SHRI PRAKASH CHAND SURANA, Jaipur V. DEPUTY COMMISSIONER OF INCOME TAX, Jaipur

ITA 116/JPR/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4332 (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: Unexplained investment; Business income; Search and seizure; Principle of natural justice; Initiation of penalty proceedings
• Section: 69; 132; 271(1)(c); 143(3); 250; 201; 274; 246A; 13; 20

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. 116/JP/2018 ASSESSMENT YEAR :2015-16 LATE SHRI PRAKASH CHAND SURANA THROUGH L/H SMT. SHOBHA SURANA D-68, NEAR POLICE MEMORIAL, JLN MARG, JAIPUR. CUKE VS. DCIT, CENTRAL CIRCLE-02, JAIPUR PAN/GIR NO.: ACTPS0755K 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 : SMT. RUNI 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 FOR THE ASSESSMENT YEAR 201 5-16 WHEREIN THE ASSESSEE HAS TAKEN 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. 20,57 ,007/- 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. 116/JP/2018 LATE SHRI PRAKASH CHAND SURANA VS. DCIT 2 ASSESSEE IS ONE OF THE MEMBERS OF THE SAID GROUP. DURING THE COURSE OF SEARCH, THE STATEMENT OF ASSESSEE (SINCE EXPIRED) W AS RECORDED U/S 132(4) WHEREIN HE SURRENDERED INCOME ON ACCOUNT OF EXCESS JEWELLERY AMOUNTING TO RS. 2,05,70,072/-. THEREAFTER, THE ASSESSEE FIRM FI LED HIS RETURN OF INCOME ON 30.09.2015 DECLARING TOTAL INCOME OF RS. 2,12,24,35 0/- 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 O N 22.12.2016 ACCEPTING THE RETURNED INCOME. SEPARATELY, THE PENALTY PROCEE DINGS U/S 271AAB WERE INITIATED BY WAY OF ISSUANCE OF NOTICE U/S 274 READ WITH SECTION 271AAB OF THE ACT AND THEREAFTER, THE AO LEVIED THE PENALTY U/S 2 71AAB VIDE HIS ORDER DATED 14.06.2017 @ 10% OF RS. 2,05,70,072/-, BEING THE UN DISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR. 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. 116/JP/2018 LATE SHRI PRAKASH CHAND SURANA VS. DCIT 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 22.12.2016 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. 116/JP/2018 LATE SHRI PRAKASH CHAND SURANA VS. DCIT 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 THE ASSESSEE HAD D ECLARED A SUM OF RS.2,05,70,072/- ON ACCOUNT OF EXCESS 4705.93 GOLD JEWELLERY FOUND DURING THE COURSE OF SEARCH FROM THE BEDROOMS OF VARIOUS FAMIL Y MEMBERS NAMELY SELF, WIFE SHOBHA SURANA, SON CHANDRA SURANA AND PRACHEER SURANA, DAUGHTER IN LAW SHARMILA SURANA AND SONAL SURANA, GRANDSON/DAUG HTERS PRASHANT, SHIVANGI AND RAGHAV, GRANDDAUGHTER-IN- LAW AAKARTI. THE SEARCH TEAM AFTER GIVING EFFECT OF TOTAL NET WEIGHT OF JEWELLERY I.E. 9982.946 DECLARED IN WEALTH TAX RETURNS FILED BY ASSESSEE AND HIS FAMILY MEMBER S HELD THE EXCESS JEWELLERY OF 4705.93 GMS AS UNEXPLAINED. IN THE STA TEMENT RECORDED U/S 132(4), THE ASSESSEE STATED THAT 98 GRAMS OF JEWELL ERY WAS PURCHASED WHICH IS IN EXCESS TO THE DECLARED JEWELLERY IN WEALTH TAX R ETURN. FURTHER, NO CREDIT OF JEWELLARY /GOLD ORNAMENTS AMOUNT WAS ALLOWED FOR SH RI CHANDRA SURANA, SMT SHARMILA SURANA, PRASHANT SURANA, AAKARATI SURANA, SHIVANGI AND RAGHAV. RELIANCE WAS PLACED ON THE DECISION OF HONBLE RAJA STHAN HIGH COURT IN CASE OF CIT VS SHRI SATYA NARAIN PATNI [2014] 46 TAXMANN.CO M 440. IT WAS FURTHER SUBMITTED THAT IT IS NOW A SETTLED POSITION OF LAW THAT THE POSSESSION OF JEWELLERY IS DEPENDENT ON THE STATUS OF FAMILY AND AGE OF MARRIAGE OF FAMILY ITA NO. 116/JP/2018 LATE SHRI PRAKASH CHAND SURANA VS. DCIT 5 MEMBERS. IT WAS SUBMITTED THAT EXCESS ITEMS WERE PE RSONAL ITEMS OF THE FAMILY MEMBERS AND HOLDING IS VERY OLD AND REASONAB LE LOOKING TO THE SIZE AND STATUS OF FAMILY. THE SAID JEWELLERY WAS RECEIVED F ROM BOTH SIDES OF RELATIVES AND FRIENDS AT THE TIME OF MARRIAGE AND THEREAFTER ON VARIOUS OTHER FESTIVALS AND AUSPICIOUS OCCASIONS. IT IS CUSTOMARY IN INDIAN SOCIETY THAT EVERY PARENT, FRIENDS & RELATIVES TO PRESENT GOLD ORNAMENTS ETC. TO HER DAUGHTER & SON IN LAW AT THE TIME OF MARRIAGE. THE FAMILY OF ASSESSEE IS OF REPUTE AND MEANS. THUS LOOKING TO THE STATUS OF THE FAMILY, CUSTOMS OF THE SOCIETY AND OTHER FACTS AND CIRCUMSTANCES, THE TOTAL WEIGHT OF GOLD IS REASONAB LE AND SOURCE OF ACQUISITION WAS EXPLAINED. HOWEVER, THE ASSESSEE TO BUY PIECE A ND AVOID LITIGATION WITH DEPARTMENT OFFERED THE SAID VALUATION OF JEWELLERY AS HIS ADDITIONAL BUSINESS INCOME OF THE CURRENT YEAR. THE LD AO HAS NOT DETER MINED IT AS INCOME FROM OTHER SOURCES U/S 69 OF INCOME TAX ACT IN THE ASSES SMENT BUT ACCEPTED AS INCOME OF CURRENT YEAR. THEREFORE MERELY ON THE BAS IS OF SURRENDER MADE IN THE SEARCH STATEMENT, THIS CANNOT BE HELD AS 'UNDISCLOS ED INCOME' FOR THE PURPOSE OF LEVY OF PENALTY U/S 271AAB OF THE ACT. IN SUPPOR T, THE RELIANCE WAS PLACED ON THE CO-ORDINATE BENCH DECISION IN CASE OF SHYAM SUN DER KHANDELWAL VS. DCIT, CC-2, JAIPUR (ITA NO. 307/JP/2018 DATED 11.04.2019). 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 ITA NO. 116/JP/2018 LATE SHRI PRAKASH CHAND SURANA VS. DCIT 6 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 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) ITA NO. 116/JP/2018 LATE SHRI PRAKASH CHAND SURANA VS. DCIT 7 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 22.12.2016 IS ISSUED TO THE ASSESSEE FIRM 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 ITA NO. 116/JP/2018 LATE SHRI PRAKASH CHAND SURANA VS. DCIT 8 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. 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 APPEALABLE 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. ITA NO. 116/JP/2018 LATE SHRI PRAKASH CHAND SURANA VS. DCIT 9 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 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 ASSESSEE RECORDED U/S 132(4) DURING THE COURSE OF S EARCH, FALLS IN THE DEFINITION OF UNDISCLOSED INCOME WHICH HAS BEEN SPECIFICALLY DEFINED AND LAID DOWN IN TERMS OF CLAUSE (C) OF EXPLANATION TO SECTION 271AA B 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 O R THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTH ER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHICH HAS (A) NOT BEEN RE CORDED 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 ITA NO. 116/JP/2018 LATE SHRI PRAKASH CHAND SURANA VS. DCIT 10 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. 12. IN THE CONTEXT OF JEWELLERY FOUND DURING THE CO URSE OF SEARCH AND APPLICABILITY OF PROVISIONS OF SECTION 271AAB, THE CO-ORDINATE BENCH IN CASE OF SHYAM SUNDER KHANDELWAL VS. DCIT, JAIPUR (SUPRA) HA S DEALT WITH THE MATTER AT LENGTH AND WE DEEM IT APPROPRIATE TO REFER TO THE R ELEVANT FINDINGS AS CONTAINED AT PARA 18 TO 20 OF THE SAID DECISION WHE REIN THE CO-ORDINATE BENCH HAS HELD AS UNDER:- 18. DURING THE COURSE OF SEARCH AND SEIZURE ACTION , GOLD JEWELLERY AND SILVER WAS FOUND AT THE RESIDENCE OF THE ASSESSEE. THE ASSESSEE HAS DECLARED A SUM OF RS. 20,03,474 (RS. 11,59,100 + RS . 8,44,374) IN HIS STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT ON ACCOUNT OF THE EXCESS GOLD JEWELLERY AND SILVER FOUND FROM THE RES IDENCE. THE SAID INCOME WAS ALSO DECLARED IN THE RETURN OF INCOME. T HE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE FAMILY OF THE ASSES SEE CONSISTING OF 10 MEMBERS I.E. ASSESSEE HIMSELF, WIFE, 2 SONS, 2 DAUG HTERS-IN-LAW AND 3 GRANDSONS AND 1 GRAND DAUGHTER. THE SAID JEWELLER Y FOUND DURING THE SEARCH WAS RECEIVED FROM BOTH SIDES OF RELATIVES AN D FRIENDS AT THE TIME OF MARRIAGE AND THEREAFTER ON VARIOUS OTHER FESTIVA LS AND AUSPICIOUS OCCASIONS. IT IS CUSTOMARY IN INDIAN SOCIETY THAT EVERY PARENT, FRIENDS & RELATIVES TO PRESENT GOLD ORNAMENTS ETC. TO HER DAU GHTER & SON IN LAW AT THE TIME OF MARRIAGE. THE FAMILY OF ASSESSEE IS RE PUTE AND MEANS. THUS LOOKING TO THE STATUS OF THE FAMILY, CUSTOMS OF THE SOCIETY AND OTHER FACTS AND CIRCUMSTANCES THE TOTAL WEIGHT OF GOLD IS REASO NABLE AND SOURCE OF ACQUISITION WAS EXPLAINED. HOWEVER, THE ASSESSEE T O BUY PEACE AND AVOID LITIGATION WITH DEPARTMENT OFFERED THE SAID V ALUATION OF JEWELLERY AS ITA NO. 116/JP/2018 LATE SHRI PRAKASH CHAND SURANA VS. DCIT 11 HIS ADDITIONAL BUSINESS INCOME OF THE CURRENT YEAR. THE LD. AO HAS NOT DETERMINED IT AS INCOME FROM OTHER SOURCES U/S 69 O F INCOME TAX ACT IN THE ASSESSMENT BUT ACCEPTED AS BUSINESS INCOME OF C URRENT YEAR. THEREFORE MERELY ON THE BASIS OF SURRENDER MADE IN THE SEARCH STATEMENT, THIS CANNOT BE HELD AS UNDISCLOSED INCO ME FOR THE PURPOSE OF LEVY OF PENALTY UNDER SECTION 271AAB. 19. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED TH AT ONCE THE JEWELLERY WAS FOUND AT THE RESIDENCE AND THE ASSESS EE HAS ADMITTED THE FACT THAT THE JEWELLERY WAS NOT RECORDED IN THE BOO KS OF ACCOUNT, THEREFORE, IT IS AN UNDISCLOSED INCOME OF THE ASSES SEE FOR THE SPECIFIED PREVIOUS YEAR FOR THE PURPOSE OF SECTION 271AAB OF THE ACT. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT WHAT IS FOUND IS THE JEWELLERY BELONG TO THE FAMILY MEMBERS OF THE ASSES SEE AND IT IS NOT DISPUTED BY THE DEPARTMENT THAT THE JEWELLERY DO NO T BELONG TO ASSESSEE ALONE. THEREFORE, MERELY BECAUSE THE ASSESSEE HAS DECLARED THE INCOME IN THE STATEMENT RECORDED UNDER SECTION 132(4), IT WOULD NOT IPSO FACTO BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE I N THE ABSENCE OF THE FACT OR ANY OTHER MATERIAL TO ESTABLISH THAT THE EN TIRE JEWELLERY FOUND AT THE TIME OF SEARCH AND SEIZURE ACTION WAS ONLY ACQU IRED BY THE ASSESSEE AND BELONG TO THE ASSESSEE ALONE. WE FIND THAT IN THE INDIAN FAMILY MOST OF THE JEWELLERY BELONG TO THE WOMEN OF THE FAMILY. IT IS ALSO CUSTOMARY IN INDIAN SOCIETY THAT THE WOMEN AND PARTICULARLY T HE MARRIED WOMEN USED TO RECEIVE THE JEWELLERY FROM THE RELATIVES AN D FRIENDS ON VARIOUS OCCASIONS INCLUDING MARRIAGE, BIRTH OF CHILD AS WEL L AS OTHER AUSPICIOUS OCCASIONS LIKE ANNIVERSARIES ETC. THE DEPARTMENT H AS NOT MADE ANY EFFORT TO FIND OUT THE FACT WHETHER THE JEWELLERY W AS ACQUIRED DURING THE YEAR UNDER CONSIDERATION OR IT IS OLD JEWELLERY. T HEREFORE, ONCE THE ITA NO. 116/JP/2018 LATE SHRI PRAKASH CHAND SURANA VS. DCIT 12 JEWELLERY WAS NOT FOUND TO BE PURCHASED DURING THE YEAR UNDER CONSIDERATION, THEN THE SAME CANNOT BE TREATED AS A N UNDISCLOSED INCOME FOR THE YEAR UNDER CONSIDERATION WHICH IS SP ECIFIED PREVIOUS YEAR. THE JEWELLERY BELONG TO THE FAMILY MEMBERS OF THE A SSESSEE AND FOUND AT THE RESIDENCE WAS OLD JEWELLERY AND, THEREFORE, THE VALUATION OF THE JEWELLERY FOR THE PURPOSE OF COMPUTING THE UNDISCLO SED INCOME BY APPLYING THE CURRENT RATES ON THE GROSS WEIGHT IS NOT PERMISSIBLE. HENCE WHEN THE DEPARTMENT HAS NOT MADE ANY EFFORTS TO ASC ERTAIN THE YEAR OF ACQUISITION OF THE JEWELLERY AND THEN TO APPLY THE RATES AS PREVAILING IN THE YEAR OF ACQUISITION AND SOME OF THE JEWELLERY E VEN NOT ACQUIRED BY THE ASSESSEE OR THE FAMILY MEMBERS BUT IS INHERITED , THEN THE MANNER IN WHICH THE DISCLOSURE IS OBTAINED ON ACCOUNT OF THE JEWELLERY WOULD NOT REPRESENT THE UNDISCLOSED INCOME AS DEFINED IN THE EXPLANATION TO SECTION 271AAB OF THE ACT. WE FIND THAT THE ORDER PASSED B Y THE AO UNDER SECTION 271AAB AS WELL AS THE ORDER OF THE LD. CIT (A) ARE SILENT ON THE ISSUE OF INCORRECT VALUATION AS WELL AS THE TIMING OF ACQUIRING OF THE PERSONAL JEWELLERY OF THE ASSESSEE AND THE FAMILY M EMBERS. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE PERSON AL JEWELLERY OF THE ASSESSEE AND FAMILY MEMBERS ACQUIRED IN THE PAST AN D SOME PART OF WHICH WAS ALSO INHERITED WILL NOT FALL IN THE AMBIT OF UNDISCLOSED INCOME. HENCE THE PENALTY LEVIED BY THE AO AGAINST SUCH DIS CLOSURE IS NOT SUSTAINABLE. IT MAY BE PERTINENT TO MENTION THAT T HE STATEMENT RECORDED UNDER SECTION 132(4) ITSELF WOULD NOT EITHER CONSTI TUTE AN INCRIMINATING MATERIAL OR UNDISCLOSED INCOME IN THE ABSENCE OF AN Y CORRESPONDING ASSET OR ENTRY IN THE SEIZED DOCUMENT REPRESENTING THE UNDISCLOSED INCOME. ACCORDINGLY, THE PENALTY LEVIED BY THE AO UNDER SECTION 271AAB OF THE ACT IS DELETED. ITA NO. 116/JP/2018 LATE SHRI PRAKASH CHAND SURANA VS. DCIT 13 13. IN THE INSTANT CASE AS WELL, IT IS AN UNDISPUTE D FACT THAT THE JEWELLERY SO FOUND DURING THE COURSE OF SEARCH HAS BEEN FOUND FR OM THE BEDROOMS OF VARIOUS MEMBERS OF THE ASSESSEES FAMILY AND THUS, SUCH JEWELLERY FOUND IN POSSESSION OF FAMILY MEMBERS BELONGS TO THEM AND DO ESNT BELONG TO ASSESSEE ALONE. THEREFORE, MERELY BECAUSE THE ASSESSEE HAS DECLARED THE SAME IN HIS STATEMENT RECORDED U/S 132(4), IT WILL NOT BE REGAR DED AS UNDISCLOSED INCOME OF THE ASSESSEE IN ABSENCE OF ANY FACT OR MATERIAL TO ESTABLISH THAT ENTIRE JEWELLERY WAS ACQUIRED BY THE ASSESSEE AND BELONGS TO THE ASS ESSEE ALONE. FURTHER, WE FIND THAT CREDIT HAS BEEN ALLOWED IN RESPECT OF JEW ELLERY DISCLOSED IN THE WEALTH TAX RETURNS BY SOME OF THE MEMBERS OF THE FAMILY. HOWEVER, THERE ARE OTHER MEMBERS OF THE FAMILY NOT SUBJECT TO WEALTH TAX, IN RESPECT OF WHICH NO CREDIT HAS BEEN ALLOWED EVEN AS PER CBDT CIRCULAR DATED 11 .05.1994 WHICH THE COURTS HAVE HELD TO BE REASONABLE POSSESSION LOOKIN G AT THE CUSTOMS PREVAILING IN OUR COUNTRY AND USEFUL GUIDANCE CAN BE DRAWN FRO M THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN CASE OF CIT VS SHRI SATYA N ARAIN PATNI (SUPRA) WHEREIN THE HONBLE HIGH COURT HAS HELD AS UNDER: 12. IT IS TRUE THAT THE CIRCULAR OF THE CBDT, REFE RRED TO SUPRA DT. 11/05/1994 ONLY REFERS TO THE JEWELLERY TO THE EXTE NT OF 500 GMS PER MARRIED LADY, 250 GMS PER UNMARRIED LADY AND 100 GM S PER MALE MEMBER OF THE FAMILY, NEED NOT BE SEIZED AND IT DOE S NOT SPEAK ABOUT THE QUESTIONING OF THE SAID JEWELLERY FROM THE PERS ON WHO HAS BEEN FOUND WITH POSSESSION OF THE SAID JEWELLERY. HOWEVE R, THE BOARD, LOOKING TO THE INDIAN CUSTOMS AND TRADITIONS, HAS FAIRLY EX PRESSED THAT JEWELLERY TO THE SAID EXTENT WILL NOT BE SEIZED AND ONCE THE BOARD IS ALSO OF THE EXPRESS OPINION THAT THE SAID JEWELLERY CANNOT BE S EIZED, IT SHOULD NORMALLY MEAN THAT ANY JEWELLERY, FOUND IN POSSESIO N OF A MARRIED LADY TO THE EXTENT OF 500 GMS, 250 GMS PER UNMARRIED LAD Y AND 100 GMS PER MALE MEMBER OF THE FAMILY WILL ALSO NOT BE QUESTION ED ABOUT ITS SOURCE AND ACQUISATION. WE CAN TAKE NOTICE OF THE FACT THA T AT THE TIME OF ITA NO. 116/JP/2018 LATE SHRI PRAKASH CHAND SURANA VS. DCIT 14 WEDDING, THE DAUGHTER/DAUGHTER-IN-LAW RECEIVES GOLD ORNAMENTS JEWELLERY AND OTHER GOODS NOT ONLY FROM PARENTAL SI DE BUT IN-LAWS SIDE AS WELL AT THE TIME OF 'VIDAI' (FAREWELL) OR/AND AT TH E TIME WHEN THE DAUGHTER-IN-LAW ENTERS THE HOUSE OF HER HUSBAND. WE CAN ALSO TAKE NOTICE OF THE FACT THAT THEREAFTER ALSO, SHE CONTIN UES TO RECEIVE SOME SMALL ITEMS BY VARIOUS OTHER CLOSE FRIENDS AND RELA TIVES OF BOTH THE SIDES AS WELL AS ON THE AUSPICIOUS OCCASION OF BIRTH OF A CHILD WHETHER MALE OR FEMALE AND THE CBDT, LOOKING TO SUCH CUTOMS PREVAIL ING THROUGHOUT INDIA, IN ONE WAY OR THE ANOTHER, CAME OUT WITH THI S CIRCULAR AND WE ACCORDINGLY ARE OF THE FIRM OPINION THAT IT SHOULD ALSO MEAN THAT TO THE EXTENT OF THE AFORESAID JEWELLERY, FOUND IN POSSESS ION OF THE VAROIUS PERSONS, EVEN SOURCE CANNOT BE QUESTIONED. IT IS CE RTAINLY 'STRIDHAN' OF THE WOMAN AND NORMALLY NO QUESTION AT LEAST TO THE SAID EXTENT CAN BE MADE. HOWEVER, IF THE AUTHORIZED OFFICERS OR/AND TH E ASSESSING OFFICERS, FIND JEWELLERY BEYOND THE SAID WEIGHT, THEN CERTAIN LY THEY CAN QUESTION THE SOURCE OF ACQUISATION OF THE JEWELLERY AND ALSO IN APPROPRIATE CASES, IF NO PROPER EXPLANATION HAS BEEN OFFERED, CAN TREA T THE JEWELLERY BEYOND THE SAID LIMIT AS UNEXPLAINED INVESTMENT OF THE PER SON WITH WHOM THE SAID JEWELLERY HAS BEEN FOUND. FURTHER, THE JEWELLERY SO FOUND DURING THE COURSE O F SEARCH WAS OLD JEWELLERY EXCEPT FOR 98 GRAMS, THEREFORE, FOR THE PURPOSES OF DETERMINING UNDISCLOSED INCOME BY WAY OF INVESTMENT IN SUCH JEWELLERY, VALU ATION AT CURRENT RATES BY DEPARTMENT VALUER IS NOT CORRECT AND WHAT NEEDS TO BE DETERMINED IS THE VALUE/COST IN THE YEAR OF ACQUISITION/INVESTMENT HO WEVER, NO EFFORTS HAVE BEEN MADE BY THE DEPARTMENT. THEREFORE, MERE DISCLOSURE OF SUCH JEWELLERY IN THE STATEMENT OF THE ASSESSEE RECORDED U/S 132(4) OF TH E ACT WOULD NOT REPRESENT UNDISCLOSED INCOME AS DEFINED IN THE EXPLANATION TO SECTION 271AAB. ITA NO. 116/JP/2018 LATE SHRI PRAKASH CHAND SURANA VS. DCIT 15 14. IN LIGHT OF AFORESAID DISCUSSIONS AND IN THE EN TIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWIN G THE DECISIONS REFERRED SUPRA, THE PENALTY LEVIED U/S 271AAB IS NOT SUSTAIN ABLE AND THE ORDERS OF THE LOWER AUTHORITIES ARE SET-ASIDE AND THE APPEAL OF T HE 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 *SANTOSH COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- LATE SHRI PRAKASH CHAND SURANA, JAIP UR 2. THE RESPONDENT- DCIT, CENTRAL CIRCLE-2, JAIPUR 3. CIT 4. CIT(A) 5. DR, ITAT, JAIPUR. 6. GUARD FILE {ITA NO. 116/JP/2018} BY ORDER, ASST. REGISTRAR