SHRI NIKHIL MADAN, JAIPUR V. ASSISTANT COMMISSIONER OF INCOME TAX, JAIPUR

ITA 117/JPR/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8231 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2020
• 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: Income from undisclosed sources; Search and seizure; Salary income; Document seized; Opportunity of being heard; Principle of natural justice; Initiation of penalty proceedings; Reasonable cause; Documents seized
• Section: 69; 132; 271(1)(c); 2; 139; 143(3); 153A; 69B; 292BB; 274; 139(1); 158BC; 73; 13; 158BFA; 22; 20

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH VC B , JAIPUR JH JES'K LH- 'KEKZ] YS[KK LNL; ,O A H JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C. SHARMA, AM & SHRI VIJAY PAL RAO, JM VK;DJ VIHY LA-@ ITA NO. 117/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2015-16. SHRI NIKHIL MADAN 8, NIKHIL APARTMENT, 670, ADARSH NAGAR, JAIPUR. CUKE VS. ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AIGPM 5610 C 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 : SMT. RUNI PAL (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 20.07.2020. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 27/07/2020. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 22 ND NOVEMBER, 2017 OF LD. CIT (A)-4, JAIPUR ARISING FROM PENALTY ORDER PASSED UNDER SECTION 271AAB OF THE IT ACT FOR THE ASSESSMENT YEAR 2015-16. THE AS SESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. THAT THE NOTICE ISSUED BY ASSESSING OFFICER FO R INITIATING THE PENALTY U/S 271AAB OF THE IT ACT, 1961 IS NOT IN ACCORDANCE WITH LAW NOT BEING SPECIFICALLY POINTING OUT THE DEFAULT FOR WHI CH THE LD. A.O. SOUGHT TO IMPOSE PENALTY U/S 271AAB. 2 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. 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 O F RS. 45,00,000/- IMPOSED BY THE LD. ASSESSING OFFICER U/ S 271AAB OF THE I.T. ACT, 1961. 3. THAT THE APPELLANT CRAVES THE PERMISSION TO ADD TO OR AMEND TO ANY OF THE ABOVE GROUNDS OF APPEAL OR TO WITHDRAW ANY O F THEM. GROUND NO. 1 IS REGARDING VALIDITY OF INITIATION OF PENALTY PROCEEDINGS FOR WANT OF SPECIFYING THE DEFAULT FOR WHICH THE AO SOUGHT TO IMPOSE THE PENALTY UNDER SECTION 271 AAB OF THE IT ACT. 2. THE ASSESSEE IS AN INDIVIDUAL AND DERIVES INCOME FROM SALARY/REMUNERATION FROM THE COMPANY IN WHICH HE IS A DIRECTOR AS WELL AS INCOME FROM OTHER SOURCES. A SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE IT ACT WAS CARRIED OUT ON 30.10.2014 IN CASE OF MAHIMA GROUP, JAIPUR UNDER WH ICH THE ASSESSEE WAS ALSO COVERED. IN THE COURSE OF SEARCH AND SEIZURE PROCE EDINGS THE ASSESSEE OFFERED AN INCOME OF RS. 4,50,00,000/- AS HIS ADDITIONAL INCOM E FOR THE CURRENT YEAR RELEVANT TO ASSESSMENT YEAR 2015-16. THE ASSESSEE FILED RETURN OF INCOME ON 31.08.2015 DECLARING TOTAL INCOME OF RS. 4,90,59,810/- WHICH INCLUDES TH E INCOME OF RS. 4,50,00,000/- OFFERED DURING THE COURSE OF SEARCH. THE ASSESSMEN T UNDER SECTION 143(3) READ WITH SECTION 153B(1)(B) OF THE ACT WAS COMPLETED ON 30 TH DECEMBER, 2016 ACCEPTING THE RETURNED INCOME. THE AO THEREAFTER INITIATED THE PR OCEEDINGS UNDER SECTION 271AAB BY 3 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. ISSUING A NOTICE UNDER SECTION 274 READ WITH SECTIO N 271AAB OF THE ACT ON 30.12.2016 AS WELL AS NOTICE DATED 26.05.2017. THE AO LEVIED THE PENALTY UNDER SECTION 271AAB OF THE ACT @ 10% OF THE INCOME DISCLOSED AND SURRENDER ED BY THE ASSESSEE WHILE PASSING THE ORDER DATED 16.06.2017. THE ASSESSEE CHALLENGE D THE ORDER OF THE AO LEVYING THE PENALTY BEFORE THE LD. CIT (A) AND RAISED THE ISSUE OF VALIDITY OF INITIATION OF PENALTY PROCEEDINGS AS WELL AS THE ORDER PASSED UNDER SECTI ON 271AAB OF THE ACT. THE LD. CIT (A) REJECTED THE CONTENTIONS RAISED BY THE ASSESSEE AND UPHELD THE LEVY OF PENALTY UNDER SECTION 271AAB OF THE ACT. 3. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS REFER RED TO THE SHOW CAUSE NOTICE ISSUED BY THE AO DATED 30.12.2016 AS WELL AS 26.05. 2017 AND SUBMITTED THAT BOTH THE NOTICES ISSUED BY THE AO ARE IDENTICAL IN THEIR WOR DINGS AND CONTENTS. IT WILL BE EVIDENT FROM THE CONTENTS OF BOTH THE NOTICES THAT IT HAS N OT EVEN STATED THE GROUND MENTIONED IN SECTION 271AAB AND GROUNDS MENTIONED THEREIN IS NOT GERMANE TO SECTION 271AAB AND EVEN NOT SPECIFIC FOR ANY DEFAULT U/S 271AAB. T HUS NOTICE ISSUED IS INVALID. IT IS SUBMITTED THAT THE PENALTY IMPOSED ON ASSESSEE U/S 271AAB IS BAD IN LAW. IT IS REQUIREMENT OF LAW THAT NOTICE U/S 274 OF THE ACT S HOULD SPECIFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271AAB WHILE IN THE NOTICE ISS UED THE GROUNDS MENTIONED IN THE NOTICE ARE BOTH THE LIMBS OF SECTION 271(1)(C) UNDE R WHICH SECTION NO PENALTY IS EXIGIBLE ON ASSESSEE AS HIS RETURNED INCOME HAVE BEEN ACCEPT ED IN ASSESSMENT AND THERE IS NO ADDITION. THE LD. A/R FURTHER SUBMITTED THAT SECT ION 271AAB(1) HAS THREE CLAUSES (A) TO (C) AND EACH CLAUSE OF SUB-SECTION (1) TO SECTIO N 271AAB PROVIDES THE CIRCUMSTANCES 4 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. AND VIOLATION ATTRACTING THE PENALTY @ 10% OR 20% O R 30% OF UNDISCLOSED INCOME OF SPECIFIED PREVIOUS YEAR. THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, THE PRINCIPLES OF NATURAL JUSTICE ARE VIOLATED. ON THE BASIS OF SUCH PROCEEDING, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. THE LD. AO EVEN IN THE ASSESSMENT ORDER HAS NOT SPECIFIED UNDER WHICH CLAU SE THE PENALTY IS LIABLE TO BE IMPOSED BUT THE AO HAS MENTIONED THE PENALTY PROCEE DINGS UNDER SECTION 271AAB OF THE IT ACT ARE BEING INITIATED. THUS THERE IS NO AP PLICATION OF MIND AT THE TIME OF ISSUING THE SHOW CAUSE NOTICE AS THE SHOW CAUSE NOTICE ISSU ED BY THE AO DO NOT SPECIFY THE UNDISCLOSED INCOME ON WHICH THE ASSESSEE IS REQUIRE D TO SHOW CAUSE. EVEN THE AO HAS NOT GIVEN ANY GROUND FOR LEVY OF PENALTY FOR WHICH THE ASSESSEE COULD PUT HIS DEFENSE. THUS IN THE ABSENCE OF SPECIFIC CHARGE AGAINST THE ASSESSEE, HE WAS NOT IN A POSITION TO COUNTER THE SHOW CAUSE NOTICE ISSUED BY THE AO AS W ELL AS HIS COGENT REPLY TO THE SHOW CAUSE NOTICE. THOUGH THE AO WHILE PASSING THE IMPU GNED ORDER HAS IMPOSED THE PENALTY AS PER CLAUSE (A) OF SECTION 271AAB(1) OF T HE ACT, HOWEVER, NO SUCH GROUND WAS SPECIFIED IN THE SHOW CAUSE NOTICE ISSUED UNDER SECTION 271AAB READ WITH SECTION 274 OF THE ACT. HE HAS RELIED UPON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY , 359 ITR 565 (KAR.) AS WELL AS THE DECISION IN THE CASE OF CIT VS. SSAS EMERALD MEADOW S, 73 TAXMANN.COM 241. THE SLP FILED BY THE DEPARTMENT AGAINST THE SAID DECISION O F THE HONBLE KARNATAKA HIGH COURT HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT REP ORTED IN 242 TAXMAN 180 (SC). THE LD. A/R HAS ALSO RELIED UPON THE DECISION OF HO NBLE JURISDICTIONAL HIGH COURT IN CASE OF M/S. SHEVETA CONSTRUCTION CO. PVT. LTD. VS. ITO DATED 6 TH DECEMBER, 2016 IN DBIT 5 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. APPEAL NO. 534/2008. THE LD. A/R HAS CONTENDED THA T THE SHOW CAUSE NOTICES ISSUED BY THE AO ARE VAGUE AND EVEN THE DEFAULT OF THE ASS ESSEE HAS BEEN ALLEGED AS PENALTY FOR CONCEALMENT OF PARTICULARS OF INCOME/FURNISHING OF INACCURATE PARTICULARS OF INCOME. THUS THE PENALTY UNDER SECTION 271AAB CANNOT BE INI TIATED FOR THE DEFAULT IN THE NATURE AS SPECIFIED IN THE SHOW CAUSE NOTICES ISSUED BY TH E AO. THE LD. A/R HAS ALSO RELIED UPON VARIOUS DECISIONS OF THIS TRIBUNAL INCLUDING D ECISIONS DATED 13.06.2018 IN CASE OF RAVI MATHUR VS. DCIT IN ITA NO. 969/JP/2017 AND ANU J MATHUR VS. DCIT IN ITA NO. 971/JP/2017. HE HAS ALSO RELIED UPON THE DECISION OF THIS TRIBUNAL IN CASE OF GOPAL DAS SONKIA VS. DCIT DATED 11.04.2019 IN ITA NO. 306/JP/ 2018. THUS THE LD. A/R HAS SUBMITTED THAT ON THE IDENTICAL FACTS THIS TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. HENCE HE HAS PLEA DED THAT THE PENALTY LEVIED UNDER SECTION 271AAB OF THE ACT IS BAD IN LAW AND LIABLE TO BE QUASHED. 4. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THE DISCREPANCY POINTED OUT IN THE SHOW CAUSE NOTICES IS NOTHING BUT ARE TYPOGRAPH ICAL MISTAKES WHEN THE NOTICE IS ISSUED UNDER SECTION 271AAB READ WITH SECTION 274 O F THE IT ACT AS CLEARLY MENTIONED IN THE CAPTION OF THE NOTICE. THUS THE SAID MISTAKE I S COVERED BY SECTION 292B OF THE ACT. THE LD. D/R HAS THUS SUBMITTED THAT THE SHOW CAUSE NOTICE ISSUED BY THE AO IS VALID AND MERE MISTAKE IN THE SHOW CAUSE NOTICE WILL NOT RENDER THE ENTIRE PROCEEDINGS ILLEGAL. IN SUPPORT OF HER CONTENTION SHE HAS RELIE D UPON THE DECISION OF HONBLE MADRAS HIGH COURT IN CASE OF SUNDARAM FINANCE LTD. VS. ACI T, 403 ITR 407 (MAD.) AND SUBMITTED THAT THE HONBLE HIGH COURT HAS REJECTED SUCH A GROUND RAISED AGAINST THE 6 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. VALIDITY OF SHOW CAUSE NOTICE AND HELD THAT ALL THE VIOLATIONS WILL NOT RESULT IN NULLIFYING THE ORDERS PASSED BY STATUTORY AUTHORITIES. IT WAS OBSERVED THAT IF THE CASE OF THE ASSESSEE IS THAT THEY HAVE BEEN PUT TO PREJUDICE AN D PRINCIPLES OF NATURAL JUSTICE WERE VIOLATED ON ACCOUNT OF BEING NOT ABLE TO SUBMIT EFF ECTIVE REPLY, IT WOULD BE A DIFFERENT MATTER. THIS WAS NEVER THE PLEA OF THE ASSESSEE EI THER BEFORE THE AO OR BEFORE THE FIRST APPELLATE AUTHORITY OR BEFORE THE TRIBUNAL. THEREFORE, SUCH AN OBJECTION AGAINST THE DEFECT IN NOTICE IS NOT ACCEPTABLE AS THE ALLEG ED DEFECT HAS CAUSED NO PREJUDICE TO THE ASSESSEE. THE LD. D/R HAS SUBMITTED THAT WHEN THE ASSESSEE HIMSELF HAS DISCLOSED THE UNDISCLOSED INCOME DURING THE COURSE OF SEARCH AND SEIZURE ACTION, THEN THE ASSESSEE WAS VERY MUCH AWARE ABOUT THE DEFAULT WHIC H ATTRACTS THE PENALTY UNDER SECTION 271AAB OF THE IT ACT. SHE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS CHALLENGED THE VALIDITY O F INITIATION OF THE PENALTY PROCEEDINGS UNDER SECTION 271AAB ON THE GROUND THAT THE SHOW CA USE NOTICES ISSUED BY THE AO ARE INVALID FOR WANT OF NOT SPECIFYING OR MAKING OUT A CHARGE AGAINST THE ASSESSEE WHICH ATTRACTS THE PENALTY UNDER SECTION 271AAB OF THE AC T. FOR READY REFERENCE, WE REPRODUCE THE NOTICES DATED 30.12.2016 AND 26.05.20 17 AS UNDER :- 7 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. 8 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. 9 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. THUS IT IS CLEAR THAT THE AO HAS HIGHLIGHTED THE CH ARGE IN BOTH THE SHOW CAUSE NOTICES AS THE ASSESSEE IS LIABLE FOR PENALTY FOR CONCEALME NT OF PARTICULARS OF INCOME/FURNISHING OF INACCURATE PARTICULARS OF INCOME. EXCEPT THE DAT E OF NOTICE, THE CONTENTS OF BOTH THE NOTICES ARE MIRROR COPY OF EACH OTHER. THE PENALTY UNDER SECTION 271AAB IS LEVIABLE AGAINST THE UNDISCLOSED INCOME OF THE SPECIFIED PRE VIOUS YEAR RESULTING FROM SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE IT ACT. TH EREFORE, IN THE ABSENCE OF ANY CHARGE OF UNDISCLOSED INCOME BY THE AO IN THE SHOW CAUSE N OTICES, THE ASSESSEE WAS DEPRIVED OF HAVING THE KNOWLEDGE OF DEFAULT AND CHARGE FOR W HICH THE AO PROPOSED TO LEVY THE PENALTY UNDER SECTION 271AAB. EVEN OTHERWISE, THE C HARGE AS STATED BY THE AO IN THE SHOW CAUSE NOTICES IS NOT FOUND TO BE ESTABLISHED A S THE ASSESSEE HAS OFFERED THE SAID INCOME IN THE RETURN OF INCOME FILED UNDER SECTION 139(1) OF THE ACT. IT IS A MANDATORY CONDITION THAT THE INCOME DISCLOSED BY THE ASSESSEE DURING THE COURSE OF SEARCH AND SEIZURE ACTION MUST FALL IN THE AMBIT OF UNDISCLOS ED INCOME AS DEFINED IN THE EXPLANATION TO SECTION 271AAB. FURTHER, THE PENALT Y UNDER SECTION 271AAB IS REQUIRED TO BE LEVIED @ 10%, 20% OR 60% DEPENDING UPON THE D EFAULT COMMITTED BY THE ASSESSEE IN THE PROCESS OF DISCLOSURE OF SUCH INCOM E, PAYMENT OF DUE TAX WITHIN THE PRESCRIBED TIME PERIOD, FURNISHING OF RETURN OF INC OME AND DECLARING THE SAID INCOME FOR THE SPECIFIED PREVIOUS YEAR. THUS THE LIABILITY OF PENALTY UNDER SECTION 271AAB OF THE ACT VARIES DEPENDING UPON THE DEFAULT COMMITTED BY THE ASSESSEE. IF THE ASSESSEE AFTER DISCLOSING THE INCOME SATISFIES THE CONDITION S SPECIFIED IN CLAUSE (A) OF SECTION 271AAB(1), THEN PENALTY IS LEVIABLE @ 10% OF THE UN DISCLOSED INCOME. WHEREAS IF THERE 10 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. IS A FURTHER DEFAULT OF DECLARING SUCH INCOME IN TH E RETURN OF INCOME TO BE FURNISHED WITHIN THE SPECIFIED DATE, THEN THE PENALTY SHALL B E LEVIABLE @ 20% OF THE INCOME DISCLOSED BY THE ASSESSEE. IN CASE THE ASSESSEE IS NOT COMPLYING WITH THE CONDITIONS AS SPECIFIED IN CLAUSE (1)(A) AND (B) OF SECTION 271AA B(1) OF THE ACT, THEN THE PENALTY SHALL BE LEVIED @ 30%/60% OF THE UNDISCLOSED INCOME. ONC E THE PROVISIONS STIPULATE LEVY OF PENALTY WHICH VARIES FROM 10% TO 30%/60% DEPENDING UPON THE DEFAULT COMMITTED BY THE ASSESSEE, THEN IT IS THE DUTY OF THE AO TO SPEC IFY THE DEFAULT WHICH IS COMMITTED BY THE ASSESSEE AND CONSEQUENTLY THE RATE AT WHICH THE PENALTY IS SOUGHT TO BE LEVIED IN TERMS OF CLAUSE (A), (B) OR (C) OF SECTION 271AAB(1 ) OF THE ACT. THIS IS NOT A MERE EMPTY FORMALITY BUT THESE ARE THE MANDATORY CONDITI ONS FOR DECIDING THE QUANTUM OF PENALTY AND THE AO HAS NO DISCRETION AS FAR AS THE QUANTUM OF THE PENALTY IS CONCERNED. THEREFORE, THE PENALTY SOUGHT TO BE LEVIED BY THE A O IN THE SHOW CAUSE NOTICE SHALL ALSO SPECIFY THE DEFAULT AND THE CONSEQUENTIAL RATE OF P ENALTY WHICH THE AO PROPOSED TO BE LEVY. FROM THE SHOW CAUSE NOTICES IT IS APPARENT AND EVIDENT THAT THE AO HAS NOT EVEN APPLIED HIS MIND BUT ISSUED THE NOTICES ONE AF TER ANOTHER WITHOUT EVEN STATING THE PRIMARY CHARGE REQUIRED FOR LEVY OF PENALTY UNDER S ECTION 271AAB OF THE ACT. BOTH THE SHOW CAUSE NOTICES ARE COMPLETELY SILENT ABOUT THE CHARGE OF UNDISCLOSED INCOME DISCOVERED DURING THE COURSE OF SEARCH AND OTHER DE FAULTS, IF ANY, MADE BY THE ASSESSEE SO AS TO ATTRACT THE PENALTY UNDER CLAUSES (A), (B) OR (C) OF SECTION 271AAB(1) OF THE IT ACT. THEREFORE, ON THE FACE OF THE SHOW CAUSE NOTIC ES IT CAN BE SAID THAT THESE ARE VAGUE AND SUFFERING FROM SERIOUS DEFECTS WHICH CANN OT BE CURED AS THE PRIMARY REQUIREMENT OF CHARGE AGAINST THE ASSESSEE IS MISSI NG IN BOTH THE NOTICES. ON THE 11 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. CONTRARY, A COMPLETELY WRONG CHARGE HAS BEEN SPECIF IED IN THESE NOTICES WHICH CANNOT BE A BASIS FOR LEVY OF PENALTY UNDER SECTION 271AAB OF THE ACT. THEREFORE, WE FIND THAT THE INITIATION OF THE PENALTY BY ISSUING THE SHOW C AUSE NOTICES DATED 30 TH DECEMBER, 2016 AND 26.05.2017 IS NOT VALID. THE COORDINATE B ENCH OF THIS TRIBUNAL IN CASE OF GOPAL DAS SONKIA VS. DCIT (SUPRA) HAS CONSIDERED AN IDENTICAL ISSUE IN PARA 5 AS UNDER :- 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WE LL AS THE RELEVANT MATERIAL ON RECORD. DURING THE COURSE OF SEARCH AN D SEIZURE ACTION UNDER SECTION 132 OF THE ACT CONDUCTED ON 15 TH OCTOBER, 2014, THE ASSESSEE DISCLOSED INCOME OF RS. 9,01,00,000/- IN HIS STATEM ENT MADE UNDER SECTION 132(4) OF THE ACT. THE SAID DISCLOSURE WAS MADE IN PURSUANT TO THE ENTRIES ON ACCOUNT OF ADVANCES FOR LAND, EXCESS CASH AND EXCESS JEWELLERY FOUND IN THE SEIZED DOCUMENTS. THE DETAI LS OF THE UNDISCLOSED INCOME SURRENDERED BY THE ASSESSEE ARE AS UNDER :- FOUND FROM ANNEXURE/ EXHIBIT NO. RELEVANT PAGE NO. AMOUNT PARTICULARS 1839, BARAH GANGAUR KA RASTA, JOHARI BAZAR, JAIPUR. ANN. B EXHIBIT NO.1 1-6 7,81,00,000/- ADVANCES FOR LAND AND OTHER LOANS/ADVANCES EXCESS CASH FOUND 20,00,000/- EXCESS JEWELLERY FOUND 1,00,00,000/- TOTAL DECLARATION 9,01,00,000/- IT IS PERTINENT TO NOTE THAT THE DISCLOSURE OF ADDI TIONAL INCOME IN THE STATEMENT RECORDED UNDER SECTION 132(4) ITSELF IS N OT SUFFICIENT TO LEVY THE PENALTY UNDER SECTION 271AAB OF THE ACT UN TIL AND UNLESS THE INCOME SO DISCLOSED BY THE ASSESSEE FALLS IN TH E DEFINITION OF 12 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. UNDISCLOSED INCOME DEFINED IN THE EXPLANATION TO SE CTION 271AAB(1) OF THE ACT. THEREFORE, THE QUESTION WHET HER THE INCOME DISCLOSED BY THE ASSESSEE IS UNDISCLOSED INCOME IN TERMS OF THE DEFINITION UNDER SECTION 271AAB OF THE ACT HAS TO B E CONSIDERED AND DECIDED IN THE PENALTY PROCEEDINGS. SINCE THE ASSESSEE HAS OFFERED THE SAID INCOME IN THE RETURN OF INCOME FIL ED UNDER SECTION 139(1) OF THE ACT, THEREFORE, THE QUESTION OF TAKIN G ANY DECISION BY THE AO IN THE ASSESSMENT PROCEEDINGS ABOUT THE TRUE NATURE OF SURRENDER MADE BY THE ASSESSEE DOES NOT ARISE AND O NLY WHEN THE AO HAS PROPOSED TO LEVY THE PENALTY THEN IT IS A PR E-CONDITION FOR INVOKING THE PROVISIONS OF SECTION 271AAB THAT THE SAID INCOME DISCLOSED BY THE ASSESSEE IN THE STATEMENT UNDER SE CTION 132(4) IS AN UNDISCLOSED INCOME AS PER THE DEFINITION PROVIDE D UNDER SECTION 271AAB. THEREFORE, THE AO IN THE PROCEEDINGS UNDER SECTION 271AAB HAS TO EXAMINE ALL THE FACTS OF THE CASE AS WELL AS THE BASIS OF THE SURRENDER AND THEN ARRIVE TO THE CONCLUSION THAT THE INCOME DISCLOSED BY THE ASSESSEE FALLS IN THE DEFINITION O F UNDISCLOSED INCOME AS STIPULATED IN THE EXPLANATION TO THE SAID SECTION. THEREFORE, WE DO NOT AGREE WITH THE CONTENTION OF T HE LD. D/R THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS MANDATO RY SIMPLY BECAUSE THE AO HAS TO FIRST ISSUE A SHOW CAUSE NOTI CE TO THE ASSESSEE AND THEN HAS TO MAKE A DECISION FOR LEVY O F PENALTY AFTER CONSIDERING THE FACT THAT ALL THE CONDITIONS PROVID ED UNDER SECTION 271AAB ARE SATISFIED. AT THE OUTSET, WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF RAVI MATHUR VS. DCIT (SUPRA) IN PARA 4 TO 6 AS UNDER :- 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. A SEARCH WAS CONDUCTE D UNDER 13 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. SECTION 132 OF THE IT ACT ON 30 TH OCTOBER, 2014 AT THE PREMISES OF THE ASSESSEE. THE ASSESSEE IN HIS STAT EMENT RECORDED UNDER SECTION 132(4) HAS DISCLOSED AN INCO ME OF RS. 10,02,00,000/- IN PURSUANT TO THE ENTRIES OF AD VANCES GIVEN FOR PURCHASE OF LAND RECORDED IN THE POCKET D IARY WHICH WAS FOUND AND SEIZED DURING THE COURSE OF SEA RCH AND SEIZURE ACTION. THIS IS YEAR OF SEARCH AND THE FINA NCIAL YEAR WOULD END ON 31 ST MARCH, 2015. HOWEVER, THE ASSESSEE DISCLOSED THIS AMOUNT OF RS. 10,02,00,000/- BASED O N THE ENTRIES IN THE DIARY REGARDING INVESTMENT IN REAL E STATE. THE DUE DATE OF FILING OF RETURN OF INCOME UNDER SECTIO N 139(1) WAS 30 TH SEPTEMBER, 2015. IT IS UNDISPUTED FACT THAT THE ASSESSEE IS AN INDIVIDUAL AND WAS NOT MAINTAINING R EGULAR BOOKS OF ACCOUNT. THEREFORE, THE TRANSACTIONS RECOR DED IN THE POCKET DIARY FOUND DURING THE COURSE OF SEARCH ITSELF WOULD NOT LEAD TO THE PRESUMPTION THAT THE ASSESSEE WOULD NOT HAVE OFFERED THIS INCOME TO TAX IF THE SEARCH I S NOT CONDUCTED ON 30 TH OCTOBER, 2014. FURTHER, THE ENTRIES IN THE DIARY ITSELF DO NO NOT REPRESENT THE INCOME OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION THOUGH THE ASSE SSEE WAS REQUIRED TO EXPLAIN THE SOURCE OF INVESTMENT IN QUESTION AND THAT SOURCE WOULD BE THE INCOME OF THE ASSESSEE . IT IS MOST LIKELY THAT THE INVESTMENT IN QUESTION WAS MAD E FROM THE UNACCOUNTED INCOME OF PRECEDING YEARS. HENCE TH E INVESTMENT IN THE REAL ESTATE ITSELF WOULD NOT REVE AL THE NATURE OF INCOME AND THE SOURCE OF INCOME OF THE YE AR UNDER CONSIDERATION. IT IS A PRE-CONDITION FOR INV OKING THE PROVISIONS OF SECTION 271AAB THAT THE ASSESSEE ADMI TTED THE UNDISCLOSED INCOME IN THE STATEMENT UNDER SECTION 1 32(4). 14 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. THE DEFINITION OF UNDISCLOSED INCOME IS PROVIDED IN SECTION 271AAB ITSELF AND, THEREFORE, THE AO IN THE PROCEED INGS UNDER SECTION 271AAB HAS TO EXAMINE ALL THE FACTS O F THE CASE AND THEN ARRIVE TO THE CONCLUSION THAT THE INC OME DISCLOSED BY THE ASSESSEE FALLS IN THE DEFINITION OF UNDISCLOSED INCOME AS STIPULATED IN THE EXPLANATION TO SAID SECTION. THE FIRST QUESTION ARISES IS WHETHER THE LEVY OF PENALTY UNDER SECTION 271AAB IS MANDATORY AND CONSEQUENTIAL TO THE DISCLOSURE OF INCOME BY THE AS SESSEE UNDER SECTION 132(4) OR THE AO HAS TO TAKE A DECISI ON WHETHER THE GIVEN CASE HAS SATISFIED THE REQUIREME NTS FOR LEVY OF PENALTY UNDER SECTION 271AAB OF THE ACT. IN ORDER TO CONSIDER THIS ISSUE, THE PROVISIONS OF SECTION 2 71AAB ARE TO BE ANALYZED. FOR READY REFERENCE, WE QUOTE SEC TION 271AAB AS UNDER :- 271AAB. (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF T HIS ACT, DIRECT THAT, IN A CASE WHERE SEARCH HAS BEEN INITIATED UND ER SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012 49 [BUT BEFORE THE DATE ON WHICH THE TAXATION LAWS (SECOND AMENDMENT) BILL, 20 16 RECEIVES THE ASSENT OF THE PRESIDENT 50 ], THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM , (A) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF THE U NDISCLOSED INCOME OF THE SPECIFIED P REVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER S UB-SECTION (4) OF SECTION 132 , ADMITS THE UNDISCLOSED INCOME AND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED I NCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE (A) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RE SPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECIFIED PR EVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; 15 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. (B) A SUM COMPUTED AT THE RATE OF TWENTY PER CENT OF TH E UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER S UB-SECTION (4) OF SECTION 132 , DOES NOT ADMIT THE UNDISCLOSED INCOME; AND (II) ON OR BEFORE THE SPECIFIED DATE (A) DECLARES SUCH INCOME IN THE RETURN OF INCOME FURNIS HED FOR THE SPECIFIED PREVIOUS YEAR; AND (B) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RE SPECT OF THE UNDISCLOSED INCOME; (C) A SUM 51 [COMPUTED AT THE RATE OF SIXTY PER CENT] OF THE UND ISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED BY TH E PROVISIONS OF CLAUSES (A) AND (B). 52 [(1A) THE ASSESSING OFFICER MAY, NOTWITHSTANDING AN YTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHERE SEARCH HA S BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE DATE ON WHICH THE TAXATION LAWS (SECOND AMENDME NT) BILL, 2016 RECEIVES THE ASSENT OF THE PRESIDENT, THE ASSESSEE SHALL PAY BY WAY OF PENALTY , IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, (A) A SUM COMPUTED AT THE RATE OF THIRTY PER CENT OF T HE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF THE ASSESSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER S UB-SECTION (4) OF SECTION 132 , ADMITS THE UNDISCLOSED INCOME AND SPECIFIES THE MAN NER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED I NCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE (A) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECIFIED PR EVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; (B) A SUM COMPUTED AT THE RATE OF SIXTY PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED UNDER THE PROVI SIONS OF CLAUSE ( A).] (2) NO PENALTY UNDER THE PROVISIONS OF 53 [ SECTION 270A OR] CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN RESPECT OF T HE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTION (1) 52 [OR SUB-SECTION (1A)]. (3) THE PROVISIONS OF SECTIONS 274 AND 275 SHALL, AS FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED TO IN THIS SECTION. EXPLANATION.FOR THE PURPOSES OF THIS SECTION, (A) 'SPECIFIED DATE' MEANS THE DUE DATE OF FURNISHING O F RETURN OF INCOME UNDER SUB- SECTION (1) OF SECTION 139 OR THE DATE ON WHICH THE PERIOD SPECIFIED IN THE NOTICE ISSUED UNDER SECTION 153A FOR FURNISHING OF RETURN OF INCOME EXPIRES, AS THE CASE MAY BE; 16 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. (B) 'SPECIFIED PREVIOUS YEAR' MEANS THE PREVIOUS YEAR (I) WHICH HAS ENDED BEFORE THE DATE OF SEARCH, BUT THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 FOR SUCH Y EAR HAS NOT EXPIRED BEFORE THE DATE OF SEARCH AND THE ASSESSEE HAS NOT FURNISHED THE RETURN OF INCOME FOR THE PREVIOUS YEAR BEFORE THE DATE OF SEA RCH; OR (II) IN WHICH SEARCH WAS CONDUCTED; (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 ACCOUNT OR OTHER DOCUMENTS OR TRANS ACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132 , WHICH HAS (A) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEARCH I N 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 54 [PRINCIPAL CHIEF COMMISSIONER OR] CHIEF COMMISSIONER OR 54 [PRINCIPAL COMMISSIONER OR] COMMISSIONER BEFORE THE DATE OF SEARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENT ED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RECORDED IN T HE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR W HICH IS FOUND TO BE FALSE AND WOULD NOT HAVE BEEN F OUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCTED.] THE SECTION BEGINS WITH THE STIPULATION THAT THE AO MAY DIRECT THE ASSESSEE SHALL PAY BY WAY OF PENALTY IF THE CONDITI ONS AS PRESCRIBED UNDER CLAUSES (A) TO (C) ARE SATISFIED. AS PER SUB-SECTI ON (3) OF SECTION 271AAB THE PROVISIONS OF SECTION 274 AND 275 AS FAR AS MAY BE APPLIED IN RELATION TO THE PENALTY REFERRED IN THIS SECTION WHICH MEANS THAT BEFORE IMPOSING THE PENALTY UNDER SEC. 271AAB, THE AO HAS TO ISSUE A SHOW CAUSE NOTICE AND GIVE A PROPER OPPORTUNITY OF HEARING TO THE ASS ESSEE. THUS THE LEVY OF PENALTY U/S. 271AAB IS NOT AUTOMATIC BUT THE A.O. H AS TO TAKE A DECISION TO IMPOSE THE PENALTY AFTER GIVING A PROPER OPPORTU NITY OF HEARING TO THE ASSESSEE. IT IS STATUTORY REQUIREMENT THAT THE EXP LANATION OF THE ASSESSEE FOR NOT FULFILLING THE CONDITIONS AS PRESCRIBED U/ S 271AAB OF THE ACT IS REQUIRED TO BE CONSIDERED BY THE AO AND PARTICULARL Y WHETHER THE 17 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. EXPLANATION FURNISHED BY THE ASSESSEE IS BONAFIDE A ND NON-COMPLIANCE OF THE SAME IS DUE TO THE REASON BEYOND THE CONTROL OF THE ASSESSEE. THEREFORE, THE PENALTY U/S 271AAB IS NOT A CONSEQUE NTIAL ACT BUT THE AO HAS TO FIRST INITIATE PROCEEDINGS BY ISSUING A SHOW CAUSE NOTICE AND AFTER CONSIDERING THE EXPLANATION AND REPLY OF THE ASSESS EE HAS TO TAKE A DECISION. THIS REQUIREMENT OF GIVING AN OPPORTUNIT Y OF HEARING ITSELF MAKES IT CLEAR THAT THE PENALTY U/S 271AAB IS NOT M ANDATORY BUT THE AO HAS TO TAKE A DECISION BASED ON THE FACTS AND CIRCU MSTANCES OF THE CASE OTHERWISE THERE IS NO REQUIREMENT OF ISSUING ANY NO TICE FOR INITIATION OF PROCEEDINGS BUT THE LEVY OF PENALTY WOULD BE CONSEQ UENTIAL AND ONLY COMPUTATION OF THE QUANTUM WAS TO BE DONE BY THE AO AS IN THE CASE OF LEVY OF INTEREST AND FEE U/S 234A TO E. EVEN THE QUA NTUM OF PENALTY LEVIABLE U/S 271AAB IS ALSO SUBJECT TO THE CONDITIO N PRESCRIBED UNDER CLAUSES (A) TO (C) OF SUB-SECTION (1) AND THE AO HA S TO AGAIN GIVE A FINDING FOR LEVY OF PENALTY @ 10% OR 20% OR 30% OF THE UNDI SCLOSED INCOME. THUS THE AO IS BOUND TO TAKE A DECISION AS TO WHAT DEFAULT IS COMMITTED BY THE ASSESSEE AND WHICH PARTICULAR CLAUSE OF SECT ION 271AAB(1) IS ATTRACTED ON SUCH DEFAULT. FURTHER, MERE DISCLOSUR E OF INCOME UNDER SECTION 132(4) WOULD NOT IPSO FACTO PAR TAKE THE CH ARACTER OF UNDISCLOSED INCOME BUT THE FACTS OF EACH CASE ARE REQUIRED TO B E ANALYZED IN OBJECTIVE MANNER SO AS TO ATTRACT THE PROVISIONS OF SECTION 2 71AAB OF THE ACT. SINCE IT IS NOT AUTOMATIC BUT THE AO HAS TO GIVE A FINDIN G THAT THE CASE OF THE ASSESSEE FALLS IN THE AMBIT OF UNDISCLOSED INCOME A S DEFINED IN EXPLANATION TO THE SAID SECTION. THEREFORE, THE PRO VISIONS OF SECTION 271AAB STIPULATE THAT THE AO MAY COME TO THE CONCLU SION THAT THE ASSESSEE SHALL PAY THE PENALTY. THE ONLY MANDATORY ASPECT IN THE PROVISION IS THE QUANTUM OF PENALTY AS SPECIFIED UN DER CLAUSES (A) TO (C) OF SEC. 271AAB(1) OF THE ACT AS 10% TO 30% OR MORE AS AGAINST THE DISCRETION GIVEN TO THE AO AS PER THE PROVISIONS OF SECTION 271(1)(C) OF THE 18 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. ACT WHERE THE AO HAS THE DISCRETION TO LEVY THE PEN ALTY FROM 100% TO 300% OF THE TAX SOUGHT TO BE EVADED. THUS THE AO I S DUTY BOUND TO COME TO THE CONCLUSION THAT THE CASE OF THE ASSESSE E IS FIT FOR LEVY OF PENALTY UNDER SECTION 271AAB AND THEN ONLY THE QUAN TUM OF PENALTY BEING 10% OR 20% OR 30% HAS TO BE DETERMINED SUBJEC T TO THE EXPLANATION OF THE ASSESSEE FOR THE DEFAULTS. 5. BEFORE WE PROCEED FURTHER, THE DECISIONS RELIED UPON BY THE LD. D/R ARE TO BE CONSIDERED. IN THE CASE OF PRINCIPAL CIT VS. SANDEEP CHANDAK & OTHERS (SUPRA) THE ISSUE BEFORE THE HONBLE HIGH CO URT WAS THE DEFECT IN THE NOTICE ISSUED UNDER SECTION 271AAB ON ACCOUNT O F MENTIONING WRONG PROVISION OF THE ACT BEING 271(1)(C) OF THE ACT. T HE HONBLE HIGH COURT AFTER CONSIDERING THE FACT THAT THE SHOW CAUSE NOTI CE ISSUED BY THE AO THOUGH MENTIONS SECTION 271(1) IN THE CAPTION OF TH E SAID NOTICE, HOWEVER, THE BODY OF THE SHOW CAUSE NOTICE CLEARLY MENTIONS SECTION 271AAB, WHICH WAS FULLY COMPREHENDED BY THE ASSESSE E AS REVEALS IN THE REPLY FILED BY THE ASSESSEE AGAINST THE SAID SHOW C AUSE NOTICE. HENCE THE HONBLE HIGH COURT HAS HELD AS UNDER :- THE LD. A.RS HAVE ALSO CHALLENGED THAT THE CAPTIO N OF THE NOTICE MENTIONED ONLY SECTION 271 AND NOT 271AAB. IN THIS RESPECT, THE COPY OF NOTICE HAS BEEN PRODUCED BY THE LD. A.R. BEFORE ME. IT IS SEEN THAT THE LD. A.R IS CORRECT IN OBSERVING THAT THE SECTION OF PEN ALTY HAS NOT BEEN CORRECTLY MENTIONED BY THE AO IN THE CAPTION. HOWE VER, THE AO WILL GET THE BENEFIT OF SECTION 292BB OF THE INCOME TAX ACT, 1961 BECAUSE FIRSTLY, THE ASSESSEE HAS RAISED NO OBJECTION BEFORE THE AO IN THIS REGARD. SECONDLY, LAST LINE OF THE NOTICE CLEARLY MENTIONS SECTION 271AAB. THIRDLY, THE ASSESSEE HAS GIVEN REPLY TO SAID NOTICE WHICH S HOWS THAT THE ASSESSEE FULLY COMPREHENDED THE IMPLICATION OF THE NOTICE TH AT IT IS FOR SECTION 271AAB. THE ASSESSEE HAS ALSO CHALLENGED THAT THE PRINCIPLE S OF NATURAL JUSTICE HAS NOT FOLLOWED BY THE AO. THE DETAILED SU BMISSIONS OF A.R IN THIS 19 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. REGARD HAS ALREADY BEEN REPRODUCED ABOVE. THE A.R DID NOT PRODUCE ANY EVIDENCE TO SHOW THAT HE WAS NOT GIVEN PROPER OPPOR TUNITY OF HEARING. IT IS CLEAR FROM THE PENALTY ORDER THAT THE AO HAS GIV EN PENALTY NOTICE AND WHICH WAS ALSO REPLIED BY THE ASSESSEE. THEREFORE, IN MY OPINION, PRINCIPLE OF NATURAL JUSTICE HAS NOT BEEN VIOLATED. THUS IN VIEW OF ABOVE DISCUSSION PENALTY IMPOSED BY AO U/S 271AAB OF THE ACT IS CONFIRMED. THUS IT WAS FOUND BY THE HONBLE HIGH COURT THAT TH E MISTAKE IN MENTIONING THE SECTION IN THE SHOW CAUSE NOTICE IS COVERED UNDER SECTION 292BB AND THE AO WILL GET THE BENEFIT OF THE SAME. THE SAID DECISION WILL NOT HELP THE CASE OF THE REVENUE SO FAR AS THE ISSU E INVOLVES THE MERITS OF LEVY OF PENALTY UNDER SECTION 271AAB. AS REGARDS T HE DECISION OF KOLKATA BENCHES OF THE TRIBUNAL IN THE CASE OF DCIT VS. AMI T AGARWAL (SUPRA), WE FIND THAT THE SAID DECISION WAS SUBSEQUENTLY RECALL ED BY THE TRIBUNAL AND A FRESH ORDER DATED 14 TH MARCH, 2018 WAS PASSED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. THEREFORE, THE DECISION RELIED UPO N BY THE LD. D/R IS NO MORE IN EXISTENCE. 6. THE QUESTION WHETHER LEVY OF PENALTY UNDER SECTI ON 271AAB BY THE AO IS MANDATORY OR DISCRETIONARY HAS BEEN CONSIDERE D BY THE VISAKHAPATNAM BENCH OF THIS TRIBUNAL IN CASE OF ACI T VS. M/S. MARVEL ASSOCIATES (SUPRA) IN PARA 5 TO 7 AS UNDER :- 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. DURING THE APPEAL HEARING, THE LD. A.R. VEHEMENTLY ARGUED THAT THE A.O. HAS LEVIED THE PENALTY UNDER THE IMPRESSION THAT THE LEVY OF PENALTY IN THE CASE OF ADMISSION OF INC OME U/S 132(4) IS MANDATORY. THE LD. A.R. FURTHER STATED THAT PENALTY U/S 271AAB OF THE ACT IS NOT MANDATORY BUT DISCRETIONARY. THE PROVISIONS OF SECTION 271AAB OF THE ACT IS PARIMATERIA WITH THAT OF SECTION 158BFA OF THE ACT RELATING TO BLOCK ASSESSM ENT AND ACCORDINGLY ARGUED THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MANDATO RY BUT DISCRETIONARY. WHEN THERE IS REASONABLE CAUSE, THE PENALTY IS NOT EXIGIBLE. THE LD. A.R. TAKEN US TO THE SECTION 271AAB OF THE ACT AND ALSO SECTION 158BFA(2) OF THE ACT AN D ARGUED THAT THE WORDS USED IN 20 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. SECTION 271AAB OF THE ACT AND THE WORDS USED IN SEC TION 158BFA(2) OF THE ACT ARE IDENTICAL. HENCE, ARGUED THAT THE PENALTY SECTION 2 71AAB OF THE ACT PENALTY IS NOT AUTOMATIC AND IT IS ON THE MERITS OF EACH CASE. FOR READY REFERENCE, WE REPRODUCE HEREUNDER SECTION 158BFA (2) OF THE ACT AND SECTION 271AAB OF THE ACT WHICH READS AS UNDER; 271AAB [PENALTY WHERE SEARCH HAS BEEN INITIATED]: (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHER E SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1 ST DAY OF JULY, 2012, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM (A) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF T HE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF SEARCH, IN A STATEMENT UNDER SUB-S ECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPECIFIES TH E MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED I NCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE (A) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RE SPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECIFIED PR EVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; (B) A SUM COMPUTED AT THE RATE OF TWENTY PER CENT O F THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER S UB-SECTION (4_) OF SECTION 132, DOES NOT ADMIT THE UNDISCLOSED INCOME; AND (II) ON OR BEFORE THE SPECIFIED DATE (A) DECLARES SUCH INCOME IN THE RETURN OF INCOME FURNIS HED FOR THE SPECIFIED PREVIOUS YEAR; AND (B) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RE SPECT OF THE UNDISCLOSED INCOME; 21 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. (C) A SUM WHICH SHALL NOT BE LESS THAN THIRTY PER C ENT BUT WHICH SHALL NOT EXCEED NINETY PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED BY THE PROVISIONS OF CLAUSES (A) AND (B). (2) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) O F SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN RESPECT OF THE UNDISCL OSED INCOME REFERRED TO IN SUB- SECTION (1). SECTION 158BFA(2): (2) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) IN THE COURSE OF ANY PROCEEDINGS UNDER THIS CHAPTER, MAY DIRECT THAT A PERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHALL NOT BE LESS THAN THE AMOUNT OF TAX LEVIABLE B UT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SO LEVIABLE IN RESPECT OF THE UND ISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER UNDER CLAUSE (C) OF SECTION 158BC : PROVIDED THAT NO ORDER IMPOSING PENALTY SHALL BE MADE IN RE SPECT OF A PERSON IF (I) SUCH PERSON HAS FURNISHED A RETURN UNDER CLAUSE (A) OF SECTION 158BC; (II) THE TAX PAYABLE ON THE BASIS OF SUCH RETURN HAS BEE N PAID OR, IF THE ASSETS SEIZED CONSIST OF MONEY, THE ASSESSEE OFFERS THE MONEY SO SEIZED TO BE ADJUSTED AGAINST THE TAX PAYABLE. (III) EVIDENCE OF TAX PAID IS FURNISHED ALONG WITH THE RE TURN; AND (IV) AN APPEAL IS NOT FILED AGAINST THE ASSESSMENT OF TH AT PART OF INCOME WHICH IS SHOWN IN THE RETURN: PROVIDED FURTHER THAT THE PROVISIONS OF THE PRECEDING PROVI SO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOME DETERMINED BY THE ASSE SSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN AND IN SUCH CASES TH E PENALTY SHALL BE IMPOSED ON THAT PORTION OF UNDISCLOSED INCOME DETERMINED WH ICH IS IN EXCESS OF THE AMOUNT OF UNDISCLOSED INCOME SHOWN IN THE RETURN. 6. CAREFUL READING OF SECTION 271AAB OF THE ACT, TH E WORDS USED ARE AO MAY DIRECT AND THE ASSESSEE SHALL PAY BY WAY OF PENAL TY. SIMILAR WORDS ARE USED SECTION 158BFA(2) OF THE ACT. THE WORD MAY DIRECT I NDICATES THE DISCRETION TO THE AO. FURTHER, SUB SECTION (3) OF SECTION 271AAB OF T HE 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. 22 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. 7. THE LEGISLATURE HAS INCLUDED THE PROVISIONS OF S ECTION 274 AND SECTION 275 OF THE ACT IN 271AAB OF THE ACT WITH CLEAR INTENTION T O CONSIDER THE IMPOSITION OF PENALTY JUDICIALLY. SECTION 274 DEALS WITH THE PROC EDURE 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 REASONA BLE OPPORTUNITY OF BEING HEARD. THEREFORE, FROM PLAIN READING OF SECTION 271 AAB OF THE ACT, IT IS EVIDENT THAT THE PENALTY CANNOT BE IMPOSED UNLESS THE ASSES SEE IS GIVEN A REASONABLE OPPORTUNITY AND ASSESSEE IS BEING HEARD. ONCE THE O PPORTUNITY 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 BOUN D BY THE ACT TO HEAR THE ASSESSEE AND TO GIVE REASONABLE OPPORTUNITY TO EXPL AIN HIS CASE, THERE IS NO MANDATORY REQUIREMENT OF IMPOSING PENALTY, BECAUSE THE OPPORTUNITY OF BEING HEARD AND REASONABLE OPPORTUNITY IS NOT A MERE FORM ALITY BUT IT IS TO ADHERE TO THE PRINCIPLES OF NATURAL JUSTICE. HONBLE A.P. HIG H COURT IN THE CASE OF RADHAKRISHNA VIHAR IN ITTA NO.740/2011 WHILE DEALIN G WITH THE PENALTY U/S 158BFA HELD THAT WE ARE OF THE OPINION THAT WHILE THE WORDS SHALL BE LIABLE UNDER SUB SECTION (1) OF SECTION 158BFA OF THE ACT THAT ARE ENTITLED TO BE MANDATORY, THE WORDS MAY DIRECT IN SUB SECTION 2 TH ERE OF INTENDED TO DIRECTORY. IN OTHER WORDS, WHILE PAYMENT OF INTEREST IS MANDAT ORY LEVY OF PENALTY IS DISCRETIONARY. IT IS TRITE POSITION OF LAW THAT DIS CRETION IS VESTED AND AUTHORITY HAS TO BE EXERCISED IN A REASONABLE AND RATIONAL MANNER DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF THE EACH CASE. PLAIN READING O F 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 HOLD THAT T HE PENALTY U/S 271AAB IS NOT MANDATORY BUT TO BE IMPOSED ON MERITS OF THE EACH C ASE. THUS THE TRIBUNAL HAS HELD THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MANDATORY BUT THE AO HAS THE DISCRETI ON TO TAKE A DECISION AND SHALL BE BASED ON JUDICIOUS DECISION O F THE AO. HENCE 23 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. WE FORTIFY OUR VIEW BY THE ABOVE DECISIONS OF TRIBU NAL IN CASE OF ACIT VS. MARVEL ASSOCIATES. THUS THE TRIBUNAL HAS ANALYZED ALL THE RELEVANT PRO VISIONS OF THE ACT AS WELL AS VARIOUS DECISIONS ON THIS POINT INCLUDING T HE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF PR. CIT VS. SAN DEEP CHANDAK, 405 ITR 648 (ALLAHABAD) RELIED UPON BY THE LD. D/R AND THEN ARRIVED AT THE CONCLUSION THAT THE PENALTY UNDER SECTION 271AAB IS NOT MANDATORY BUT THE AO HAS THE DISCRETION TO TAKE A DECISION AND TH E SAME SHOULD BE BASED ON JUDICIOUS DECISION OF THE AO. ACCORDINGLY FOLLOWING THE EARLIER DECISION OF THIS TRIBUNAL IN THE CASE OF RAVI MATHU R VS. DCIT (SUPRA), WE HOLD THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MANDATORY BUT THE AO HAS A DISCRETION AFTER CONSIDERING ALL THE R ELEVANT ASPECTS OF THE CASE AND THEN TO SATISFY HIMSELF THAT THE CASE OF T HE ASSESSEE FALLS IN THE DEFINITION OF UNDISCLOSED INCOME AS PROVIDED IN THE EXPLANATION TO SECTION 271AAB OF THE ACT. ACCORDINGLY, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE ORDER OF THIS TRIBUNAL WHEREIN THE DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT AS WELL AS THE HONBLE 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. GROUND NO. 2 IS REGARDING LEVY OF PENALTY UNDER SEC TION 271AAB OF THE IT ACT BEING UNJUST AND AGAINST THE PROVISIONS OF L AW. 24 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. 6. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT W HAT IS DISCLOSED BY THE ASSESSEE DURING THE COURSE OF SEARCH AND SEIZURE ACTION IS T HE ADDITIONAL INCOME AND NOT AN UNDISCLOSED INCOME. HE HAS FURTHER SUBMITTED THAT EVEN OTHERWISE THE INCOME DISCLOSED BY THE ASSESSEE DURING THE COURSE OF SEAR CH AND SEIZURE DOES NOT FALL IN THE DEFINITION OF UNDISCLOSED INCOME AS PROVIDED IN EXP LANATION TO SECTION 271AAB OF THE ACT. HE HAS REFERRED TO SEIZED MATERIAL AND SUBMIT TED THAT THE ENTRIES IN THE DIARY ARE VERY VAGUE AND DO NOT REPRESENT ANY UNDERLYING ASSE TS. ALL THE ENTRIES ARE REGARDING ADVANCES FOR LAND WHEREAS NEITHER ANY EVIDENCE IN T HE FORM OF ANY RECEIPT OR AGREEMENT TO SHOW THAT THERE IS AN ACTUAL TRANSACTI ON OF ADVANCE NOR ANY DETAILS OR PARTICULARS OF LAND ARE FOUND OR BROUGHT ON RECORD TO SHOW THAT THE ADVANCES WERE GIVEN FOR PURCHASE OF THE SAID LAND. THUS THESE ARE ONLY VAGUE ENTRIES AND CONTAINING IMAGINARY NAMES AND DETAILS. THUS THE LD. A/R HAS CONTENDED THAT THE SAID SEIZED DOCUMENTS ARE NOTHING BUT DUMB AND DEAF PAPERS WITH OUT INDICATING ANY UNDISCLOSED INCOME OF THE ASSESSEE. THE ASSESSEE SURRENDERED T HE INCOME JUST TO BUY PEACE AND UNNECESSARY LITIGATION. THERE IS NO IOTA OF EVIDEN CE THAT THE SURRENDERED INCOME WAS UNDISCLOSED INCOME OF THE ASSESSEE. WHEN THERE IS NO ACTUAL TRANSACTION OF ADVANCE OR PURCHASE OF LAND OR EVEN DESCRIPTION OF ANY LAND FO R WHICH THE ALLEGED ADVANCES WERE GIVEN, THEN THE DISCLOSURE OF THE SAID INCOME BY TH E ASSESSEE AS AN ADDITIONAL INCOME CANNOT BE TREATED AS UNDISCLOSED INCOME OF THE ASSE SSEE. HE HAS REFERRED TO THE CBDT CIRCULAR NO. 286 OF 2003 DATED 10 TH MARCH, 2003 AND SUBMITTED THAT THE CBDT EXPRESSED ITS CONCERN ABOUT THE PRACTICE OF CONFESS ION OF ADDITIONAL INCOME DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS WHICH DO N OT SERVE ANY USEFUL PURPOSE IN THE 25 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. ABSENCE OF ANY EVIDENCE OF INCOME WHICH LEADS TO IN FORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED. HENCE THE LD. A/R HAS SUBMITTED THAT THE BOARD HAS TIME AND AGAIN ADVISED THE TAXING AUTHORI TIES TO AVOID OBTAINING AN ADMISSION/CONFESSION OF UNDISCLOSED INCOME UNDER CO ERCIVE/UNDUE INFLUENCE. HE HAS THEN REFERRED TO THE CIRCULAR DATED 18 TH DECEMBER, 2018 AND SUBMITTED THAT THE CBDT HAS REPEATED ITS EARLIER INSTRUCTIONS. THUS THE LD. A/R HAS SUBMITTED THAT IN THE ABSENCE OF ANY UNDISCLOSED INCOME INDICATED OR DISCOVERED O N THE BASIS OF SEIZED MATERIAL, THE DISCLOSURE MADE IN THE STATEMENT UNDER SECTION 132( 4) IS NOT SUFFICIENT TO LEVY THE PENALTY UNDER SECTION 271AAB OF THE ACT. IN SUPPOR T OF HIS CONTENTION, HE HAS RELIED UPON THE FOLLOWING DECISIONS :- RAVI MATHUR VS. DCIT ITA NO. 969/JP/2017 DATED 13.06.2018. DINESH KUMAR AGARWAL VS. ACIT ITA NOS. 855 & 856/JP/2017 DATED 24.07.2018. RAJA RAM MAHESHWARI VS. DCIT ITA NO. 992/JP/2017 DATED 10.01.2019. M/S. RAMBHAJOS VS. ACIT ITA NO. 991/JP/2017 DATED 11.01.2019. RAJENDRA KUMAR GUPTA VS. DCIT ITA NO. 359/JP/2017 DATED 18.01.2019. THUS THE LD. A/R HAS SUBMITTED THAT EVEN IF THE SEI ZED MATERIAL DISCLOSES SOME OUT-FLOW OF FUNDS FROM THE ASSESSEES HANDS, THE SAME CANNOT NECESSARILY BE AN INCOME OF THE ASSESSEE. THEREFORE, IN THE ABSENCE OF ANY OTHER M ATERIAL OR EVIDENCE TO SHOW THE 26 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. UNDISCLOSED INCOME OF THE ASSESSEE, ONLY THE ENTRIE S IN THE SEIZED MATERIAL WHICH IS DUMB AND DEAF DOCUMENT CANNOT BE THE BASIS OF LEVY OF PENALTY UNDER SECTION 271AAB OF THE IT ACT. THUS NO INCRIMINATING DOCUMENT WAS FOUND DURING THE COURSE OF SEARCH AND SEIZURE ACTION AND THE ALLEGED SEIZED PAPERS ON THE BASIS OF WHICH SURRENDER WAS TAKEN BY THE DEPARTMENT CONTAINS ONLY IMAGINARY NAM ES AND SOME FIGURES. NEITHER DURING THE SEARCH PROCEEDINGS NOR THE AO HAS MADE A NY ENQUIRY OR INVESTIGATION REGARDING THE ENTRIES MADE IN THE SEIZED PAPERS. T HE SURRENDER OF THE SAID INCOME BY THE ASSESSEE WAS JUST TO BUY PEACE AS IT IS EVIDENT FROM THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT. THE SAID ENTRIES IN THE POCKET DIARY GIVING ADVANCES ITSELF IS NOT AN UNDISCLOSED INCOME BUT DUE TO UNDUE PRESSURE EXERTED BY THE REVENUE AUTHORITIES TO OBTAIN THE SURRENDER, THE ASSESSEE H AS MADE THE SURRENDER OF THE SAID INCOME. 7. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THE UNACCOUNTED INCOME WAS FOUND RECORDED IN THE SEIZED DOCUMENTS WHICH CONSTI TUTE UNDISCLOSED INCOME AS DEFINED IN EXPLANATION TO SECTION 271AAB OF THE ACT. THE L D. D/R HAS FURTHER SUBMITTED THAT THOUGH THE ENTRIES ARE IN RESPECT OF THE ADVANCES G IVEN BY THE ASSESSEE, HOWEVER, WITHOUT CORRESPONDING INCOME THE ADVANCE CANNOT BE GIVEN THEREFORE, INVESTMENT OF THE ASSESSEE HAS A CORRESPONDING UNDISCLOSED INCOME . THE ASSESSEE HIMSELF SURRENDERED THE SAID INCOME DURING THE COURSE OF SE ARCH AND SEIZURE ACTION AND HIS STATEMENT RECORDED UNDER SECTION 132(4) ON OATH, TH EREFORE, NOW THE ASSESSEE CANNOT BACK OUT FROM HIS OWN STATEMENT. SHE HAS RELIED UP ON THE ORDERS OF THE AUTHORITIES BELOW. 27 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE SEIZED MATERIAL ON THE BASIS OF WHICH THE ASSESSEE HAS DISCLOSED THE INCOME OF RS. 4,50,00,000/- IS A DIARY IN WHICH 5 ( FIVE) ENTRIES ARE RECORDED. THE ENTRIES ARE IN THE NATURE OF PAYMENTS FOR LAND. ONL Y CERTAIN NAMES AND AMOUNTS ARE WRITTEN UNDER THE HEAD AGAINST LAND. NEITHER AN Y DESCRIPTION OF THE LAND IS GIVEN IN THE SEIZED MATERIAL NOR EVEN THE COMPLETE PARTICULA RS OF THE PERSONS EXCEPT SOME NAMES ARE APPEARING LIKE JAGDISH, SITA RAM, SURESH CHAND, SHYAM KUMAR, DHARAM CHAND. THE ENTRIES IN THE SEIZED MATERIAL DO NOT R EVEAL ANY INCOME OF THE ASSESSEE BUT THESE ARE ONLY THE PAYMENTS MADE BY THE ASSESSEE. THEREFORE, THE SEIZED MATERIAL ITSELF DOES NOT DISCLOSE ANY INCOME FOR THE YEAR UN DER CONSIDERATION AS THE SAID PAYMENT MAY BE REPRESENTING THE INCOME OF THE PAST YEARS OR THE INCOME OF SOME OTHER PERSON. THE DEPARTMENT HAS NOT MADE ANY ENQU IRY ABOUT THE PARTICULARS OF THE LAND AS WELL AS THE PERSONS TO WHOM THE ALLEGED PAY MENT WAS MADE. EVEN NO EFFORTS WERE MADE TO FIND OUT WHETHER THESE PAYMENTS WERE M ADE AGAINST ANY PARTICULAR TRANSACTION OF PURCHASE OF LAND. IT IS ALSO NOT ON RECORD WHETHER THESE IMAGINARY NAMES FOUND WRITTEN IN THE SEIZED MATERIAL WERE HAVING AN Y LAND UNDER THEIR OWNERSHIP OR NOT. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THIS TRIB UNAL IN THE CASE OF GOPAL DAS SONKIA VS. DCIT (SUPRA) IN PARA 8 AS UNDER :- 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. AS APPARENT FROM THE SEIZED DO CUMENTS, THE ASSESSEE DISCLOSED INTER ALIA THE INCOME OF RS. 7,81,00,000/ - ON ACCOUNT OF 28 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. ADVANCES FOR LAND. ON CAREFUL PERUSAL AND CONSIDER ATION OF THE SEIZED DOCUMENTS, WE FIND THAT VARIOUS ENTRIES ARE MADE AG AINST VARIOUS NAMES FROM THE MONTH OF MAY, 2014 TO 4 TH OCTOBER, 2014. THESE ENTRIES ARE IN RESPECT OF CERTAIN AMOUNTS AGAINST SOME IMAGINARY N AMES AND THE DEPARTMENT HAS NOT MADE ANY EFFORT OR CONDUCTED ANY ENQUIRY EITHER DURING THE SEARCH AND SEIZURE ACTION OR DURING THE ASSESSMENT PROCEEDINGS OR IN THE PENALTY PROCEEDINGS TO ASCERT AIN THE PARTICULARS OF THESE PERSONS WHETHER THESE ARE REAL EXISTING PERSO NS OR ONLY FAKE NAMES ARE WRITTEN IN THE SEIZED DOCUMENTS. FURTHER, THER E IS NO DESCRIPTION OF ANY LAND FOR WHICH THE ALLEGED ADVANCES ARE FOUND T O BE NOT IN THE SEIZED MATERIAL. APART FROM THESE ENTRIES, THERE IS NOTHI NG ON RECORD OR EVEN ANY ENQUIRY WAS CONDUCTED BY THE DEPARTMENT TO FIND OUT THE PARTICULARS OF THE DETAILS OR TRANSACTIONS FOR WHICH THE ALLEGED A DVANCES WERE GIVEN BY THE ASSESSEE. THE MERE ENTRIES IN THESE DOCUMENTS D O NOT REVEAL THE CORRECT NATURE OF TRANSACTION AND THE EXISTENCE OF THE CORRESPONDING ASSET FOR WHICH THE ALLEGED ADVANCES WERE GIVEN. THE DEP ARTMENT HAS CONCENTRATED ONLY TO OBTAIN THE SURRENDER FROM THE ASSESSEE BUT NO RELEVANT QUESTION OR ENQUIRY WAS CONDUCTED TO FIND OUT THE PARTICULARS OF THE LAND AND THE FULL PARTICULARS OF THE PERSONS TO WHOM THE ADVANCES WERE GIVEN. IN THE ABSENCE OF THE EXISTENCE OF THE LAND FOR WHICH THE ALLEGED ADVANCES WERE GIVEN, THESE ENTRIES ALONE WO ULD NOT IPSO FACTO UNDISCLOSED INCOME OF THE ASSESSEE. EVEN OTHERWISE, THESE ENTRIES ITSELF ARE NOT HAVING ANY ELEMENT OF INCOME BUT THESE ARE ALL EXPENDITURE ENTRIES AND, THEREFORE UNTIL AND UNLESS THE FULL PA RTICULARS OF THE LAND OR THE ASSET AGAINST WHICH THE ADVANCES WERE GIVEN IS IDENTIFIED ALONG WITH THE PERSONS TO WHOM THE ADVANCES WERE GIVEN, IT WOU LD NOT BE REGARDED AS REPRESENTING THE UNDISCLOSED INCOME OF THE ASSES SEE. FURTHER, THE ADVANCES GIVEN IN THE MONTH OF MAY, 2014 MAY NOT NE CESSARILY BE REPRESENTING THE UNDISCLOSED INCOME OF THE YEAR UND ER CONSIDERATION. 29 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. NEITHER ANY OTHER DOCUMENT LIKE AGREEMENT TO PURCHA SE AND SALE OF LAND OR RECEIPT TO INDICATE THE REAL TRANSACTION ENTERED INTO BY THE ASSESSEE WITH THE PERSONS WHOSE NAMES ARE RECORDED IN THE SE IZED MATERIAL ARE EITHER FOUND OR BROUGHT ON RECORD BY THE AO. THE E XISTENCE OF THE ASSET BEING LAND FOR WHICH THE ALLEGED ADVANCES WERE GIVE N IS ESSENTIAL TO ESTABLISH THAT THE ASSESSEE HAS ACTUALLY ENTERED IN TO THESE TRANSACTIONS AND PAID THE ADVANCES. IN THE ABSENCE OF SUCH FACT OR THE LAND FOR WHICH THE ADVANCES WERE GIVEN OR THE FULL PARTICULARS OF THE PERSONS TO SHOW THAT THE NAMES APPEARING IN THE SEIZED DOCUMENTS ARE REA L EXISTING PERSONS, THESE ENTRIES IN THE SEIZED DOCUMENTS WOULD NOT CON STITUTE UNDISCLOSED INCOME ON ACCOUNT OF ADVANCES FOR LAND. THEREFORE, WITHOUT ASCERTAINING THE FULL PARTICULARS OF THE PERSONS IN WHOSE NAMES THE ENTRIES ARE MADE, IT IS POSSIBLE THAT ALL THESE NAMES ARE IMAGINARY AND NOT THE NAMES OF ANY EXISTING PERSONS. THE VAGUE ENTRIES ITSELF DO NOT REPRESENT THE REAL TRANSACTION AND CONSEQUENTLY THE UNDISCLOSED INCOME OF THE ASSESSEE. THE COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF RA JENDRA KUMAR GUPTA VS. DCIT (SUPRA) HAS CONSIDERED THE ISSUE OF OUT FL OW OF FUNDS FROM THE ASSESSEE CAN BE AN UNDISCLOSED INCOME FOR THE PURPO SE OF SECTION 271AAB OF THE ACT IN PARA 21 AS UNDER :- 21. DURING THE COURSE OF SEARCH, A NOTE BOOK (DIA RY) 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 PARTICULA RS OF PERSONS TO WHOM LOANS WERE GIVEN AND ALSO FAILED 30 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. TO SUBSTANTIATE THE SAME. THE SAID FINDINGS HAVE N OT 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 INC OME U/S 271AAB, THE SAID CASH ADVANCES CANNOT BE STATED TO BE INCOME WHICH IS REPRESENTED BY ANY MONEY, BUL LION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING. WHET HER IT CAN THEN BE SAID THAT SUCH UNDISCLOSED CASH ADVANCES RE PRESENTS 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 . A CASH ADVANCE PER SE REPRESENTS AN OUTFLOW OF FUNDS FROM THE ASSESSEES HAND AND AN IN COME PER SE REPRESENTS AN INFLOW OF FUNDS IN THE HANDS O F THE ASSESSEE. THEREFORE, ONCE THERE IS AN INFLOW OF FU NDS BY WAY OF INCOME, THERE CAN BE SUBSEQUENT OUTFLOW BY W AY OF AN ADVANCE TO ANY THIRD PARTY. GIVING AN ADVANCE A ND INCOME THUS CONNOTES DIFFERENT MEANING AND CONNOTAT ION AND THUS CANNOT BE USED INTER-CHANGEABLY. IN THE D EFINITION OF UNDISCLOSED INCOME, WHERE IT TALKS ABOUT INCOME BY WAY OF ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUM ENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132 , WHAT PERHAPS HAS BEEN ENVISAGED BY THE LEGISLATU RE IS AN INFLOW OF FUNDS IN THE HANDS OF THE ASSESSEE WHI CH HAS BEEN FOUND BY WAY OF ANY ENTRY IN THE BOOKS OF ACCO UNTS OR OTHER DOCUMENTS, AND WHICH HAS NOT BEEN RECORDED BE FORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNTS OR OTHE R 31 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. DOCUMENTS MAINTAINED BY THE ASSESSEE IN THE NORMAL COURSE AND NOT VICE-VERSA. WE ARE ALSO CONSCIOUS OF THE FA CT 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 S ECTION 69B CANNOT BE EXTENDED AND APPLIED AUTOMATICALLY IN CONTEXT OF SECTION 271AAB. IT IS A WELL-SETTLED LEGAL PROP OSITION THAT THE DEEMING PROVISIONS ARE LIMITED FOR THE PURPOSES THAT HAVE BEEN BROUGHT ON THE STATUTE BOOK AND HAVE THER EFORE 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 S ECTION 69 AND SECTION 69B COULD HAVE BEEN APPLIED IN THE CONT EXT OF BRINGING TO TAX SUCH INVESTMENTS TO TAX IN THE QUAN TUM PROCEEDINGS, THOUGH THE FACT OF THE MATTER IS THAT THE AO HAS NOT EVEN INVOKED THE SAID DEEMING PROVISIONS IN THE QUANTUM PROCEEDINGS. THEREFORE, EVEN ON THIS ACCOUN T, THE DEEMING FICTION CANNOT BE EXTENDED TO THE PENALTY PROCEEDINGS WHICH ARE SEPARATE AND DISTINCT FROM TH E ASSESSMENT PROCEEDINGS AND MORE SO, WHERE THE PROVI SIONS OF SECTION 271AAB PROVIDE FOR A SPECIFIC DEFINITION OF UNDISCLOSED INCOME. WHERE A SPECIFIC DEFINITION OF UNDISCLOSED INCOME HAS BEEN PROVIDED IN SECTION 271 AAB, BEING A PENAL PROVISION, THE SAME MUST BE STRICTLY CONSTRUED AND IN LIGHT OF SATISFACTION OF CONDITIONS SPECIFIE D THEREIN AND IT IS NOT EXPECTED TO EXAMINE OTHER PROVISIONS WHER E THE SAME HAS BEEN DEFINED OR DEEMED FOR THE PURPOSES OF BRINGING THE AMOUNT TO TAX. IN LIGHT OF THE SAME, THE 32 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. UNDISCLOSED INVESTMENT BY WAY OF ADVANCES CAN BE SU BJECT MATTER OF ADDITION IN THE QUANTUM PROCEEDINGS, AS T HE SAME HAS BEEN SURRENDERED DURING THE COURSE OF SEARCH IN THE STATEMENT RECORDED U/S 132(4) AND OFFERED IN THE RE TURN 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 DESERVED TO BE SET-ASIDE. ACCORDINGLY IN VIEW OF THE FACTS AND CIRCUMSTANCES AS DISCUSSED ABOVE AS WELL AS THE ORDER OF THE COORDINATE BENCH OF THIS T RIBUNAL, WE HOLD THAT THE ENTRIES IN THE SEIZED DOCUMENTS REPRESENTING TH E PAYMENT ON ACCOUNT OF LAND IN THE ABSENCE OF THE OTHER ESSENTIAL FACTS REGARDING THE PARTICULARS OF THE LAND AS WELL AS THE PERSONS DO NOT CONSTITUT E UNDISCLOSED INCOME OF THE ASSESSEE AS DEFINED IN THE EXPLANATION TO SECTI ON 271AAB OF THE ACT. ACCORDINGLY, THE PENALTY LEVIED UNDER SECTION 271AA B BY THE AO AND CONFIRMED BY THE LD. CIT (A) IS NOT SUSTAINABLE AND LIABLE TO BE DELETED. 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 PERSON S DO NOT CONSTITUTE UNDISCLOSED INCOME OF THE ASSESSEE AS DEFINED IN THE EXPLANATIO N TO SECTION 271AAB OF THE ACT. IN THE CASE IN HAND, ON THE ANALYSIS OF FACTS AND IN T HE LIGHT OF DEFINITION OF UNDISCLOSED INCOME GIVEN IN THE EXPLANATION TO SECTION 271AAB OF THE ACT, THE ENTRIES IN THE SEIZED 33 ITA NO. 117/JP/2018 SHRI NIKHIL MADAN, JAIPUR. MATERIAL OF PAYMENT FOR LAND WITHOUT ANY UNDERLYING ASSETS BEING THE LAND DO NOT CONSTITUTE UNDISCLOSED INCOME OF THE ASSESSEE. ACC ORDINGLY BY FOLLOWING THE EARLIER DECISION OF THIS TRIBUNAL, THE PENALTY LEVIED UNDER SECTION 271AAB IS DELETED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 27/07 /2020. SD/- SD/- ( JES'K LH- 'KEKZ ) ( FOT; IKY JKWO (RAMESH C. SHARMA ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED: 27 /07/2020. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI NIKHIL MADAN, JAIPUR. 2. THE RESPONDENT THE ACIT CENTRAL CIRCLE-1, JAIP UR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 117/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR