SHRI KRISHNA KANT BANSAL, KOTA V. DEPUTY COMMISSIONER OF INCOME TAX, JAIPUR

ITA 122/JPR/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5973 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 01-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Gift; Business income; Search and seizure; Opportunity of being heard; Principle of natural justice; Block assessment; Retraction
• Section: 69; 27; 132; 143(3); 69B; 274; 13; 158BFA; 20

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC H B JAIPUR JH LAANHI XKSLKBZ] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA- @ ITA NO. 122/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2015-16 SHRI KRISHNA KANT BANSAL, RISHABH BHAWAN, GUMANPURA, NEW COLONY, KOTA CUKE VS. DCIT, CENTRAL CIRCLE-03, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABRPB7862M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI S. R. SHARMA & S HRI R. K. BHATRA (CA) JKTLO DH VKSJ LS @ REVENUE BY : SMT. RUNI PAL (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 30/09/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 03/10/2019 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 21.11.2017 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. 20,50 ,000/- IMPOSED BY THE LD. ASSESSING OFFICER U/S 271AAB OF THE I.T. ACT, 1 961. ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 2 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A PARTNER IN TWO PARTNERSHIP FIRMS AND DERIVING INCOME IN THE FORM O F INTEREST AND SHARE IN THE PROFITS FROM THESE TWO PARTNERSHIP FIRMS. A SEARCH U/S 132 OF THE ACT WAS CONDUCTED ON 05.02.2015 IN CASE OF BUNDI SILICA GRO UP, KOTA AND THE ASSESSEE IS PART OF THE SAID GROUP. DURING THE COURSE OF SE ARCH PROCEEDINGS, THE STATEMENT OF THE ASSESSEE WAS RECORDED U/S 132(4) O F THE ACT WHEREIN HE HAS DECLARED UNDISCLOSED INCOME OF RS. 2,05,00,000/- AS ADDITIONAL INCOME. SUBSEQUENTLY, THE ASSESSEE E-FILED ITS RETURN OF IN COME ON 29.09.2015 DECLARING TOTAL INCOME OF RS. 2,31,97,900/- WHICH INCLUDES AD DITIONAL INCOME OF RS. 2,05,00,000/- OFFERED TO TAX DURING THE COURSE OF SEARCH. THE ASSESSMENT PROCEEDINGS WERE SUBSEQUENTLY COMPLETED U/S 143(3) R.W.S 153B(1)(B) WHEREIN THE RETURNED INCOME WAS ACCEPTED. THE ASSESSING OFF ICER SEPARATELY INITIATED THE PENALTY PROCEEDINGS U/S 271AAB BY WAY OF ISSUE OF NOTICE U/S 274 R.W.S 271AAB OF THE ACT DATED 09.12.2016 WHICH WAS DULY S ERVED ON THE ASSESSEE. 3. DURING THE COURSE OF PENALTY PROCEEDINGS, THE AS SESSING OFFICER STATED THAT ALL THE ESSENTIAL REQUIREMENT OF SECTION 271AA B(1)(A) ARE SATISFIED IN THE INSTANT CASE AND GIVEN THAT THE ASSESSEE HAD ADMITT ED UNDISCLOSED INCOME OF RS. 2,05,00,000/- IN HIS STATEMENT U/S 132(4) OF TH E ACT AND PAID THE TAXES THEREON BEFORE SPECIFIED DATE, PENALTY @ 10% U/S 27 1AAB ON THE UNDISCLOSED INCOME OF RS. 2,05,00,000/- AMOUNTING TO RS 20,50,0 00 WAS LEVIED ON THE ASSESSEE. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE LD. CIT(A). THE LD. CIT(A) HAS CONFIRMED THE LEVY OF PE NALTY U/S 271AAB OF THE ACT HOLDING THAT THE PENALTY IS MANDATORY IN NATURE AND THERE IS NO DISCRETION WITH THE AO AND UNLIKE SECTION 271AAA WHEREIN IMMUNITY F ROM IMPOSITION OF PENALTY IS POSSIBLE SUBJECT TO FULFILLMENT OF CONDITIONS IN SECTION 271AAA(2), THERE IS NO ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 3 IMMUNITY CLAUSE PROVIDED FROM PENALTY U/S 271AAB. B EING AGGRIEVED, THE ASSESSEE IS NOW IN APPEAL BEFORE US. 5. AT THE OUTSET, THE LD AR SUBMITTED THAT THE MAT TER IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE COORD INATE BENCH IN OTHER GROUP CASES OF THE ASSESSEE IN CASES OF SURAJMAL BANSAL H UF, JAIPUR VS. DCIT, JAIPUR (ITA NO. 124-127/JP/2018 DATED 08/04/2019) WHEREIN UNDER IDENTICAL SET OF FACTS AND CIRCUMSTANCES, THE PENALTY WAS DELETED BY THE TRIBUNAL. 6. IT WAS FURTHER SUBMITTED BY THE LD AR THAT THE S HOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER INITIATING THE PENALTY PRO CEEDINGS HAS BEEN ISSUED IN A ROUTINE MANNER WITHOUT MENTIONING UNDER WHICH CLAUS E OF SECTION 271AAB OF THE ACT, THE ASSESSEE IS LIABLE FOR PENALTY. IT WAS SUBMITTED THAT SECTION 271AAB(1) HAS THREE CLAUSES (A) TO (C) AND EACH CLA USE OF SUB-SECTION (1) TO SECTION 271AAB PROVIDES FOR SEPARATE RATE OF PENALT Y AND UNLESS THE SAME IS SPECIFIED, THE ASSESSEE IS NOT IN A POSITION TO RES POND AND THUS, THE PRINCIPLES OF NATURAL JUSTICE ARE VIOLATED. IT WAS SUBMITTED THAT THERE IS NO APPLICATION OF MIND ON THE PART OF THE AO, AT THE TIME OF ISSUING THE SHOW CAUSE NOTICE, AS THE SHOW CAUSE NOTICE ISSUED BY THE AO DO NOT SPECI FY THE UNDISCLOSED INCOME ON WHICH THE ASSESSEE IS REQUIRED TO SHOW CAUSE. EV EN THE AO HAS NOT GIVEN ANY GROUND FOR LEVY OF PENALTY FOR WHICH THE ASSESS EE COULD PUT ITS DEFENSE. THUS IN THE ABSENCE OF SPECIFIC CHARGE AGAINST THE ASSESSEE, THE ASSESSEE WAS NOT IN A POSITION TO RESPOND TO THE SHOW CAUSE NOTI CE ISSUED BY THE AO. IT WAS SUBMITTED THAT THOUGH THE AO WHILE PASSING THE IMPU GNED ORDER HAS IMPOSED THE PENALTY AS PER CLAUSE (A) OF SECTION 271AAB(1) OF THE ACT, HOWEVER, NO SUCH GROUND WAS SPECIFIED IN THE SHOW CASUE NOTICE ISSUED U/S 271AAB READ WITH SECTION 274 OF THE ACT. IN SUPPORT, RELIANCE W AS PLACED ON THE HONBLE KARNATAKA HIGH COURT DECISION IN THE CASE OF CIT VS . M/S SSAS EMERALD MEADOWS REPORTED IN 2015 (11) TMI 1620, IN CASE OF MANJUNATHA COTTON & ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 4 GINNING FACTORY [2013] 359 ITR 565 (KARNATAKA) AND VARIOUS DECISIONS OF THE CO-ORDINATE BENCHES OF THE TRIBUNAL. IT WAS ACCORDI NGLY SUBMITTED THAT NOTICE ISSUED U/S 271AAB IS BAD IN LAW AND THEREFORE, THE PENALTY LEVY U/S 271AAB(1)(A) DESERVES TO BE DELETED. 7. IT WAS FURTHER SUBMITTED THAT THE LOWER AUTHORIT IES HAVE ERRED IN HOLDING THE LEVY OF PENALTY U/S 271AAB OF THE ACT AS MANDAT ORY IN NATURE. DRAWING SUPPORT FROM THE DECISION OF THE CO-ORDINATE BENCH IN CASE OF DCIT VS. MANISH AGARWAL REPORTED IN 92 TAXMANN.COM 81, IT WAS SUBMI TTED THAT IMPOSITION OF PENALTY U/S 271AAB IS NOT MANDATORY BUT DISCRETION IN NATURE DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF THE EACH CASE. 8. IT WAS FURTHER SUBMITTED THAT IN THE SEARCH PROC EEDINGS CARRIED OUT AT THE ASSESSEES PREMISES, NO EVIDENCE WAS FOUND DURING T HE COURSE OF SEARCH EXCEPT ANNEXURE-AS EXHIBIT-11 WHEREIN CERTAIN FIGURES, DAT ES AND CRYPTIC NAMES WERE WRITTEN. THE SEARCH PARTIES ADDED THESE FIGURES WHI CH WORKED OUT TO RS. 1,99,25,000/- HOLDING AMOUNTS AS RUPEES GIVEN TO VA RIOUS PERSONS AS ADVANCES FOR PURCHASE OF LAND. IT WAS SUBMITTED THAT NO INCR IMINATING MATERIAL WAS FOUND DURING THE SEARCH AND SAID ANNEXURE-AS EXHIBIT-11 W AS CONTAINING IMAGINARY NAMES AND SOME FIGURES. FURTHER THE OFFICERS OF SEA RCH PROCEEDINGS AND LD. AO DIDNT MAKE ANY FURTHER ENQUIRY/INVESTIGATION REGAR DING ENTRIES IN THE SEIZED PAPERS. IT WAS SUBMITTED THAT THE SAID ENTRIES IN T HE POCKET DIARY GIVING ADVANCES ITSELF IS NOT AN UNDISCLOSED INCOME. THE R EVENUE AUTHORITIES HAVE EXERTED UNDUE PRESSURE AND OBTAINED THE SURRENDER O F INCOME FROM THE ASSESSEE. IN SUPPORT, THE RELIANCE WAS PLACED ON TH E CBDT CIRCULAR NO. F. NO. 286/2/2003-IT (INV.) DATED 10.03.2003 WHEREIN THE C BDT HAS EXPRESSED ITS CONCERN ABOUT THE PRACTICE OF OBTAINING THE CONFESS ION OF ADDITIONAL INCOME DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS . IT WAS SUBMITTED THAT THE PROVISIONS OF SECTION 271AAB CLEARLY REQUIRES THAT SUCH UNDISCLOSED INCOME TO ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 5 BE SUBSTANTIATED AND, THEREFORE, THE ASSESSEE IS RE QUIRED TO SPECIFY THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND FURTHER S UBSTANTIATE THE SAME FURNISHING MATERIAL AVAILABLE WITH HIM. IN THE ABSE NCE OF ANY RECORD OR MATERIAL TO SHOW ANY UNDISCLOSED SOURCE OF INCOME, THE ENTIR E DISCLOSURE WAS ON PAPERS IS TO AVOID UNDUE HARASSMENT AND UNWANTED LITIGATIO N AND THE ASSESSEE COULD NOT HAVE SUBSTANTIATED SUCH INCOME SO DECLARED DURI NG THE COURSE OF SEARCH. IT WAS SUBMITTED THAT THERE IS NO IOTA OF EVIDENCE THA T SURRENDERED INCOME WAS UNDISCLOSED INCOME OF THE ASSESSEE. IT WAS SUBMITTE D THAT SAID SURRENDER WAS MADE TO BUY PIECE AND AVOID LONG LITIGATION WITH DE PARTMENT ON THE REQUEST THAT NO PENALTY PROCEEDINGS ETC. BE INITIATED AGAIN ST IT. IN SUPPORT, RELIANCE WAS PLACED ON THE CO-ORDINATE BENCH DECISION IN CASE OF ACIT VS. MARVAL ASSOCIATES 92 TAXMANN.COM 109 WHEREIN IT WAS HELD THAT PENALTY U/S 271AAB IS ATTRACTED ON UNDISCLOSED INCOME BUT NOT ON ADMISSION MADE BY THE ASSESSEE U/S 132(4) OF THE ACT. THE AO MUST ESTABLISH THAT THERE IS UND ISCLOSED INCOME ON THE BASIS OF INCRIMINATING MATERIAL. FURTHER, RELIANCE WAS PL ACED ON THE CO-ORDINATE BENCH IN DECISION IN CASE OF AJAY SHARMA VS. DCIT [ 2013] 30 TAXMANN.COM 109 WHEREIN IT WAS HELD THAT ADDITION ON ACCOUNT OF ALL EGED RECEIVABLES AS PER SEIZED PAPER CANNOT BE MADE AS THERE IS NO DIRECT M ATERIAL WHICH LEADS AND ESTABLISHES THAT ANY INCOME RECEIVED BY THE ASSESSE E WHICH HAS NOT BEEN DECLARED BY THE ASSESSEE. THE FACTS OF THE ASSESSEE S CASE SHOWS THAT THERE WAS NO UNDISCLOSED INCOME FOUND DURING THE COURSE O F SEARCH AND NO INCRIMINATING MATERIAL WAS FOUND, HENCE THERE IS NO CASE FOR IMPOSING PENALTY U/S 271AAB OF THE ACT. FURTHER, RELIANCE WAS PLACED ON THE CO-ORDINATE BENCH IN DECISION IN CASE OF SH. RAJENDRA KUMAR GUPTA VS. DCIT, CC-2, JAIPUR (ITA NO. 359/JP/2017 DATED 18.01.2019) AND IT WAS SUBMITTED THE FACTS OF THE SAID CASE SQUARELY APPLIES IN CASE OF ASSESSEE AND THERE FORE, THE PENALTY SO LEVIED SHOULD BE DELETED. ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 6 9. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE FURTH ER DECLARED A SUM OF RS. 5,75,000/- ON ACCOUNT OF EXCESS SILVER FOUND DURING THE COURSE OF SEARCH FROM RESIDENCE. IT IS SUBMITTED THAT THE SILVER ITEMS WE RE PERSONAL ITEMS OF THE FAMILY MEMBERS AND HOLDING IS VERY OLD AND REASONAB LE LOOKING TO THE SIZE AND STATUS OF FAMILY. THE SAID SILVER ITEMS WERE RECEIV ED FROM 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 SOME GIFTS IN SILVER ETC. TO HER DAUGHTER & SON IN LAW AT THE TIME OF MARRIAGE. THE FAMILY OF ASSESSEE IS REPUTE AND MEANS. THUS LOOKING TO THE STATUS OF THE FAMILY, CUSTOMS OF THE SOCIETY AND OTHER FACTS AND CIRCUMSTANCES THE TOTAL SILVER FOUND IS REASONABLE AND SOURCE OF ACQUISITION WAS EXPLAINED. HOWEVER, THE ASSESSEE TO BUY PIECE AND A VOID LITIGATION WITH DEPARTMENT OFFERED THE SAID VALUATION OF SILVER AS HIS ADDITIONAL BUSINESS INCOME OF THE CURRENT YEAR. HOWEVER THE DEPARTMENT HAS NOT MADE ANY EFFORTS TO ASCERTAIN THE YEAR OF ACQUISITION OF THE SILVER AND THEN TO APPLY THE RATES AS PREVAILING IN THE YEAR OF ACQUISITION AND SOME OF T HE SILVER EVEN 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 SILVER WOULD NOT REPRESENT THE UNDISCLOSED INCOME AS DEFINED IN THE EXPLANATION TO SECTION 271AAB OF THE ACT. THE LD. AO HAS NOT DETERMINED IT AS INCOME FROM OTH ER SOURCES U/S 69 OF THE INCOME TAX ACT IN THE ASSESSMENT BUT ACCEPTED AS IN COME OF CURRENT YEAR. THEREFORE MERELY ON THE BASIS OF SURRENDER MADE IN THE SEARCH STATEMENT, THIS CANNOT BE HELD AS UNDISCLOSED INCOME FOR THE PURP OSE OF LEVY OF PENALTY U/S 271AAB. 10. IT WAS FINALLY SUBMITTED THAT THERE IS NO VALI D GROUND GIVEN IN THE ASSESSMENT ORDER FOR INITIATING PENALTY PROCEEDINGS , THE INITIATION OF PENALTY IS STATUTORILY DEFECTIVE, THE ASSESSEE HAS FILED ITS R ETURN OF INCOME IN GOOD FAITH INCLUDING THE ADDITIONAL INCOME SURRENDERED DURING THE COURSE OF SEARCH TO ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 7 PURCHASE PEACE OF MIND AND AVOID LITIGATION, ASSESS MENT HAS BEEN COMPLETED ACCEPTING THE INCOME DECLARED BY THE ASSESSEE AND T HERE IS NO UNDISCLOSED INCOME FOUND DURING THE COURSE OF SEARCH AND PENALT Y SO LEVIED SHOULD BE DELETED. 11. PER CONTRA, THE LD. DR HEAVILY RELIED ON THE F INDINGS OF THE LOWER AUTHORITIES. IT WAS SUBMITTED BY THE LD DR THAT THE ASSESSEE HAS SURRENDERED THE UNDISCLOSED INCOME OF RS. 2,05,00,000/- IN ITS STATEMENT RECORDED DURING THE COURSE OF SEARCH U/S 132(4) OF THE ACT AND THE SAID SURRENDER IS CLEARLY AN ADMISSION ON THE PART OF THE ASSESSEE THAT THERE IS UNDISCLOSED INCOME WHICH HAS BEEN FOUND DURING THE COURSE OF SEARCH. ONCE TH E SURRENDER OF UNDISCLOSED INCOME HAS BEEN MADE BY THE ASSESSEE, THERE IS NO C AUSE OF ACTION WHICH LIES WITH THE ASSESSING OFFICER TO ESTABLISH FURTHER THA T THERE IS ANY UNDISCLOSED INCOME SO EARNED BY THE ASSESSEE. IN THIS CASE, THE SEARCH WAS CONDUCTED ON 5.02.2015 WHEREIN THE STATEMENT OF THE ASSESSEE WAS RECORDED U/S 132(4) WHEREIN HE HAS SURRENDERED THE AMOUNT OF RS 2,05,00 ,000. SUBSEQUENTLY, THE ASSESSEE HAS DISCLOSED THE SAME IN ITS RETURN OF IN COME FILED ON 29.09.2015. THEREFORE, THE ASSESSEE WAS HAVING AMPLE TIME TO RE TRACT FROM SAID SURRENDER, HOWEVER THERE IS NO SUCH RETRACTION DURING POST-SEA RCH PROCEEDINGS AND EVEN THE ASSESSEE HAS INCLUDED THE SAME IN ITS RETURN OF INCOME. EVEN FROM THE PERUSAL OF THE ASSESSEES STATEMENT, THERE IS NOTHI NG WHICH DEMONSTRATES THAT THERE IS ANY FORCED SURRENDER BY THE ASSESSEE. THE CONTENTION OF THE LD AR THEREFORE HAS THUS NO BASIS WHERE HE CONTENDS THAT THE SEARCH PARTY HAVE EXERTED UNDUE PRESSURE AND OBTAINED SURRENDER OF IN COME AND THEREFORE, THERE WAS NO UNDISCLOSED INCOME IN THE HANDS OF THE ASSES SEE. IT WAS FURTHER SUBMITTED THAT THE LEVY OF PENALTY U/S 271AAB IS MA NDATORY IS NATURE AND REFERENCE WAS DRAWN TO PROVISIONS OF SECTION 271AAA WHICH PROVIDES FOR IMMUNITY FROM LEVY OF PENALTY AS AGAINST THE PROVIS IONS OF SECTION 271AAB WHEREIN THERE IS NO SUCH PROVISION PROVIDING FROM I MMUNITY. IT WAS ACCORDINGLY ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 8 SUBMITTED THAT THERE IS NO INFIRMITY IN THE ORDER O F THE ASSESSING OFFICER WHEREIN HE HAS LEVIED THE PENALTY @ 10% OF THE UNDI SCLOSED INCOME AS PER THE PROVISIONS OF SECTION 271AAB AND ORDER OF THE LD. C IT(A) WHO HAS CONFIRMED THE SAID LEVY SHOULD BE UPHELD. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUE D THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT UNDER IDENTICAL SET OF FA CTS AND CIRCUMSTANCES OF THE CASE, IN CASE OF OTHER GROUP CASES WHERE THE SEARCH WAS CONDUCTED, MATTER RELATING TO LEVY OF PENALTY WAS EXAMINED AT LENGTH BY THE COORDINATE BENCH IN CASES OF SURAJMAL BANSAL HUF, JAIPUR VS. DCIT, JAIPUR (ITA NO. 124- 127/JP/2018 DATED 08/04/2019) WHEREIN, THE PENALTY WAS DELETED BY THE TRIBUNAL. THE RELEVANT FINDINGS OF THE COORDINATE BENCH READ AS UNDER: 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERSUE D THE MATERIAL AVAILABLE ON RECORD. THIS TRIBUNAL IS TAKING A CONSISTENT VIE W THAT LEVY OF PENALTY U/S 271AAB IS NOT AUTOMATIC IN NATURE BUT THE AO HAS DI SCRETION 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 UNDI SCLOSED INCOME IN TERMS OF SECTION 271AAB(1) R.W. EXPLANATION DEFINING THE UND ISCLOSED INCOME. IN THIS REGARD, WE REFER TO THE DECISION OF THE TRIBUNAL IN CASE OF RAJENDRA KUMAR GUPTA VS DCIT (SUPRA) WHEREIN IT WAS HELD AS UNDER: 12. NOW, COMING TO THE MAIN GROUND OF APPEAL. IN THIS REGARD, THE LD AR HAS RAISED THE CONTENTION CHALLENGING THE FINDIN GS OF THE AO THAT PENALTY U/S 271AAB IS MANDATORY IN NATURE AND THERE IS NO DISCRETION WITH THE INCOME TAX AUTHORITIES. IT WAS SUBMITTED BY THE LD AR THAT IN SECTION 271AAB, THE WORD MAY IS USED INSTEAD OF SHALL SO IT IS NOT MANDATORY BUT SAME IS DISCRETIONARY. IT WAS SUBMITT ED THAT IT IS SETTLED POSITION OF LAW THAT PENALTIES ARE NOT COMPULSORY, NOT MANDATORY BUT ARE ALSO DISCRETIONARY CONSIDERING THE OVERALL FACTS AN D CIRCUMSTANCES OF THE ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 9 CASE. IN SUPPORT, RELIANCE WAS PLACED ON PROVISION S OF SECTION 158BFA(2) WHEREIN SIMILAR PHRASELOGY HAS BEEN USED BY THE LEG ISLATURE AND THE DECISIONS OF THE COORDINATE BENCHES IN CASE OF DCIT VS MANISH AGARWAL 92 TAXMANN.COM 81 AND ACIT VS MARVEL ASSOCIATES 92 TAXMANN.COM 109. 13. PER CONTRA, THE LD. DR SUBMITTED THAT THE ASSES SEE HAS SURRENDERED THE UNDISCLOSED INCOME IN HIS STATEMENT RECORDED U/S 132(4) AND THEREFORE, THERE CANNOT BE ANY QUESTION OF SAID SURRENDER OF INCOME NOT FALLING IN THE DEFINITION OF UNDISCLOSED INCOME . IT WAS SUBMITTED THAT THE PENALTY U/S 271AAB IS MANDATORY IN NATURE AND I S IMPOSED AT THE VARYING RATE OF 10%, 20% OR 30% DEPENDING ON THE FU LFILLMENT OF CERTAIN CONDITIONS THEREIN. IT WAS SUBMITTED THAT ALL THE C ONDITIONS SPECIFIED IN SECTION 271AAB HAVE BEEN FULFILLED IN THE INSTANT C ASE, THEREFORE, THE PENALTY U/S 271AAB BEING IN THE NATURE OF MANDATORY PENALTY AND THERE BEING NO DISCRETION WITH THE INCOME TAX AUTHORITIES , THE PENALTY SO IMPOSED BY THE AO WAS RIGHTLY CONFIRMED BY THE LD C IT(A) AND THE ORDER OF THE LD CIT(A) SHOULD BE UPHELD. 14. IN THIS REGARD, WE REFER TO THE PROVISIONS OF SECTION 271AAB WHICH BEGINS WITH THE STIPULATION THAT THE ASSESSING OFFI CER MAY DIRECT 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 SE CTION 274 AND SECTION 275 AS FAR AS MAY BE APPLIED IN RELATION TO PENALTY UNDER THIS SECTION WHICH MEANS THAT BEFORE LEVYING THE PENALTY, THE AS SESSING OFFICER HAS TO ISSUE A SHOW-CAUSE GRANTING AN OPPORTUNITY TO THE A SSESSEE. THUS, THE LEVY OF PENALTY IS NOT AUTOMATIC BUT THE ASSESSING OFFICER HAS TO DECIDE BASED ON FACTS AND CIRCUMSTANCES OF THE CASE. SIMI LAR VIEW HAS BEEN ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 10 TAKEN BY THE VARIOUS CO-ORDINATE BENCHES AND USEFUL REFERENCE CAN BE DRAWN TO THE DECISION OF THE CO-ORDINATE BENCH IN C ASE OF ACIT VS MARVEL ASSOCIATES (SUPRA) WHEREIN IT WAS HELD AS UNDER: 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. DURING THE APPEAL HEARING, THE LD. A.R. VEHE MENTLY ARGUED THAT THE A.O. HAS LEVIED THE PENALTY UNDER THE IMPR ESSION THAT THE LEVY OF PENALTY IN THE CASE OF ADMISSION OF INCOME 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 PRO VISIONS OF SECTION 271AAB OF THE ACT IS PARIMATERIA WITH THAT OF SECTION 158BFA OF THE ACT RELATING TO BLOCK ASSESSMENT AND ACCORDINGLY ARGUED THAT THE LEVY OF PENALTY UNDER SECTION 271AA B IS NOT MANDATORY BUT DISCRETIONARY. WHEN THERE IS REASONAB LE CAUSE, THE PENALTY IS NOT EXIGIBLE. THE LD. A.R. TAKEN US TO T HE SECTION 271AAB OF THE ACT AND ALSO SECTION 158BFA(2) OF THE ACT AND ARGUED THAT THE WORDS USED IN SECTION 271AAB OF THE ACT AND THE WORDS USED IN SECTION 158BFA(2) OF THE ACT ARE IDEN TICAL. HENCE, ARGUED THAT THE PENALTY SECTION 271AAB OF THE ACT P ENALTY 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 ANYT HING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, I N A CASE WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR A FTER THE 1ST DAY OF JULY, 2012, THE ASSESSEE SHALL PAY BY WAY OF PEN ALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 11 (A) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF THE U NDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSE SSEE (I) IN THE COURSE OF SEARCH, IN A STATEMENT UNDER SUB-S ECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME A ND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED INCOME 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 PREVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; (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- ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 12 (A) DECLARES SUCH INCOME IN THE RETURN OF INCOME FURNISHED FOR THE SPECIFIED PREVIOUS YEAR; AND (B) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME; (C) A SUM WHICH SHALL NOT BE LESS THAN THIRTY PER CENT BUT WHICH SHALL NOT EXCEED NINETY PER CENT OF THE UNDISCLOSED INCOME OF TH E 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 I N RESPECT OF THE UNDISCLOSED 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 D IRECT THAT A PERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHAL L NOT BE LESS THAN THE AMOUNT OF TAX LEVIABLE BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SO LEVIABLE IN RESPECT OF T HE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER UNDER CL AUSE (C) OF SECTION 158BC: PROVIDED THAT NO ORDER IMPOSING PENALTY SHALL BE MA DE IN RESPECT 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 ASSE SSEE OFFERS THE MONEY SO SEIZED TO BE ADJUSTED AGA INST THE TAX ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 13 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 PRECEDI NG PROVISO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOME DETERMINED B Y THE ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN AND IN SUCH CASES THE PENALTY SHALL BE IMPOSED ON T HAT PORTION OF UNDISCLOSED INCOME DETERMINED WHICH 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 PENALTY'. SIMILAR WORDS ARE USED SECTION 158BFA(2) OF THE ACT . THE WORD MAY DIRECT INDICATES THE DISCRETION TO THE AO. FURT HER, SUB SECTION (3) OF SECTION 271AAB OF THE ACT, FORTIFIES THIS VI EW. 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 THI S SECTION. 7. THE LEGISLATURE HAS INCLUDED THE PROVISIONS OF S ECTION 274 AND SECTION 275 OF THE ACT IN 271AAB OF THE ACT WITH CL EAR INTENTION TO CONSIDER THE IMPOSITION OF PENALTY JUDICIALLY. SECT ION 274 DEALS WITH THE PROCEDURE FOR LEVY OF PENALTY, WHEREIN, IT DIRE CTS THAT NO ORDER IMPOSING PENALTY SHALL BE MADE UNLESS THE ASSESSEE HAS BEEN HEARD OR HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. THEREFORE, FROM PLAIN READING OF SECTION 271AAB OF THE ACT, IT IS EVIDENT THAT THE PENALTY CANNOT BE IMPOSED UNLESS T HE ASSESSEE IS GIVEN A REASONABLE OPPORTUNITY AND ASSESSEE IS BEIN G HEARD. ONCE THE OPPORTUNITY IS GIVEN TO THE ASSESSEE, THE PENAL TY CANNOT BE ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 14 MANDATORY AND IT IS ON THE BASIS OF THE FACTS AND M ERITS PLACED BEFORE THE A.O. ONCE THE A.O. IS BOUND BY THE ACT T O HEAR THE ASSESSEE AND TO GIVE REASONABLE OPPORTUNITY TO EXPL AIN HIS CASE, THERE IS NO MANDATORY REQUIREMENT OF IMPOSING PENAL TY, BECAUSE THE OPPORTUNITY OF BEING HEARD AND REASONABLE OPPOR TUNITY IS NOT A MERE FORMALITY BUT IT IS TO ADHERE TO THE PRINCIPLE S OF NATURAL JUSTICE. HON'BLE A.P. HIGH COURT IN THE CASE OF RAD HAKRISHNA VIHAR IN ITTA NO.740/2011 WHILE DEALING WITH THE PENALTY U/S 158BFA HELD THAT 'WE ARE OF THE OPINION THAT WHILE THE WOR DS 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 SECTIO N 2 THERE OF INTENDED TO DIRECTORY'. IN OTHER WORDS, WHILE PAYME NT OF INTEREST IS MANDATORY LEVY OF PENALTY IS DISCRETIONARY. IT IS T RITE POSITION OF LAW THAT DISCRETION IS VESTED AND AUTHORITY HAS TO BE E XERCISED IN A REASONABLE AND RATIONAL MANNER DEPENDING UPON THE F ACTS AND CIRCUMSTANCES OF THE EACH CASE. PLAIN READING OF SE CTION 271AAB AND 274 OF THE ACT INDICATES THAT THE IMPOSITION OF PENALTY U/S 271AAB OF THE ACT IS NOT MANDATORY BUT DIRECTORY. A CCORDINGLY WE HOLD THAT THE PENALTY U/S 271AAB IS NOT MANDATORY B UT TO BE IMPOSED ON MERITS OF THE EACH CASE. 15. THEREFORE, WE AGREE WITH THE CONTENTIONS OF THE LD AR THAT THE LEVY OF PENALTY UNDER SECTION 271AAB IS NOT MANDATORY. IN THE INSTANT CASE, IT THEREFORE NEEDS TO BE EXAMINED WHETHER THERE IS ANY BASIS FOR LEVY OF PENALTY OR NON-LEVY THEREOF AND THE SAME WILL DEPEN D UPON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WHICH WE SHALL DI SCUSS IN SUBSEQUENT PARAGRAPHS. ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 15 12. FOR THE PURPOSES OF LEVY OF PENALTY, WHAT HAS T O BE SEEN IS THAT WHETHER THE SURRENDER SO MADE, IN TERMS OF STATEMENT OF THE ASSESSEE RECORDED U/S 132(4) DURING THE COURSE OF SEARCH, FALLS IN THE DE FINITION OF UNDISCLOSED INCOME WHICH HAS BEEN SPECIFICALLY LAID DOWN IN TE RMS OF CLAUSE (C) OF EXPLANATION 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 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 SEARCH I N 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 C OMMISSIONER 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 O F ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORM AL 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. ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 16 13. IN THE INSTANT CASE, DURING THE COURSE OF SEARC H, A DIARY HAS BEEN FOUND WHEREIN THERE ARE NOTINGS RELATING TO ADVANCE GIVEN TO CERTAIN PERSONS TOWARDS PURCHASE OF LAND. THE NOTINGS DESCRIBE THE NAME OF CERTAIN PERSONS, THE AMOUNT ADVANCED WHICH RANGES FROM RS 25 LACS TO RS 70 LACS AND THE DATE OF SUCH ADVANCE IS FROM 16.12.2014 TO 28.01.2015 BEFOR E THE DATE OF SEARCH ON 5.02.2015. THEREFORE, WHAT HAS BEEN FOUND DURING TH E COURSE OF SEARCH IS CERTAIN ENTRIES RELATING TO UNDISCLOSED ADVANCES/IN VESTMENT IN PURCHASE OF LAND. BESIDES THE SAID ENTRIES, THERE ARE NO OTHER DOCUME NTS/MATERIAL IN TERMS OF FULL PARTICULARS AND ADDRESS OF THE PERSON TO WHOM THE A DVANCE HAS BEEN GIVEN, ANY AGREEMENT TO SELL, THE DESCRIPTION AND LOCATION OF THE PROPERTY ETC, WHICH HAS BEEN FOUND DURING THE COURSE OF SEARCH. THE ASS ESSEE HUF IS A PARTNER IN TWO PARTNERSHIP FIRMS AND DERIVES INCOME FROM SHARE IN THE PROFIT AND INTEREST FROM SUCH PARTNERSHIP FIRMS WHICH IT HAS REPORTED I N ITS RETURN OF INCOME AND THEREFORE, AS FAR AS MAINTENANCE OF BOOKS OF ACCOUN TS IS CONCERNED, THE ASSESSEE HUF NOT CARRYING ON ANY BUSINESS IS THUS N OT REQUIRED TO MAINTAIN REGULAR BOOKS OF ACCOUNTS. THE DIARY FOUND DURING THE COURSE OF SEARCH AND SEIZURE AT THE PREMISES OF THE ASSESSEE CONTAINS TH E ENTRIES OF ADVANCES GIVEN FOR PURCHASE OF LAND AND THEREFORE, THE SAID AMOUNT OF ADVANCE GIVEN FOR PURCHASE OF LAND CAN BE RECORDED IN THE CAPITAL ACC OUNT OF THE ASSESSEE. THUS THE TRANSACTIONS FOUND RECORDED IN THE DIARY ARE TO BE RECORDED IN THE CAPITAL ACCOUNT OF THE ASSESSEE AS WELL AS IN THE BALANCE S HEET PREPARED AS ON 31.03.2015 AND NOT ON THE DATE OF SEARCH AS ON 5.02 .2015. THESE TRANSACTIONS ARE RECORDED IN A DIARY WHICH IS NOTHING BUT OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE, THEN IT CANNOT BE PRESUMED THAT THE ASSESSEE WOULD NOT HAVE DISCLOSED THE SAME IN THE RETURN OF INCOME TO BE FILED AFTER THE DATE OF SEARCH. ANOTHER QUESTION THAT ARISE FOR CONSIDERATI ON IS WHETHER THE ADVANCES SO GIVEN FOR PURCHASE OF LAND QUALIFY AS UNDISCLOS ED INCOME AS PER DEFINITION GIVEN IN THE EXPLANATION TO SECTION 271AAB OF THE A CT. AN ADVANCE REPRESENTS AN OUTFLOW OF FUNDS AND WHAT HAS BEEN ENVISAGED BY THE LEGISLATURE WHILE ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 17 DEFINING UNDISCLOSED INCOME IN SECTION 271AAB IS AN INFLOW OF FUNDS WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS OR O THER DOCUMENTS ON OR BEFORE THE DATE OF SEARCH AND NOT AN OUTFLOW OF FUN DS. FURTHER, THE DEEMING FICTION SO ENVISAGED IN SECTION 69 AND 69B CANNOT B E EXTENDED AND APPLIED AUTOMATICALLY IN CONTEXT OF SECTION 271AAB WHICH CO NTAINS A SPECIFIC DEFINITION OF UNDISCLOSED INCOME. AN IDENTICAL MATTER HAS COM E UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN CASE OF RAJENDRA KUMAR GUPTA VS DCIT (SUPRA) WHEREIN IT WAS HELD AS UNDER: 21. DURING THE COURSE OF SEARCH, A NOTE BOOK (DIA RY) HAS BEEN FOUND REFERRED TO AS ANN. AS WHEREIN THERE ARE CERT AIN NOTINGS RELATING TO CASH ADVANCES GIVEN TO VARIOUS PERSONS TOTALING TO RS 82,80,000. REFERRING TO THE STATEMENT OF THE ASSESS EE IN RESPECT OF THESE NOTINGS RECORDED U/S 132(4), LD CIT(A) HAS GIVEN A FINDING THAT THE ASSESSEE HAS GIVEN A GENERALIZED S TATEMENT WITHOUT SPECIFYING THE COMPLETE PARTICULARS OF PERS ONS TO WHOM LOANS WERE GIVEN AND ALSO FAILED TO SUBSTANTIATE TH E SAME. THE SAID FINDINGS HAVE NOT BEEN DISPUTED BY THE REVENUE AND THEREFORE, MERELY BASED ON SURRENDER AND GENERALIZE D STATEMENT OF THE ASSESSEE, IN ABSENCE OF ANYTHING SPECIFIC TO CORROBORATE SUCH ENTRIES, CAN IT BE SAID THAT SUCH ENTRIES/NOTI NGS REPRESENT UNDISCLOSED INCOME OF THE ASSESSEE. AS PER THE DEF INITION OF UNDISCLOSED INCOME U/S 271AAB, THE SAID CASH ADVANC ES CANNOT BE STATED TO BE INCOME WHICH IS REPRESENTED BY ANY MON EY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING. WHET HER IT CAN THEN BE SAID THAT SUCH UNDISCLOSED CASH ADVANCES REPRESENTS INCO ME 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 CAS H ADVANCE PER SE REPRESENTS AN OUTFLOW OF FUNDS FROM THE ASSESSEES HAND AND AN INCOME PER SE REPRESENTS AN INFLOW OF FUNDS IN THE HANDS O F THE ASSESSEE. ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 18 THEREFORE, ONCE THERE IS AN INFLOW OF FUNDS BY WAY OF INCOME, THERE CAN BE SUBSEQUENT OUTFLOW BY WAY OF AN ADVANCE TO ANY T HIRD PARTY. GIVING AN ADVANCE AND INCOME THUS CONNOTES DIFFERENT MEANI NG AND CONNOTATION AND THUS CANNOT BE USED INTER-CHANGEABL Y. IN THE DEFINITION OF UNDISCLOSED INCOME, WHERE IT TALKS ABOUT INCOME BY WAY OF ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANS ACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHAT PERHAPS HAS BEEN ENVISAGED BY THE LEGISLATURE IS AN INFLOW OF FUNDS IN THE HAN DS OF THE ASSESSEE WHICH HAS BEEN FOUND BY WAY OF ANY ENTRY IN THE BOO KS OF ACCOUNTS OR OTHER DOCUMENTS, AND WHICH HAS NOT BEEN RECORDED BE FORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED BY THE ASSESSEE IN THE NORMAL COURSE AND NOT VICE-VERSA. W E ARE ALSO CONSCIOUS OF THE FACT THAT THERE ARE DEEMING PROVISIONS IN TE RMS OF SECTION 69 AND 69B WHEREIN SUCH AMOUNTS MAY BE DEEMED AS INCOME IN ABSENCE OF SATISFACTORY EXPLANATION. IN OUR VIEW, THE DEEMING FICTION SO ENVISAGED UNDER SECTION 69 AND SECTION 69B CANNOT BE EXTENDED AND APPLIED AUTOMATICALLY IN CONTEXT OF SECTION 271AAB. IT IS A WELL-SETTLED LEGAL PROPOSITION THAT THE DEEMING PROVISIONS ARE LIMITED FOR THE PURPOSES THAT HAVE BEEN BROUGHT ON THE 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 SECTION 69 AND SECTION 69B COULD HAVE BEEN APPLIED IN THE CONTEXT OF BRINGING TO TAX SUCH INVE STMENTS TO TAX IN THE QUANTUM 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 ACCOUNT, THE D EEMING FICTION CANNOT BE EXTENDED TO THE PENALTY PROCEEDINGS WHICH ARE SE PARATE AND DISTINCT FROM THE ASSESSMENT PROCEEDINGS AND MORE SO, WHERE THE PROVISIONS OF SECTION 271AAB PROVIDE FOR A SPECIFIC DEFINITION OF UNDISCLOSED INCOME. ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 19 WHERE A SPECIFIC DEFINITION OF UNDISCLOSED INCOME H AS BEEN PROVIDED IN SECTION 271AAB, BEING A PENAL PROVISION, THE SAME M UST BE STRICTLY CONSTRUED AND IN LIGHT OF SATISFACTION OF CONDITION S SPECIFIED THEREIN AND IT IS NOT EXPECTED TO EXAMINE OTHER PROVISIONS WHERE T HE SAME HAS BEEN DEFINED OR DEEMED FOR THE PURPOSES OF BRINGING THE AMOUNT TO TAX. IN LIGHT OF THE SAME, THE UNDISCLOSED INVESTMENT BY WA Y OF ADVANCES CAN BE SUBJECT MATTER OF ADDITION IN THE QUANTUM PROCEEDIN GS, AS THE SAME HAS BEEN SURRENDERED DURING THE COURSE OF SEARCH IN THE STATEMENT RECORDED U/S 132(4) AND OFFERED IN THE RETURN OF INCOME, HOW EVER THE SAME CANNOT BE SAID TO QUALIFY AS AN UNDISCLOSED INCOME IN THE CONTEXT OF SECTION 271AAB READ WITH THE EXPLANATION THERETO AN D PENALTY SO LEVIED THEREON DESERVED TO BE SET-ASIDE. 14. IN LIGHT OF ABOVE DISCUSSIONS AND FOLLOWING TH E EARLIER DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF RAJ ENDRA KUMAR GUPTA (SUPRA), WE DELETE THE PENALTY LEVIED UNDER SECTION 271AAB O F THE ACT ON CASH ADVANCES OF RS 2,25,00,000 TOWARDS PURCHASE OF LAND. SINCE THE ISSUE OF LEVY OF PENALTY U/S 271AAB OF THE ACT HAS BEEN DECIDED ON MERITS, T HEREFORE, THE ISSUE OF VALIDITY OF INITIATION OF THE PENALTY PROCEEDING DU E TO DEFECTIVE SHOW CAUSE NOTICE BECOME ACADEMIC IN NATURE AND WE DO NOT PROP OSE TO ADJUDICATE THE SAME. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ITA NO. 125/JP/18 16. IN ITA NO. 125/JP/18 IN CASE OF ASHOK BANSAL, B OTH THE PARTIES SUBMITTED THAT THE FACTS AND CIRCUMSTANCES OF THE CASE ARE ID ENTICAL EXCEPT THE FACT THAT BESIDES THE SURRENDER OF ADDITIONAL INCOME DURING T HE COURSE OF SEARCH CONSIST ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 20 OF CASH ADVANCES OF RS 1,00,50,000 TOWARDS PURCHASE OF LAND, THERE IS SURRENDER ON ACCOUNT OF JEWELLERY VALUED AT RS 49,6 2,554 FOUND DURING THE COURSE OF SEARCH. 17. AS FAR AS JEWELLERY VALUED AT RS 49,62,554 WHIC H HAS BEEN PHYSICALLY FOUND IN POSSESSION OF THE ASSESSEE, AND WHICH IS I N EXCESS OF WHAT HAS BEEN DISCLOSED IN THE WEALTH TAX RETURN, DURING THE COUR SE OF SEARCH IS CONCERNED, THERE CANNOT BE ANY DISPUTE THAT THE SAME REPRESENT S UNDISCLOSED INCOME SO DEFINED IN SECTION 271AAB AND WHICH HAS NOT BEEN DI SCLOSED ON OR BEFORE THE DATE OF SEARCH. REGARDING THE CONTENTION OF THE LD AR THAT SUCH JEWELLERY IS PERSONAL JEWELLERY OF THE ASSESSEE AND HIS FAMILY M EMBERS AND HAS BEEN PURCHASED OUT OF PAST SAVINGS AND/OR HAS BEEN RECEI VED AS GIFT IN THE PAST ON VARIOUS FESTIVITIES AND OTHER AUSPICIOUS OCCASIONS, THESE ARE CONTENTIONS WHICH ARE RELEVANT FOR DETERMINING THE NATURE AND SOURCE OF SUCH UNDISCLOSED INCOME FOR THE PURPOSES OF DETERMINING THE QUANTUM OF PENA LTY WHICH CAN BE LEVIED AND WHICH WE FIND THAT THE LOWER AUTHORITIES HAVE D ULY CONSIDERED WHILE LEVYING PENALTY @ 10%. IN THE RESULT, WE CONFIRM THE LEVY OF PENALTY @ 10% ON THE UNDISCLOSED INCOME OF RS 49,62,554. 16. WE FIND THAT THE FACTS AND CIRCUMSTANCES OF TH E CASE IS SIMILAR THE AFORESAID CASE AND FOLLOWING THE DECISION OF THE CO ORDINATE BENCH (SUPRA), WE DELETE THE PENALTY LEVIED UNDER SECTION 271AAB OF T HE ACT ON CASH ADVANCES OF RS 1,99,25,000 TOWARDS PURCHASE OF LAND. THE LEVY OF PENALTY @ 10% ON THE EXCESS SILVER FOUND DURING THE COURSE OF SEARCH AND VALUED AT RS 575,000 IS HOWEVER CONFIRMED. 17. SINCE THE ISSUE OF LEVY OF PENALTY U/S 271AAB O F THE ACT HAS BEEN DECIDED ON MERITS, THEREFORE, THE ISSUE OF VALIDITY OF INITIATION OF THE PENALTY ITA NO. 122/JP/2018 SHRI KRISHN A KANT BANSAL, KOTA VS. DCIT, JAIPUR 21 PROCEEDING DUE TO DEFECTIVE SHOW CAUSE NOTICE BECOM E ACADEMIC IN NATURE AND WE DO NOT PROPOSE TO ADJUDICATE THE SAME. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/10/2019. SD/- SD/- LANHI XKSLKBZ FOE FLAG ;KNO ( SANDEEP GOSAIN ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 03/10/2019 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI KRISHNA KANT BANSAL, KOTA 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CENTRAL CIRCLE-03, JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 122/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR