSIBLE SUBJECT TO FULFILLMENT OF CONDITIONS, T HERE IS NO IMMUNITY CLAUSE PROVIDED FROM PENALTY U/S 271AAB. IT WAS ACCORDINGL Y HELD THAT THE PENALTY U/S 271AAB IS MANDATORY IN NATURE AND THERE IS NO DISCR ETION WITH THE AO AND THE PENALTY SO LEVIED BY THE ASSESSING OFFICER WAS CONF IRMED. AGAINST THE SAID FINDINGS, THE ASSESSEE IS NOW IN APPEAL BEFORE US. 5. DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT THE PENALTY NOTICE DATED 14.12.2016 DOES NOT SPECIFY THE SPECIF IC LIMB OF SECTION 271AAB UNDER WHICH THE PENALTY WAS SOUGHT TO BE LEVIED. SI MILARLY, THE SECOND SHOW CAUSE NOTICE DATED 15.05.2017 ALSO DOES NOT SPECIFY THE LIMB UNDER WHICH THE ASSESSING OFFICER SEEK TO LEVY PENALTY U/S 271AAB O F THE ACT. IT WAS SUBMITTED THAT BOTH THE NOTICES WERE ISSUED IN A ROUTINE MANN ER WITHOUT MENTIONING UNDER WHICH CLAUSE OF SECTION 271AAB OF THE ACT, TH E ASSESSEE IS LIABLE FOR PENALTY. THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY, OTHERWISE, THE PRINCIPLES OF NATURAL JUSTICE ARE VIOLATED AND ON THE BASIS OF SUCH PROCEEDING, NO PENALTY COULD BE IMPOS ED ON THE ASSESSEE. THUS, THERE IS NO APPLICATION OF MIND AT THE TIME OF ISSU ING THE SHOW CAUSE NOTICE BY THE AO. IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS FINALLY LEVIED PENALTY AS PER CLAUSE (A) OF SECTION 271AAB OF THE ACT, HOWEVE R, NO SUCH GROUND WAS SPECIFIED IN THE SHOW CAUSE NOTICE ISSUED U/S 271AA B READ WITH SECTION 274 OF THE ACT. 6. IT WAS FURTHER SUBMITTED THAT THE AO AND THE LD CIT(A) ARE NOT CORRECT IN STATING THAT THE LEVY OF PENALTY U/S 271AAB IS MAND ATORY IN NATURE AS THE PROVISIONS OF SECTION 271AAB STATES THAT THE ASSESS ING OFFICER MAY LEVY PENALTY WHICH THUS PERMITS THE ASSESSING OFFICER TO USE HIS DISCRETION TO LEVY OR NOT TO LEVY A PENALTY DEPENDING UPON FACTS AND CIRCUMSTANC ES OF THE CASE. IT WAS FURTHER SUBMITTED THAT THE LEGISLATURE HAS INCLUDED THE PROVISIONS OF SECTION 274 AND 275 OF THE ACT IN CONTEXT OF SECTION 271AAB OF THE ACT WITH CLEAR INTENTION ITA NO. 113/JP/2018 M/S SUMANGAL GEMS, JAIPUR VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 4 TO CONSIDER THE IMPOSITION OF PENALTY JUDICIALLY. T HEREFORE, THE PENALTY CANNOT BE IMPOSED UNLESS THE ASSESSEE IS GIVEN A REASONABL E OPPORTUNITY AND ASSESSEE IS BEING HEARD. ONCE THE OPPORTUNITY IS GIVEN TO TH E ASSESSEE, THE PENALTY CANNOT BE MANDATORY AND IT IS ON THE BASIS OF FACTS AND MERITS PLACED BEFORE THE AO. ONCE THE AO IS BOUND BY THE ACT TO HEAR THE ASSESSEE AND TO GIVE REASONABLE OPPORTUNITY TO EXPLAIN HIS CASE, THERE I S NO MANDATORY REQUIREMENT OF IMPOSING PENALTY. IT WAS FURTHER SUBMITTED THAT THE PENALTY ORDER U/S 271AAB IS AN APPEALABLE ORDER U/S 246A BEFORE CIT(A ) AND THEREFORE, IT IS NOT CORRECT TO HOLD THAT THE PENALTY U/S 271AAB IS MAND ATORY IN NATURE AND HAD THAT BEING THE INTENTION OF LEGISLATURE, THERE WOUL D NOT HAVE BEEN ANY PROVISION OF APPEAL AGAINST THE SAID LEVY OF PENALTY. 7. IT WAS FURTHER SUBMITTED THAT DURING THE COURSE OF SEARCH, IN THE STATEMENT RECORDED U/S 132(4) OF THE I.T. ACT, 1961 , THE PARTNER OF ASSESSEE FIRM SURRENDERED A SUM OF RS.1,44,92,480/- ON ACCOU NT OF ALLEGED EXCESS STOCK. IN THE COURSE OF SEARCH THE DEPARTMENTAL VALUER HAD VALUED THE TOTAL VALUE OF STOCK OF EMERALD ROUGH, SEMI PRECIOUS STONES AND EM ERALD FINISHED FOUND AT THIS PREMISES AT RS.1,80,61,660/- WHEREAS AS PER BO OKS OF ACCOUNTS OF ASSESSEE FIRM, THE VALUE OF STOCK WAS RS.35,69,180/ -. IT WAS SUBMITTED THAT THE DEFERENTIAL VALUE OF STOCK OF RS.1,44,92,480/- OFFE RED BY ASSESSEE FIRM AS ADDITIONAL BUSINESS INCOME WAS NOTHING BUT THE DIFF ERENCE IN VALUATION OF STOCK. THUS NO EXCESS STOCK WAS FOUND DURING THE COURSE OF SEARCH SURVEY. IT IS ONLY DIFFERENCE IN VALUATION OF STOCK VALUED BY REGISTER ED VALUER. IT WAS SUBMITTED THAT IT IS AN ADMITTED FACT THAT THERE IS NO IDENTI FIABLE/SEPARABLE STOCK FOUND WHICH CAN BE SAID AS UNDISCLOSED. MORE PARTICULARLY , ASSESSEE FIRM HAS NO UNEXPLAINED PURCHASES OR SALES. THERE IS NO REAL IN COME AND NO REAL EXCESS STOCK. WITHOUT ESTABLISHING REAL INCOME, NO PENALTY CAN BE IMPOSED PRESUMING THE HYPOTHETICAL INCOME. IN THE INSTANT CASE, THE S URRENDER HAS BEEN MADE ON ACCOUNT OF EXCESS VALUE OF STOCK, IT IS NOT A CASE WHERE DURING SEARCH, ITA NO. 113/JP/2018 M/S SUMANGAL GEMS, JAIPUR VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 5 UNACCOUNTED SALES OR UNEXPLAINED PURCHASES HAVE BEE N FOUND. THEREFORE, WHENEVER THE ASSESSEE WILL SELL THESE STOCKS, THE R ESULTED PROFIT WILL AUTOMATICALLY GET INCORPORATED IN ITS TAXABLE PROFI TS. UNDER THE FACTS AND CIRCUMSTANCES, IN NO CASE THERE WOULD BE ANY UNDISC LOSED INCOME OF THE ASSESSEE, THEREFORE, PROVISION OF SECTION 271AAB IS NOT ATTRACTED IN THE INSTANT CASE. ACCORDINGLY IT WAS SUBMITTED THAT IT IS NOT A CASE WHERE DEPARTMENT EITHER FOUND ANY INCOME OR ANY ASSETS OR ANY EXPENS ES NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNTS OR DOCUMENTS, HENCE, THE AMOUNT SURRENDERED BY WAY OF EXCESS VALUE OF STOCK DOES NOT MEET THE DEFI NITION OF UNDISCLOSED INCOME GIVEN IN SECTION 271AAB AND MERELY BASIS TH E SURRENDER MADE IN THE STATEMENT RECORDED U/S 132(4), NO PENALTY CAN BE LE VIED. IN SUPPORT, THE RELIANCE WAS PLACED ON THE CO-ORDINATE BENCH DECISI ON IN CASE OF M/S RAMBHAJO VS ACIT (ITA NO. 991/JP/17 DATED 11.01.2019), M/S SILVER ART & PALACE (ITA NO. 236/JP/18 DATED 11.02.2019) AND SHRI PADAM CHAND PUNGLIYA, JAIPUR VS. ACIT, JAIPUR (ITA NO. 112/JP/2018 DATED 05/04/2019) . 8. PER CONTRA, THE LD. DR IS HEARD WHO HAS RELIED O N THE ORDER OF THE LOWER AUTHORITIES AND SUBMITTED THAT ONCE THE ASSESSEE HA S SURRENDERED THE AMOUNT DURING THE COURSE OF SEARCH IN THE STATEMENT RECORD ED U/S 132(4) OF THE ACT OF THE ONE OF THE PARTNERS OF THE ASSESSEE FIRM, THERE FORE, THERE IS NO BASIS TO STATE THAT THERE IS NO UNDISCLOSED INCOME FOUND DUR ING THE COURSE OF SEARCH. IT WAS FURTHER SUBMITTED THAT THE PROVISIONS OF SECTIO N 271AAB ARE CLEAR IN CONTRAST TO SECTION 271AAA WHEREIN THERE IS NO MECH ANISM FOR IMMUNITY FROM LEVY OF PENALTY AND THE ONLY DISCRETION WHICH LIES WITH THE ASSESSING OFFICER IS IN TERMS OF QUANTUM OF LEVY OF PENALTY AND THAT TO, DE PENDS UPON THE SATISFACTION OF THE SPECIFIC TERMS AND CONDITIONS AS PROVIDED IN THE SAID PROVISIONS. THE LD DR ACCORDINGLY SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FIRSTLY, THE QUESTION THAT ARISES FOR CO NSIDERATION IS THE NATURE OF ITA NO. 113/JP/2018 M/S SUMANGAL GEMS, JAIPUR VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 6 CHARGE(S) SPECIFIED UNDER SECTION 271AAB OF THE ACT . WHETHER IT PROVIDES FOR A SINGULAR CHARGE OF UNDISCLOSED INCOME FOR THE SPECI FIED PREVIOUS YEAR FOUND DURING THE COURSE OF SEARCH INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012 OR IT PROVIDES FOR MULTIPLES CHARGES AS SO CONTENDED BY THE LD AR IN TERMS OF CLAUSE (A), CLAUSE (B) OR CLAUSE (C) TO SUB-SECTION (1) TO SECTION 271AAB OF THE ACT. ON CLOSE READING OF PROVISIONS OF SECTION 271AAB, WE FIND THAT THE PRIMARY CONDITION OR CHARGE FOR LEVY OF PE NALTY IS THE EXISTENCE OF UNDISCLOSED INCOME FOR THE SPECIFIED PREVIOUS YEAR FOUND DURING THE COURSE OF SEARCH IN THE CASE OF ASSESSEE. ONCE THE SAID PRIMA RY CONDITION OR CHARGE IS SATISFIED, FOR THE PURPOSES OF QUANTIFYING THE PENA LTY, THE ASSESSING OFFICER HAS TO EXAMINE THE SATISFACTION OF ANCILLARY CONDITIONS AS SPECIFIED UNDER CLAUSE (A), CLAUSE (B) OR CLAUSE (C) TO SUB-SECTION (1) TO SECT ION 271AAB. MERELY BECAUSE THE QUANTUM OF PENALTY VARIES FROM 10% TO 30% SUBJE CT TO COMPLIANCES WITH THE ANCILLIARY CONDITIONS, IT CANNOT BE SAID THAT W HERE THE AO HAS INITIATED THE PENALTY UNDER SECTION 271AAB, THERE IS ANY AMBIGUIT Y IN THE CHARGE OR THERE IS ANY LACK OF APPLICATION OF MIND ON PART OF THE ASSE SSING OFFICER. FURTHER, THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT BASED O N ADDITION MADE AND INVESTIGATION/ENQUIRY CONDUCTED DURING THE COURSE O F ASSESSMENT PROCEEDINGS, RATHER IT IS BASED ON SEARCH CONDUCTED ON THE ASSES SEE ON OR AFTER THE 1ST DAY OF JULY, 2012, IN SUCH A SITUATION, WHERE THE PENAL TY SHOW-CAUSE NOTICE IS ISSUED U/S 271AAB, THE ASSESSING OFFICER IS MAKING THE ASSESSEE AWARE OF THE CHARGE AGAINST HIM IN TERMS OF UNDISCLOSED INCOME F OUND DURING THE COURSE OF SEARCH AND THUS, THE ASSESSEE IS GRANTED AN OPPORTU NITY TO REFUTE SUCH CHARGE AND FILE ITS EXPLANATIONS/SUBMISSIONS. UNLIKE PROVI SIONS OF SECTION 271(1)(C) WHICH PROVIDES FOR SEPARATE CHARGE OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME , THERE IS A SINGULAR CHARGE UNDER SECTION 271AAB IN TERMS OF THE EXISTENCE OF U NDISCLOSED INCOME FOR THE SPECIFIED PREVIOUS YEAR FOUND DURING THE COURSE OF SEARCH. THEREFORE, IN THE INSTANT CASE, WHERE THE NOTICE DATED 14.12.2016 IS ISSUED TO THE ASSESSEE FIRM ITA NO. 113/JP/2018 M/S SUMANGAL GEMS, JAIPUR VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 7 TO SHOW-CAUSE WHY PENALTY SHOULD NOT BE LEVIED U/S 271AAB OF THE ACT, THE ASSESSEE IS MADE AWARE OF THE SPECIFIC CHARGE AGAIN ST IT AND AN OPPORTUNITY HAS THUS BEEN GIVEN TO REBUT SUCH CHARGE AND THEREF ORE, WE DONOT SEE ANY INFIRMITY IN THE INITIATION OF THE PENALTY PROCEEDI NGS AND CONSEQUENT PENALTY ORDER SO PASSED BY THE AO ON THIS ACCOUNT. FURTHER , EVEN FOR SAKE OF ARGUMENT, IF IT IS ASSUMED THAT PRIMARY CHARGE OF U NDISCLOSED INCOME HAS TO BE READ ALONG WITH ANCILLARY CONDITIONS AND THUS MULTI PLES CHARGES HAVE BEEN PRESCRIBED IN TERMS OF CLAUSE (A), CLAUSE (B) OR CL AUSE (C) TO SUB-SECTION (1) TO SECTION 271AAB AND WHERE THE ASSESSING OFFICER HAS NOT STATED THE SPECIFIED CHARGE AT THE TIME OF INITIATION OF PENALTY PROCEED INGS, IN OUR CONSIDERED VIEW, SUCH UNCERTAIN CHARGE AT THE STAGE OF INITIATION OF PENALTY PROCEEDINGS CAN BE MADE GOOD WITH A CLEAR-CUT CHARGE IN THE PENALTY OR DER. IN ANY CASE, EXISTENCE OF A CLEAR-CUT CHARGE IN PENALTY ORDER IS A MUST SO AS TO VALIDATE ANY PENALTY ORDER AND SO LONG AS THERE IS A CLEAR FINDING IN TH E PENALTY ORDER, NO INFIRMITY CAN BE SAID TO ARISE IN THE PENALTY ORDER. IN THE I NSTANT CASE, THE AO HAS RECORDED HIS SATISFACTION WHILE PASSING THE ASSESSM ENT ORDER THAT THERE IS UNDISCLOSED INCOME FOUND DURING THE COURSE OF SEARC H AND OTHER CONDITIONS BEING SATISFIED AND THEREFORE, THE ASSESSEE IS LIAB LE FOR PENALTY U/S 271AAB, THEREAFTER THE NOTICE INITIATING THE PENALTY PROCEE DINGS U/S 271AAB WAS ISSUED TO THE ASSESSEE. THEREAFTER, THE ASSESSING OFFICER HAS GIVEN A SPECIFIC FINDING AS REFLECTED IN THE PENALTY ORDER THAT THE ASSESSEE IS LIABLE FOR PENALTY U/S 271AAB(1)(A) WHICH PROVIDES FOR LEVY OF PENALTY @ 1 0% ON THE UNDISCLOSED INCOME FOUND DURING THE COURSE OF SEARCH AND ADMITT ED IN STATEMENT RECORDED U/S 132(4) OF THE ACT. THEREFORE, WE DONOT SEE ANY INFIRMITY IN THE INITIATION OF PENALTY PROCEEDINGS AND CONSEQUENT PENALTY ORDER SO PASSED BY THE ASSESSING OFFICER ON THIS ACCOUNT AND THE CONTENTIONS SO RAIS ED BY THE LD AR IN THIS REGARD CANNOT BE ACCEPTED. ITA NO. 113/JP/2018 M/S SUMANGAL GEMS, JAIPUR VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 8 10. NOW COMING TO ANOTHER CONTENTION OF THE LD AR W HERE HE HAS CHALLENGED THE FINDINGS OF THE LOWER AUTHORITIES THAT PENALTY U/S 271AAB IS MANDATORY IN NATURE AND THERE IS NO DISCRETION WITH THE INCOME T AX AUTHORITIES. IN THIS REGARD, WE AGAIN REFER TO THE PROVISIONS OF SECTION 271AAB WHICH BEGINS WITH THE STIPULATION THAT THE ASSESSING OFFICER MAY DIRE CT THE ASSESSEE AND THE ASSESSEE SHALL PAY THE PENALTY AS PER CLAUSE (A) TO (C) SO SATISFIED IN SUB- SECTION (1) TO SECTION 271AAB. FURTHER, AS PER SUB -SECTION (3) OF SECTION 271AAB, THE PROVISIONS OF SECTION 274 AND SECTION 2 75 AS FAR AS MAY BE APPLIED IN RELATION TO PENALTY UNDER THIS SECTION WHICH MEA NS THAT BEFORE LEVYING THE PENALTY, THE ASSESSING OFFICER HAS TO ISSUE A SHOW- CAUSE GRANTING AN OPPORTUNITY TO THE ASSESSEE. FURTHER, THE ORDER LE VYING THE PENALTY IS AN APPELLABLE ORDER AND THEREFORE, THE FACT THAT THE S TATUE HAS PROVIDED FOR AN APPELLATE REMEDY AGAINST THE LEVY OF PENALTY, THE L EVY OF PENALTY CANNOT BE HELD AS MANDATORY BUT THE SAME WILL DEPEND UPON FAC TS AND CIRCUMSTANCES OF EACH CASE. THUS, WE AGREE WITH THE CONTENTIONS OF T HE LD AR THAT THE LEVY OF PENALTY IS NOT MANDATORY IN ALL CASES BUT THE ASSES SING OFFICER HAS TO DECIDE BASED ON FACTS AND CIRCUMSTANCES OF THE CASE. IN FA CT, IT IS A CONSISTENT VIEW OF THIS TRIBUNAL ACROSS VARIOUS BENCHES THAT LEVY OF P ENALTY U/S 271AAB IS NOT AUTOMATIC IN NATURE BUT THE AO HAS THE DISCRETION A ND HAS TO TAKE A DECISION AFTER ARRIVING AT THE CONCLUSION THAT THE INCOME DI SCLOSED BY THE ASSESSEE IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT IS AN UND ISCLOSED INCOME IN TERMS OF SECTION 271AAB(1) R/W. EXPLANATION DEFINING THE UNDISCLOSED INCOME. FURTHER, WHERE THE DISCRETION SO APPLIED BY THE ASS ESSING OFFICER HAS BEEN RIGHTLY EXERCISED OR NOT IN A PARTICULAR CASE CAN B E REVIEWED AND SUBJECT TO APPELLATE REMEDY AS SO PROVIDED IN THE ACT. 11. THIS NOW TAKES US TO NEXT CONTENTION OF THE LD AR REGARDING AMOUNT SURRENDERED DURING THE COURSE OF SEARCH NOT QUALIFY ING AS AN UNDISCLOSED INCOME U/S 271AAB R/W EXPLANATION THERETO AND MERE LY SURRENDER MADE IN THE ITA NO. 113/JP/2018 M/S SUMANGAL GEMS, JAIPUR VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 9 STATEMENT RECORDED U/S 132(4) IS NOT SUFFICIENT FOR LEVY OF PENALTY. IT IS A SETTLED LEGAL PROPOSITION THAT THE PENALTY PROVISIO NS NEEDS TO BE CONSTRUED STRICTLY. THEREFORE, WHERE THE STATUE HAS PROVIDED FOR A CHARGE FOR LEVY OF PENALTY WHICH IS UNDISCLOSED INCOME FOR THE SPECIF IED PREVIOUS YEAR FOUND DURING THE COURSE OF SEARCH IN THE CASE OF ASSESSEE AND HAS ALSO DEFINED THE MEANING OF UNDISCLOSED INCOME, FOR THE PURPOSES OF LEVY OF PENALTY, WHAT HAS TO BE SEEN IS WHETHER THE SURRENDER SO MADE, IN TER MS OF STATEMENT OF THE PARTNER OF THE ASSESSEE FIRM RECORDED U/S 132(4) DU RING THE COURSE OF SEARCH, FALLS IN THE DEFINITION OF UNDISCLOSED INCOME WHI CH HAS BEEN SPECIFICALLY DEFINED AND LAID DOWN IN TERMS OF CLAUSE (C) OF EXP LANATION TO SECTION 271AAB WHICH READS AS UNDER: (C) 'UNDISCLOSED INCOME' MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENT ED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OT HER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHICH HAS (A) NOT BEEN R ECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN T HE 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 SEA RCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENT ED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXP ENSE RECORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR WHIC H IS FOUND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD TH E SEARCH NOT ITA NO. 113/JP/2018 M/S SUMANGAL GEMS, JAIPUR VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 10 BEEN CONDUCTED. 12. IN THE INSTANT CASE, THEREFORE, WHAT HAS TO BE DETERMINED IS THE INCOME OF SUCH PREVIOUS YEAR WHICH IS REPRESENTED BY SUCH STOCK OF GOODS WHICH IS NOT FOUND RECORDED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR. WHER E THE STOCK WHICH IS RECORDED IN THE BOOKS OF ACCOUNTS AND THE STOCK PHY SICALLY FOUND DURING THE COURSE OF SEARCH HAVE NO DISCREPANCY IN TERMS OF QU ANTITY, THEN ANY DIFFERENCE IN VALUATION DONE BY THE DEPARTMENT VALUER WOULD NO T AMOUNT TO UNDISCLOSED INCOME AS SO DEFINED IN THE EXPLANATION TO SECTION 271AAB OF THE ACT. FURTHER, THE VALUATION OF SUCH UNDISCLOSED STOCK IS REQUIRED TO DETERMINE THE INVESTMENT WHICH HAS BEEN MADE IN SUCH STOCK AND WHICH HAS REM AINED UNDISCLOSED TO THE REVENUE AUTHORITIES. THE INVESTMENT IN STOCK IS TH E FUNCTION OF PRICE OR COST AT WHICH STOCK HAS BEEN PURCHASED BY THE ASSESSEE AND THEREFORE, WHAT IS TO BE DETERMINED IS THE PURCHASE PRICE/COST OF SUCH STOCK AND NOT THE MARKET PRICE. WHERE SUCH STOCK IS ULTIMATELY SOLD, ANY PROFIT ARI SING THEREFROM WOULD BE BROUGHT TO TAX IN REGULAR COURSE AND THE DETERMINAT ION OF MARKET PRICE WOULD BE RELEVANT AT THAT POINT IN TIME. 13. IN THE INSTANT CASE, STOCK OF EMERALD ROUGH, SE MI-PRECIOUS AND EMERALD FINISHED GEMSTONES WAS FOUND DURING THE COURSE OF S EARCH AND THESE ARE STOCK- IN-TRADE OF THE ASSESSEE FIRM IN WHICH IT REGULARS DEALS AS PART OF ITS BUSINESS. WHAT IS THEREFORE RELEVANT FOR THE PRESENT PURPOSES IS FIRSTLY, WHETHER THERE IS ANY EXCESS STOCK PHYSICALLY FOUND WHICH IS NOT RECO RDED IN THE BOOKS OF ACCOUNTS AND SECONDLY, THE COST AT WHICH SUCH EXCES S UNDISCLOSED STOCK HAS BEEN ACQUIRED ALONGWITH THE COST OF CUTTING AND POL ISHING SUCH ROUGH GEMSTONES INTO FINISHED GEMSTONES AND NOT THE VALUE AT WHICH SUCH STOCK CAN FETCH IN THE MARKET OR THE FAIR MARKET VALUE OF SUC H STOCK. WE NOTE THAT IN THE ENTIRE VALUATION REPORT AND IN THE PROCEEDINGS OF S EARCH AND SEIZURE, THE ITA NO. 113/JP/2018 M/S SUMANGAL GEMS, JAIPUR VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 11 DEPARTMENT HAS NOT MADE ANY ALLEGATION THAT THERE W AS ANY DISCREPANCY IN THE QUANTITY OF STOCK FOUND DURING THE COURSE OF SEARCH AND STOCK RECORDED IN THE BOOKS OF ACCOUNT. FURTHER, THE VALUATION OF THE STO CK HAS BEEN MADE BY THE DEPARTMENT VALUER BASIS THE MARKET VALUE AS ON THE DATE OF SEARCH AND THE ASSESSING OFFICER HAS MERELY GONE BY THE SURRENDER MADE DURING THE COURSE OF SEARCH AND THERE IS THUS NO EXERCISE WHICH HAS BEEN UNDERTAKEN BY THE ASSESSING OFFICER TO DETERMINE THE COST OF THE GOOD S SO FOUND DURING THE COURSE OF SEARCH. IN OUR VIEW, GIVEN THAT THE ASSESSEE HA S DISCLOSED THE WHOLE OF THE AMOUNT SURRENDERED DURING THE COURSE OF SEARCH IN I TS RETURN OF INCOME, THE AMOUNT SO SURRENDERED AND DISCLOSED IN THE RETURN O F INCOME IS SUBJECT MATTER OF ASSESSMENT AND HAS RIGHTLY BEEN BROUGHT TO TAX I N THE QUANTUM PROCEEDINGS WHICH HAS SINCE ATTAINED FINALITY. HOWEVER, AS FAR AS PRESENT PENALTY PROCEEDINGS U/S 271AAB ARE CONCERNED WHICH IS SOLEL Y BASED ON THE SEARCH PROCEEDINGS AND ANYWAYS INDEPENDENT OF THE ASSESSME NT PROCEEDINGS, THE ASSESSING OFFICER IS REQUIRED TO GIVE A SPECIFIC FI NDING THAT THERE IS AN UNDISCLOSED INCOME FOUND DURING THE COURSE OF SEARC H IN TERMS OF UNDISCLOSED STOCK AND WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT. THE UNDISCLOSED STOCK COULD BE IN TERMS OF PHYSICALLY I DENTIFIABLE STOCK NOT FOUND RECORDED IN THE BOOKS OF ACCOUNTS OR THE STOCK NOT FOUND RECORDED AT THE APPROPRIATE VALUE SO DETERMINED BY THE ASSESSING OF FICER. IN THE INSTANT CASE, WE FIND THAT THE ASSESSING OFFICER HAS MERELY GONE BY THE SURRENDER STATEMENT WHERE THE STOCK HAS BEEN VALUED AT MARKET PRICE PRE VAILING AS ON THE DATE OF SEARCH AND HAS NOT EXAMINED THE MATTER FROM THE PER SPECTIVE OF DETERMINING ANY EXCESS STOCK AND THE COST OF SUCH STOCK WHICH I S NOT RECORDED IN THE BOOKS OF ACCOUNTS. THERE IS NO FINDING THAT THERE IS ANY EXCESS STOCK WHICH HAS BEEN PHYSICALLY FOUND AND WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS AS ON THE DATE OF SEARCH. IN LIGHT OF ABOVE DISCUSSIO NS, IT IS THUS CLEAR THAT DIFFERENCE IN STOCK OF GOODS AS PER BOOKS AND AS FO UND AT THE TIME OF SEARCH IS ON ACCOUNT OF VALUATION OF SUCH STOCK AT THE MARKET VALUE INSTEAD OF COST AND ITA NO. 113/JP/2018 M/S SUMANGAL GEMS, JAIPUR VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 12 THE SAME CANNOT BE A BASIS TO HOLD THAT IT REPRESEN T UNDISCLOSED INCOME SO DEFINED IN EXPLANATION TO SECTION 271AAB OF THE ACT . THE CO-ORDINATE BENCH IN CASE OF SHRI PADAM CHAND PUNGLIYA, JAIPUR VS. ACIT, JAIPUR (SUPRA) HAS DEALT WITH AN IDENTICAL ISSUE AND RELEVANT FINDINGS ARE C ONTAINED AT PARA 9 OF THE SAID DECISION WHEREIN THE CO-ORDINATE BENCH HAS HELD AS UNDER:- 9. AS REGARDS THE UNDISCLOSED INCOME ON ACCOUNT OF EXCESS STOCK, WE NOTE THAT DURING THE COURSE OF SEARCH AND SEIZURE A CTION THE DEPARTMENT HAS GOT VALUED THE STOCK OF THE ASSESSEE FROM THE D EPARTMENTAL VALUER. WE FIND THAT IN THE VALUATION REPORT THE VALUER HAS NOT MADE ANY ATTEMPT TO FIND OUT THE NET WEIGHT BUT ALL THE ARTICLES ARE TAKEN AT GROSS WEIGHT ON WHICH THE PREVAILING MARKET PRICES AS ON THE DATE O F SEARCH WERE APPLIED. THUS IT IS CLEAR THAT THE DIFFERENCE IN THE CLOSING STOCK WAS DUE TO THE VALUATION DETERMINED BY THE DEPARTMENTAL VALUER BAS ED ON THE GROSS WEIGHT AND PREVAILING MARKET PRICES IN COMPARISON T O THE VALUE RECORDED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. WE FURTHER NOTE THAT IN THE ENTIRE VALUATION REPORT AND IN THE PROCEEDINGS OF T HE SEARCH AND SEIZURE, THE DEPARTMENT HAS NOT MADE ANY ALLEGATION THAT THE RE WAS ANY DISCREPANCY IN THE QUANTITY OF THE STOCK FOUND DURI NG THE COURSE OF SEARCH AND SEIZURE AND THE STOCK RECORDED BY THE AS SESSEE IN THE BOOKS OF ACCOUNT. ONCE THE STOCK WHICH IS RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THE STOCK PHYSICALLY FOUND AT THE TIME OF SEARCH HAS NO DISCREPANCY IN TERMS OF QUANTITY, THEN ONLY BECAUSE OF DIFFERENCE IN VALUATION DONE BY THE DEPARTMENTAL VALUER WOULD NOT AMOUNT TO UNDISCLOSED INCOME BASED ON THE DEFINITION AS PER E XPLANATION TO SECTION 271AAB OF THE ACT. THEREFORE, ONCE THE STOCK IS FOU ND RECORDED IN THE BOOKS OF ACCOUNT, IT DOES NOT FALL IN THE CATEGORY OF VALUABLE ARTICLE OR THINGS WHICH HAS 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. FOR READY RE FERENCE, WE QUOTE THE ITA NO. 113/JP/2018 M/S SUMANGAL GEMS, JAIPUR VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 13 DEFINITION AS PROVIDED IN CLAUSE (C) OF EXPLANATION TO SECTION 271AAB OF THE ACT AS UNDER :- (A) XXXX XXXXX XXXXX (B) XXXXX XXXXX XXXXXX (C) 'UNDISCLOSED INCOME' MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRE SENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOU NT 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 SEAR CH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN T HE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE 54[PRINCIPA L CHIEF COMMISSIONER OR] CHIEF COMMISSIONER OR 54[PRINCIPAL COMMISSIONER OR] COMMISSIONER BEFORE THE DATE OF SE ARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPR ESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXP ENSE RECORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR WHIC H IS FOUND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD TH E SEARCH NOT BEEN CONDUCTED. THEREFORE, THE STOCK WHICH WAS FOUND AT THE TIME OF SEARCH AND SEIZURE WAS NOT DISPUTED BY THE DEPARTMENT THAT THE SAME HA S BEEN RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. ONCE THE STO CK IS RECORDED IN THE BOOKS OF ACCOUNT AND NO DISCREPANCY IS FOUND AS FAR AS QUANTITY OF STOCK, THEN THE DIFFERENCE OF VALUATION WOULD NOT AMOUNT T O UNDISCLOSED INCOME ITA NO. 113/JP/2018 M/S SUMANGAL GEMS, JAIPUR VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 14 IN TERMS OF DEFINITION PRESCRIBED IN THE EXPLANATIO N TO SECTION 271AAB OF THE ACT. THE COORDINATE BENCH OF THE TRIBUNAL IN TH E CASE OF M/S. RAMBHAJOS VS. ACIT (SUPRA) HAS CONSIDERED THE IDEN TICAL ISSUE IN PARA 38 AS UNDER:- 38. FIRSTLY, REGARDING STOCK OF KUNDAN MEENA, AND DIAMOND AND OTHER GEMSTONES STUDDED JEWELLERY WHICH HAS BEEN SURRENDE RED DURING THE COURSE OF SEARCH, WHAT HAS TO BE DETERMINED IS THE INCOME WHICH IS REPRESENTED BY SUCH STOCK OF JEWELLERY WHICH IS NOT FOUND RECORDED IN THE BOOKS OF ACCOUNTS MAINTAINED IN THE NORMAL COURSE R ELATING TO SUCH PREVIOUS YEAR. IN OTHER WORDS, THE VALUE AT WHICH S UCH STOCK HAS BEEN ACQUIRED BY THE ASSESSEE AND NOT THE VALUE WHICH SU CH STOCK CAN FETCH IN THE MARKET OR THE FAIR MARKET VALUE OF SUCH STOCK. IN THE INSTANT CASE, IT HAS BEEN CONTENDED THAT THE VALUATION OF THE STOCK HAS BEEN DONE AT MARKET RATE AS ON THE DATE OF SEARCH WITHOUT CONSID ERING THE COST DISCLOSED IN THE BOOKS OF ACCOUNTS AND WITHOUT CONS IDERING THE WELL- ACCEPTED ACCOUNTING POLICY WHICH HAS BEEN FOLLOWED BY THE ASSESSEE FIRM WHERE IT VALUES ITS STOCK AT LOWER OF COST AND NET REALIZABLE VALUE. THE COST CAN BE DETERMINED ON THE BASIS OF HISTORICAL A ND/OR CURRENT COST SO RECORDED IN THE BOOKS OF ACCOUNTS. ALTERNATIVELY, P AST GROSS PROFIT PERCENTAGE CAN ALSO GIVE A REASONABLE BASIS FOR DET ERMINING SUCH COST. IN THE INSTANT CASE, THE LD AR HAS CONTENDED THAT WHER E GROSS PROFIT OF THE PAST YEAR DETERMINED AT THE RATE OF 13.92% IS USED AND APPLIED TO THE STOCK VALUED BY THE REVENUE AT THE CURRENT MARKET V ALUE, IT WILL RESULT IN A SCENARIO WHERE THE STOCK AS PER BOOKS OF ACCOUNT IS HIGHER THAN THE STOCK VALUED AT THE TIME OF SEARCH. AS PER COMPUTAT ION PREPARED WHICH WE HAVE NOTED ABOVE, WE FIND THAT STOCK (INCLUDING STOCK OF SILVER JEWELLERY) AS PER BOOKS OF ACCOUNTS COMES TO RS 35, 11,24,031 AS AGAINST RS 34,27,22,924 VALUED BY THE DEPARTMENT AT THE TIM E OF SEARCH AND THEREFORE, CONTENTION SO ADVANCED BY THE LD AR IS F OUND REASONABLE. ITA NO. 113/JP/2018 M/S SUMANGAL GEMS, JAIPUR VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 15 ANOTHER ASPECT WHICH HAS BEEN SUBMITTED BY THE ASSE SSEE RELATES TO NON-DEDUCTION ON ACCOUNT OF CHAPADI, WAX ETC FOR TH E KUNDAN MEENA JEWELLERY WHILE PHYSICALLY WEIGHING THE JEWELLERY. IT WAS SUBMITTED BY THE LD AR THAT THE SAID FACT WAS DULY BROUGHT TO TH E NOTICE OF ASSESSING OFFICER VIDE WRITTEN SUBMISSION DATED 15.12.2015, H OWEVER, THE SAME HAS NOT BEEN CONSIDERED BY THE ASSESSING OFFICER. IN OU R VIEW, GIVEN THAT THE ASSESSEE HAS DISCLOSED THE WHOLE OF THE AMOUNT SURR ENDERED DURING THE COURSE OF SEARCH IN ITS RETURN OF INCOME, THE AMOUN T SO SURRENDERED AND DISCLOSED IN THE RETURN OF INCOME HAS RIGHTLY BEEN BROUGHT TO TAX IN THE QUANTUM PROCEEDINGS. HOWEVER, AS FAR AS PENALTY PRO CEEDINGS ARE CONCERNED, THE ASSESSING OFFICER IS REQUIRED TO GIV E A SPECIFIC FINDING THAT THERE IS AN UNDISCLOSED INCOME FOUND DURING THE COU RSE OF SEARCH AND WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT . IN THE INSTANT CASE, WE FIND THAT THE ASSESSING OFFICER HAS MERELY GONE BY THE SURRENDER STATEMENT AND HAS NOT EXAMINED THE MATTER FROM THE PERSPECTIVE OF DETERMINING THE COST OF SUCH STOCK AND THE QUANTIFI CATION THEREOF AFTER ALLOWING DEDUCTION FOR CHAPADI, WAX, ETC. WHICH IS A WELL ESTABLISHED STEP AS PART OF VALUATION METHODOLOGY OF SUCH KIND OF JE WELLERY AND WHICH HAS BEEN FOLLOWED AT OTHER LOCATIONS EXCEPT AT JAIPUR. THERE IS NO FINDING THAT THERE IS ANY EXCESS STOCK WHICH HAS BEEN PHYSICALLY FOUND AND WHICH HAS NOT BEEN FOUND RECORDED IN THE BOOKS OF ACCOUNTS AS ON THE DATE OF SEARCH. IN LIGHT OF ABOVE DISCUSSIONS, IT IS THUS C LEAR THAT DIFFERENCE IN STOCK OF JEWELLERY AND SILVER ITEMS AS PER BOOKS AN D AS FOUND AT THE TIME OF SEARCH IS ON ACCOUNT OF VALUATION OF SUCH STOCK AT THE MARKET VALUE INSTEAD OF COST AND SUCH VALUATION DIFFERENCE AND O N ACCOUNT OF NON- DEDUCTION OF CHAPADI, WAX, ETC WHILE WEIGHING THE K UNDAN MEENA JEWELLERY AND THE SAME CANNOT BE A BASIS TO HOLD TH AT IT REPRESENT UNDISCLOSED INCOME SO DEFINED IN EXPLANATION TO SEC TION 271AAB OF THE ACT AND THE PENALTY LEVIED THEREON IS LIABLE TO BE SET-ASIDE. ITA NO. 113/JP/2018 M/S SUMANGAL GEMS, JAIPUR VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR 16 ACCORDINGLY, IN VIEW OF THE ABOVE FACTS AND CIRCUMS TANCES OF THE CASE AND FOLLOWING THE EARLIER ORDER OF THIS TRIBUNAL, W E HOLD THAT THE AMOUNT REPRESENTING THE EXCESS STOCK BASED ON THE VALUATIO N OF THE DEPARTMENTAL VALUER CANNOT BE REGARDED AS UNDISCLOS ED INCOME IN TERMS OF DEFINITION PROVIDED IN THE EXPLANATION TO SECTIO N 271AAB OF THE ACT. HENCE, THE PENALTY LEVIED AGAINST SUCH AMOUNT IS NO T SUSTAINABLE. IN LIGHT OF AFORESAID DISCUSSIONS AND IN THE ENTIRE TY OF FACTS AND CIRCUMSTANCES OF THE CASE, THE PENALTY LEVIED U/S 271AAB IS NOT S USTAINABLE AND THE ORDERS OF THE LOWER AUTHORITIES ARE SET-ASIDE AND THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/02/2020. SD/- SD/- ( SANDEEP GOSAIN ) (VIKRAM SINGH YADAV) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED:- 24/02/2020 * GANESH KR. COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S SUMANGAL GEMS, JAIPUR 2. THE RESPONDENT- DCIT, CENTRAL CIRCLE-02, JAIPUR 3. CIT 4. CIT(A) 5. DR, ITAT, JAIPUR. 6. GUARD FILE {ITA NO. 113/JP/2018} BY ORDER, ASST. REGISTRAR