SHRI SURAJMAL BANSAL HUF, KOTA V. DEPUTY COMMISSIONER OF INCOME TAX, JAIPUR

ITA 124/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8443 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2019
• 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; Search and seizure; Opportunity of being heard; Principle of natural justice; Reasonable cause; Block assessment; Retraction
• Section: 69; 27; 132; 143(3); 69B; 274; 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 BENCHE S B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 124/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2015-16 SHRI SURAJMAL BANSAL HUF, RISHABH BHAWAN, GUMANPURA NEW COLONY, KOTA CUKE VS. THE DCIT, CENTRAL CIRCLE-3, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AALHS8764C VIHYKFKHZ@ APPELLA NT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA. NO. 125/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2015-16 SHRI ASHOK BANSAL, RISHABH BHAWAN, GUMANPURA NEW COLONY, KOTA CUKE VS. THE DCIT, CENTRAL CIRCLE-3, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABSPB6411D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA. NO. 126/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2015-16 SHRI CHANDRA BIHARI BANSAL HUF, RISHABH BHAWAN, GUMANPURA NEW COLONY, KOTA CUKE VS. THE DCIT, CENTRAL CIRCLE-3, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAAHC3726M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA. NO. 127/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2015-16 SHRI NAVNEET BANSAL RISHABH BHAWAN, GUMANPURA, NEW COLONY, KOTA CUKE VS. THE DCIT, CENTRAL CIRCLE-3, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABPPB2495J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 2 FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI S. R. SHARMA (CA) & SH RI RAJNIKANT (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI JAY SINGH (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 04/04/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 08/04/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THESE ARE FOUR APPEALS FILED BY THE RESPECTIVE ASS ESSEES AGAINST THE RESPECTIVE ORDERS OF LD. CIT(A)-4, JAIPUR DATED 20.11.2017 & 21.11.2017 FOR ASSESSMENT YEAR 2015-16. SINCE THE C OMMON ISSUE RELATING TO LEVY OF PENALTY U/S 271AAB IS INVOLVED, ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY T HIS CONSOLIDATED ORDER. ITA NO. 124/JP/2018 2. FOR THE PURPOSES OF APPRECIATION OF FACTS AND PR ESENT DISCUSSIONS, THE CASE OF M/S SURAJ MAL BANSAL (HUF) IN ITA NO. 1 24/JP/2018 IS TAKEN AS THE LEAD CASE WITH THE CONSENT OF BOTH THE PARTI ES. IN ITS APPEAL, THE ASSESSEE HUF HAS TAKEN THE FOLLOWING GROUNDS OF APP EAL: 1. THAT THE NOTICE ISSUED BY ASSESSING OFFICER FO R INITIATING THE PENALTY U/S 271AAB OF THE I.T. ACT, 1961 IS NOT IN ACCORDANCE WITH LAW NOT BEING SPECIFICALLY POINTING OUT THE DE FAULT FOR WHICH THE LD. AO SOUGHT TO IMPOSE PENALTY U/S 271AAB. 2. THAT WITHOUT PREJUDICE TO THE GROUND NO.(1) ABOV E ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS WRONG, UNJUST AND HAS ERRED IN LAW IN CONFIRMING PE NALTY OF RS. ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 3 22,50,000/- IMPOSED BY THE LD. ASSESSING OFFICER U/ S 271AAB OF THE I.T. ACT, 1961. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE HUF IS A PARTNER IN TWO PARTNERSHIP FIRMS AND DERIVING INCOM E IN THE FORM OF INTEREST AND SHARE IN THE PROFITS FROM THESE TWO PA RTNERSHIP FIRMS. A SEARCH U/S 132 OF THE ACT WAS CONDUCTED ON 05.02.20 15 IN CASE OF BUNDI SILICA GROUP, KOTA AND THE ASSESSEE HUF IS PA RT OF THE SAID GROUP. DURING THE COURSE OF SEARCH PROCEEDINGS, TH E STATEMENT OF THE KARTA OF THE HUF, SHRI CHANDRA BEHARI BANSAL WAS RE CORDED U/S 132(4) OF THE ACT WHEREIN HE HAS DECLARED UNDISCLOSED INCO ME OF RS. 2,25,00,000/- AS ADDITIONAL INCOME OF THE HUF. SUBSEQUENTLY, THE ASSESSEE E-FILED ITS RETURN OF INCOME ON 29.09.2015 DECLARING TOTAL INCOME OF RS. 2,46,19,600/- WHICH INCLUDES ADDITION AL INCOME OF RS. 2,25,00,000/- 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 OF RS. 2,46, 19,600/- WAS ACCEPTED. THE ASSESSING OFFICER SEPARATELY INITIATE D THE PENALTY PROCEEDINGS U/S 271AAB BY WAY OF ISSUE OF NOTICE U/ S 274 R.W.S 271AAB OF THE ACT DATED 15.12.2016 WHICH WAS DULY SERVED O N THE ASSESSEE. 4. DURING THE COURSE OF PENALTY PROCEEDINGS, THE AS SESSING OFFICER STATED THAT ALL THE ESSENTIAL REQUIREMENT OF SECTIO N 271AAB(1)(A) ARE SATISFIED IN THE INSTANT CASE AND GIVEN THAT THE AS SESSEE HAD ADMITTED UNDISCLOSED INCOME OF RS. 2,25,00,000/- IN ITS STAT EMENTS U/S 132(4) OF THE ACT AND PAID THE TAXES THEREON BEFORE SPECIFIED DATE, PENALTY @ 10% U/S 271AAB ON THE UNDISCLOSED INCOME OF RS. 2,2 5,00,000/- AMOUNTING TO RS 22,50,000 WAS LEVIED ON THE ASSESSE E. ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 4 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE LD. CIT(A). THE LD. CIT(A) HAS CONFIRMED THE LEVY OF PENALTY U/S 271AAB OF THE ACT HOLDING THAT THE PENALTY IS MANDA TORY IN NATURE AND THERE IS NO DISCRETION WITH THE AO AND UNLIKE SECTI ON 271AAA WHEREIN IMMUNITY FROM IMPOSITION OF PENALTY IS POSSIBLE SUB JECT TO FULFILLMENT OF CONDITIONS IN SECTION 271AAA(2), THERE IS NO IMMUNI TY CLAUSE PROVIDED FROM PENALTY U/S 271AAB. BEING AGGRIEVED, THE ASSES SEE IS NOW IN APPEAL BEFORE US. 6. DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER INITIA TING THE PENALTY PROCEEDINGS HAS BEEN ISSUED IN A ROUTINE MANNER WIT HOUT MENTIONING UNDER WHICH CLAUSE OF SECTION 271AAB OF THE ACT, TH E ASSESSEE IS LIABLE FOR PENALTY. IT IS SUBMITTED THAT SECTION 271AAB(1) HAS THREE CLAUSES (A) TO (C) AND EACH CLAUSE OF SUB-SECTION (1) TO SECTIO N 271AAB PROVIDES FOR SEPARATE RATE OF PENALTY AND UNLESS THE SAME IS SPE CIFIED, THE ASSESSEE IS NOT IN A POSITION TO RESPOND AND THUS, THE PRINC IPLES OF NATURAL JUSTICE ARE VIOLATED. IT WAS SUBMITTED THAT THERE IS NO AP PLICATION 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 SPECIFY T HE UNDISCLOSED INCOME ON WHICH THE ASSESSEE IS REQUIRED TO SHOW CA USE. EVEN THE AO HAS NOT GIVEN ANY GROUND FOR LEVY OF PENALTY FOR WH ICH THE ASSESSEE COULD PUT ITS DEFENSE. THUS IN THE ABSENCE OF SPECI FIC CHARGE AGAINST THE ASSESSEE, THE ASSESSEE WAS NOT IN A POSITION TO RES POND TO THE SHOW CAUSE NOTICE ISSUED BY THE AO. IT WAS SUBMITTED THA T THOUGH THE AO WHILE PASSING THE IMPUGNED ORDER HAS IMPOSED THE PE NALTY AS PER CLAUSE (A) OF SECTION 271AAB(1) OF THE ACT, HOWEVER , NO SUCH GROUND ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 5 WAS SPECIFIED IN THE SHOW CASUE NOTICE ISSUED U/S 2 71AAB READ WITH SECTION 274 OF THE ACT. IN SUPPORT, RELIANCE WAS PL ACED 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 & GINNING FACTORY [2013] 359 ITR 565 (KARNAT AKA) AND VARIOUS DECISIONS OF THE CO-ORDINATE BENCHES OF THE TRIBUNA L. IT WAS ACCORDINGLY SUBMITTED THAT NOTICE ISSUED U/S 271AAB IS BAD IN L AW AND THEREFORE, THE PENALTY LEVY U/S 271AAB(1)(A) DESERVES TO BE DE LETED. 7. IT WAS FURTHER SUBMITTED THAT THE LOWER AUTHORIT IES HAVE ERRED IN HOLDING THE LEVY OF PENALTY U/S 271AAB OF THE ACT A S MANDATORY IN NATURE. DRAWING SUPPORT FROM THE DECISION OF THE CO -ORDINATE BENCH IN CASE OF DCIT VS. MANISH AGARWAL REPORTED IN 92 TAXM ANN.COM 81, IT WAS SUBMITTED THAT IMPOSITION OF PENALTY U/S 271AAB IS NOT MANDATORY BUT DISCRETION IN NATURE DEPENDING UPON THE FACTS A ND 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 FOU ND DURING THE COURSE OF SEARCH EXCEPT ANNEXURE-AS EXHIBIT-11 WHER EIN CERTAIN FIGURES, DATES AND CRYPTIC NAMES WERE WRITTEN. THE SEARCH PA RTIES ADDED THESE FIGURES WHICH WORKED OUT TO RS. 2,25,00,000/- HOLDI NG AMOUNTS AS RUPEES GIVEN TO VARIOUS PERSONS AS ADVANCES FOR PUR CHASE OF LAND. IT WAS SUBMITTED THAT NO INCRIMINATING MATERIAL WAS FO UND DURING THE SEARCH AND SAID ANNEXURE-AS EXHIBIT-11 WAS CONTAINI NG IMAGINARY NAMES AND SOME FIGURES. FURTHER THE OFFICERS OF SEA RCH PROCEEDINGS AND LD. AO DIDNT MAKE ANY FURTHER ENQUIRY/INVESTIGATIO N REGARDING ENTRIES IN THE SEIZED PAPERS. IT WAS SUBMITTED THAT THE SAID E NTRIES IN THE POCKET ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 6 DIARY GIVING ADVANCES ITSELF IS NOT AN UNDISCLOSED INCOME. THE REVENUE AUTHORITIES HAVE EXERTED UNDUE PRESSURE AND OBTAINE D THE SURRENDER OF INCOME FROM THE ASSESSEE. IN SUPPORT, THE RELIANCE WAS PLACED ON THE CBDT CIRCULAR NO. F. NO. 286/2/2003-IT (INV.) DATED 10.03.2003 WHEREIN THE CBDT HAS EXPRESSED ITS CONCERN ABOUT TH E PRACTICE OF OBTAINING THE CONFESSION OF ADDITIONAL INCOME DURIN G THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS. IT WAS SUBMITTED TH AT THE PROVISIONS OF SECTION 271AAB CLEARLY REQUIRES THAT SUCH UNDISCLOS ED INCOME TO BE SUBSTANTIATED AND, THEREFORE, THE ASSESSEE IS REQUI RED TO SPECIFY THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED AND FU RTHER SUBSTANTIATE THE SAME FURNISHING MATERIAL AVAILABLE WITH HIM. IN THE ABSENCE OF ANY RECORD OR MATERIAL TO SHOW ANY UNDISCLOSED SOURCE O F INCOME, THE ENTIRE DISCLOSURE WAS ON PAPERS IS TO AVOID UNDUE HARASSME NT AND UNWANTED LITIGATION AND THE ASSESSEE COULD NOT HAVE SUBSTANT IATED SUCH INCOME SO DECLARED DURING THE COURSE OF SEARCH. IT WAS SUBMIT TED THAT THERE IS NO IOTA OF EVIDENCE THAT SURRENDERED INCOME WAS UNDISC LOSED INCOME OF THE ASSESSEE. IT WAS SUBMITTED THAT SAID SURRENDER WAS MADE TO BUY PIECE AND AVOID LONG LITIGATION WITH DEPARTMENT ON THE RE QUEST THAT NO PENALTY PROCEEDINGS ETC. BE INITIATED AGAINST IT. IN SUPPOR T, RELIANCE WAS PLACED ON THE CO-ORDINATE BENCH DECISION IN CASE OF ACIT V S. MARVAL ASSOCIATES 92 TAXMANN.COM 109 WHEREIN IT WAS HELD THAT PENALTY U/S 271AAB IS ATTRACTED ON UNDISCLOSED INCOME BUT NOT ON ADMISSIO N MADE BY THE ASSESSEE U/S 132(4) OF THE ACT. THE AO MUST ESTABLI SH THAT THERE IS UNDISCLOSED INCOME ON THE BASIS OF INCRIMINATING MA TERIAL. FURTHER, RELIANCE WAS PLACED ON THE CO-ORDINATE BENCH IN DEC ISION IN CASE OF AJAY SHARMA VS. DCIT [2013] 30 TAXMANN.COM 109 WHEREIN I T WAS HELD THAT ADDITION ON ACCOUNT OF ALLEGED RECEIVABLES AS PER S EIZED PAPER CANNOT BE MADE AS THERE IS NO DIRECT MATERIAL WHICH LEADS AND ESTABLISHES THAT ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 7 ANY INCOME RECEIVED BY THE ASSESSEE WHICH HAS NOT B EEN DECLARED BY THE ASSESSEE. THE FACTS OF THE ASSESSEES CASE SHOW S THAT THERE WAS NO UNDISCLOSED INCOME FOUND DURING THE COURSE OF SEARC H AND NO INCRIMINATING MATERIAL WAS FOUND, HENCE THERE IS NO CASE FOR IMPOSING PENALTY U/S 271AAB OF THE ACT. FURTHER, RELIANCE WA S 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 APPLI ES IN CASE OF ASSESSEE AND THEREFORE, THE PENALTY SO LEVIED SHOULD BE DELE TED. 9. IT WAS FINALLY SUBMITTED THAT THERE IS NO VALID GROUND GIVEN IN THE ASSESSMENT ORDER FOR INITIATING PENALTY PROCEEDINGS , THE INITIATION OF PENALTY IS STATUTORILY DEFECTIVE, THE ASSESSEE HUF HAS FILED ITS RETURN OF INCOME IN GOOD FAITH INCLUDING THE ADDITIONAL INCOM E SURRENDERED DURING THE COURSE OF SEARCH TO PURCHASE PEACE OF MIND AND AVOID LITIGATION, ASSESSMENT HAS BEEN COMPLETED ACCEPTING THE INCOME DECLARED BY THE ASSESSEE AND THERE IS NO UNDISCLOSED INCOME FOUND D URING THE COURSE OF SEARCH AND PENALTY SO LEVIED SHOULD BE DELETED. 10. 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. 2,25,00,0 00/- 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 T HE PART OF THE ASSESSEE THAT THERE IS UNDISCLOSED INCOME WHICH HAS BEEN FOUND DURING THE COURSE OF SEARCH. ONCE THE SURRENDER OF UNDISCL OSED INCOME HAS BEEN MADE BY THE ASSESSEE, THERE IS NO CAUSE OF ACT ION WHICH LIES WITH THE ASSESSING OFFICER TO ESTABLISH FURTHER THAT THE RE IS ANY UNDISCLOSED ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 8 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 2,25,00,000. SUBSEQUENTLY, THE ASSESSEE HAS DISCLOS ED THE SAME IN ITS RETURN OF INCOME FILED ON 29.09.2015. THEREFORE, T HE ASSESSEE WAS HAVING AMPLE TIME TO RETRACT FROM SAID SURRENDER, H OWEVER THERE IS NO SUCH RETRACTION DURING POST-SEARCH PROCEEDINGS AND EVEN THE ASSESSEE HAS INCLUDED THE SAME IN ITS RETURN OF INCOME. EVEN FROM THE PERUSAL OF THE ASSESSEES STATEMENT, THERE IS NOTHING WHICH DE MONSTRATES THAT THERE IS ANY FORCED SURRENDER BY THE ASSESSEE. THE CONTENTION OF THE LD AR THEREFORE HAS THUS NO BASIS WHERE HE CONTENDS TH AT THE SEARCH PARTY HAVE EXERTED UNDUE PRESSURE AND OBTAINED SURRENDER OF INCOME AND THEREFORE, THERE WAS NO UNDISCLOSED INCOME IN THE H ANDS OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE LEVY OF PENALTY U/S 271AAB IS MANDATORY IS NATURE AND REFERENCE WAS DRAWN TO P ROVISIONS OF SECTION 271AAA WHICH PROVIDES FOR IMMUNITY FROM LEVY OF PEN ALTY AS AGAINST THE PROVISIONS OF SECTION 271AAB WHEREIN THERE IS NO SU CH PROVISION PROVIDING FROM IMMUNITY. IT WAS ACCORDINGLY SUBMIT TED THAT THERE IS NO INFIRMITY IN THE ORDER OF THE ASSESSING OFFICER WHE REIN HE HAS LEVIED THE PENALTY @ 10% OF THE UNDISCLOSED INCOME AS PER THE PROVISIONS OF SECTION 271AAB AND ORDER OF THE LD. CIT(A) WHO HAS CONFIRMED THE SAID LEVY SHOULD BE UPHELD. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERSUED THE MATERIAL AVAILABLE ON RECORD. THIS TRIBUNAL IS TAKING A CONS ISTENT VIEW THAT LEVY OF PENALTY U/S 271AAB IS NOT AUTOMATIC IN NATURE BUT T HE AO HAS DISCRETION TO TAKE A DECISION AFTER ARRIVING AT THE CONCLUSION THAT THE INCOME DISCLOSED BY THE ASSESSEE IN THE STATEMENT RECORDED U/S 132(4) OF THE ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 9 ACT IS AN UNDISCLOSED INCOME IN TERMS OF SECTION 27 1AAB(1) R.W. EXPLANATION DEFINING THE UNDISCLOSED INCOME. IN THI S 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 FINDINGS OF THE AO THAT PENALTY U/S 271AAB IS MANDATORY IN NATURE A ND 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 SUBMITTED THAT IT IS SETTLED POSITION OF LAW THAT PENALTIES ARE NOT COMPULSORY, NOT MANDATORY BUT ARE ALSO DISC RETIONARY CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE. IN SUPPORT, RELIANCE WAS PLACED ON PROVISIONS OF SECTI ON 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 QUEST ION OF SAID SURRENDER OF INCOME NOT FALLING IN THE DEFINITION O F UNDISCLOSED INCOME. IT WAS SUBMITTED THAT THE PENALTY U/S 271A AB IS MANDATORY IN NATURE AND IS IMPOSED AT THE VARYING R ATE OF 10%, 20% OR 30% DEPENDING ON THE FULFILLMENT OF CERTAIN CONDITIONS THEREIN. IT WAS SUBMITTED THAT ALL THE CONDITIONS S PECIFIED IN SECTION 271AAB HAVE BEEN FULFILLED IN THE INSTANT C ASE, THEREFORE, ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 10 THE PENALTY U/S 271AAB BEING IN THE NATURE OF MANDA TORY PENALTY AND THERE BEING NO DISCRETION WITH THE INCOME TAX A UTHORITIES, THE PENALTY SO IMPOSED BY THE AO WAS RIGHTLY CONFIRMED BY THE LD CIT(A) AND THE ORDER OF THE LD CIT(A) SHOULD BE UPH ELD. 14. IN THIS REGARD, WE REFER TO THE PROVISIONS OF SECTION 271AAB WHICH BEGINS WITH THE STIPULATION THAT THE ASSESSIN G OFFICER MAY DIRECT THE ASSESSEE AND THE ASSESSEE SHALL PAY THE PENALTY AS PER CLAUSE (A) TO (C) SO SATISFIED IN SUB-SECTION (1) T O SECTION 271AAB. FURTHER, AS PER SUB-SECTION (3) OF SECTION 271AAB, THE PROVISIONS OF SECTION 274 AND SECTION 275 AS FAR AS MAY BE APP LIED IN RELATION TO PENALTY UNDER THIS SECTION WHICH MEANS THAT BEFORE LEVYING THE PENALTY, THE ASSESSING OFFICER HAS TO I SSUE A SHOW- CAUSE GRANTING AN OPPORTUNITY TO THE ASSESSEE. THU S, 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 TAKEN BY THE VARIOUS CO-ORDINATE BENCHES AND U SEFUL REFERENCE CAN BE DRAWN TO THE DECISION OF THE CO-OR DINATE BENCH IN CASE OF ACIT VS MARVEL ASSOCIATES (SUPRA) WHEREI N 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 L D. A.R. VEHEMENTLY ARGUED THAT THE A.O. HAS LEVIED THE PENA LTY UNDER THE IMPRESSION THAT THE LEVY OF PENALTY IN TH E 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 I S NOT MANDATORY BUT DISCRETIONARY. THE PROVISIONS OF SECT ION ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 11 271AAB OF THE ACT IS PARIMATERIA WITH THAT OF SECTI ON 158BFA OF THE ACT RELATING TO BLOCK ASSESSMENT AND ACCORDINGLY ARGUED THAT THE LEVY OF PENALTY UNDER S ECTION 271AAB IS NOT MANDATORY BUT DISCRETIONARY. WHEN THE RE 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 AND ARGUED THAT THE WORDS USED IN SECTION 271AAB OF THE ACT AND THE WORDS USED IN SEC TION 158BFA(2) OF THE ACT ARE IDENTICAL. HENCE, ARGUED T HAT THE PENALTY SECTION 271AAB OF THE ACT PENALTY IS NOT AU TOMATIC AND IT IS ON THE MERITS OF EACH CASE. FOR READY REF ERENCE, WE REPRODUCE HEREUNDER SECTION 158BFA (2) OF THE AC T 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, DIRE CT THAT, IN A CASE WHERE SEARCH HAS BEEN INITIATED UNDER SECTIO N 132 ON OR AFTER THE 1ST DAY OF JULY, 2012, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYA BLE BY HIM (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 ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 12 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 TH E 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- (A) DECLARES SUCH INCOME IN THE RETURN OF INCOME FURNISHED FOR THE SPECIFIED PREVIOUS YEAR; AND (B) PAYS TH E 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 THE ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 13 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 TH E ASSESSEE IN RESPECT OF THE UNDISCLOSED INCOME REFER RED 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, M AY DIRECT THAT A PERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHALL NOT BE LESS THAN THE AMOUNT OF TAX LEVI ABLE BUT WHICH SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TA X SO LEVIABLE IN RESPECT OF THE UNDISCLOSED INCOME DETER MINED BY THE ASSESSING OFFICER UNDER CLAUSE (C) OF SECTION 1 58BC: 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 AGAINST T HE 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: ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 14 PROVIDED FURTHER THAT THE PROVISIONS OF THE PRECEDI NG PROVISO SHALL NOT APPLY WHERE THE UNDISCLOSED INCOM E DETERMINED BY THE ASSESSING OFFICER IS IN EXCESS OF THE INCOME SHOWN IN THE RETURN AND IN SUCH CASES THE PE NALTY SHALL BE IMPOSED ON THAT PORTION OF UNDISCLOSED INC OME DETERMINED WHICH IS IN EXCESS OF THE AMOUNT OF UNDI SCLOSED 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 PA Y BY WAY OF PENALTY'. SIMILAR WORDS ARE USED SECTION 158 BFA(2) OF THE ACT. THE WORD MAY DIRECT INDICATES THE DISCR ETION TO THE AO. FURTHER, SUB SECTION (3) OF SECTION 271AAB OF THE ACT, FORTIFIES THIS VIEW. SUB SECTION (3) OF SECTION 271AAB: THE PROVISIONS OF SECTION 274 AND 275 SHALL, AS FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED TO IN THIS SECTION. 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 TO CONSIDER THE IMPOSITION OF PENAL TY JUDICIALLY. SECTION 274 DEALS WITH THE PROCEDURE FO R LEVY OF PENALTY, WHEREIN, IT DIRECTS THAT NO ORDER IMPOSING PENALTY SHALL BE MADE UNLESS THE ASSESSEE HAS BEEN HEARD OR HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. THEREFORE, FROM PLAIN READING OF SECTION 271AAB OF THE ACT, IT IS EVIDENT THAT THE PENALTY CANNOT BE IMPOSED UN LESS THE ASSESSEE IS GIVEN A REASONABLE OPPORTUNITY AND ASSE SSEE IS BEING HEARD. ONCE THE OPPORTUNITY IS GIVEN TO THE A SSESSEE, ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 15 THE PENALTY CANNOT BE MANDATORY AND IT IS ON THE BA SIS OF THE FACTS AND MERITS PLACED BEFORE THE A.O. ONCE TH E A.O. IS BOUND BY THE ACT TO HEAR THE ASSESSEE AND TO GIV E REASONABLE OPPORTUNITY TO EXPLAIN HIS CASE, THERE I S NO MANDATORY REQUIREMENT OF IMPOSING PENALTY, BECAUSE THE OPPORTUNITY OF BEING HEARD AND REASONABLE OPPORTUNI TY IS NOT A MERE FORMALITY BUT IT IS TO ADHERE TO THE PRI NCIPLES OF NATURAL JUSTICE. HON'BLE A.P. HIGH COURT IN THE CAS E OF RADHAKRISHNA VIHAR IN ITTA NO.740/2011 WHILE DEALIN G WITH THE PENALTY U/S 158BFA HELD THAT 'WE ARE OF THE OPI NION THAT WHILE THE WORDS SHALL BE LIABLE UNDER SUB SECT ION (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 PAYME NT OF INTEREST IS MANDATORY LEVY OF PENALTY IS DISCRETION ARY. IT IS TRITE POSITION OF LAW THAT DISCRETION IS VESTED AND AUTHORITY HAS TO BE EXERCISED IN A REASONABLE AND RATIONAL MA NNER DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF THE E ACH CASE. PLAIN READING OF SECTION 271AAB AND 274 OF TH E ACT INDICATES THAT THE IMPOSITION OF PENALTY U/S 271AAB OF THE ACT IS NOT MANDATORY BUT DIRECTORY. ACCORDINGLY WE HOLD THAT THE PENALTY U/S 271AAB IS NOT MANDATORY BUT 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 MAN DATORY. IN THE INSTANT CASE, IT THEREFORE NEEDS TO BE EXAMINED WHETHER THERE IS ANY BASIS FOR LEVY OF PENALTY OR NON-LEVY THEREO F AND THE SAME ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 16 WILL DEPEND UPON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WHICH WE SHALL DISCUSS IN SUBSEQUENT PARAGRAPHS. 12. FOR THE PURPOSES OF LEVY OF PENALTY, WHAT HAS T O BE SEEN IS THAT WHETHER THE SURRENDER SO MADE, IN TERMS OF STATEMEN T OF THE ASSESSEE RECORDED U/S 132(4) DURING THE COURSE OF SEARCH, FA LLS IN THE DEFINITION OF UNDISCLOSED INCOME WHICH HAS BEEN SPECIFICALLY LAID DOWN IN TERMS OF CLAUSE (C) OF EXPLANATION TO SECTION 271AAB WHIC H 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, JEW ELLERY OR OTHER VALUABLE ARTICLE O R THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHICH HAS (A) NOT BEEN RE CORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE PRINCIPAL CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIONER BEFORE THE DATE OF SEARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENT ED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 17 EXPENSE RECORDED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR WHICH IS FOUND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH N OT BEEN CONDUCTED. 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 DESC RIBE THE NAME OF CERTAIN PERSONS, THE AMOUNT ADVANCED WHICH RANGES F ROM RS 25 LACS TO RS 70 LACS AND THE DATE OF SUCH ADVANCE IS FROM 16. 12.2014 TO 28.01.2015 BEFORE THE DATE OF SEARCH ON 5.02.2015. THEREFORE, WHAT HAS BEEN FOUND DURING THE COURSE OF SEARCH IS CERTA IN ENTRIES RELATING TO UNDISCLOSED ADVANCES/INVESTMENT IN PURCHASE OF LAND . BESIDES THE SAID ENTRIES, THERE ARE NO OTHER DOCUMENTS/MATERIAL IN T ERMS OF FULL PARTICULARS AND ADDRESS OF THE PERSON TO WHOM THE A DVANCE HAS BEEN GIVEN, ANY AGREEMENT TO SELL, THE DESCRIPTION AND L OCATION OF THE PROPERTY ETC, WHICH HAS BEEN FOUND DURING THE COURS E OF SEARCH. THE ASSESSEE HUF IS A PARTNER IN TWO PARTNERSHIP FIRMS AND DERIVES INCOME FROM SHARE IN THE PROFIT AND INTEREST FROM SUCH PAR TNERSHIP FIRMS WHICH IT HAS REPORTED IN ITS RETURN OF INCOME AND THEREFO RE, AS FAR AS MAINTENANCE OF BOOKS OF ACCOUNTS IS CONCERNED, THE ASSESSEE HUF NOT CARRYING ON ANY BUSINESS IS THUS NOT REQUIRED TO MA INTAIN REGULAR BOOKS OF ACCOUNTS. THE DIARY FOUND DURING THE COURSE OF SEARCH AND SEIZURE AT THE PREMISES OF THE ASSESSEE CONTAINS THE ENTRIES O F 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 A RE TO BE RECORDED IN ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 18 THE CAPITAL ACCOUNT OF THE ASSESSEE AS WELL AS IN T HE BALANCE SHEET PREPARED AS ON 31.03.2015 AND NOT ON THE DATE OF SE ARCH AS ON 5.02.2015. THESE TRANSACTIONS ARE RECORDED IN A DI ARY WHICH IS NOTHING BUT OTHER DOCUMENTS MAINTAINED IN THE NORMAL COUR SE, THEN IT CANNOT BE PRESUMED THAT THE ASSESSEE WOULD NOT HAVE DISCLO SED THE SAME IN THE RETURN OF INCOME TO BE FILED AFTER THE DATE OF SEARCH. ANOTHER QUESTION THAT ARISE FOR CONSIDERATION IS WHETHER TH E ADVANCES SO GIVEN FOR PURCHASE OF LAND QUALIFY AS UNDISCLOSED 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 EN VISAGED BY THE LEGISLATURE WHILE DEFINING UNDISCLOSED INCOME IN SECTION 271AAB IS AN INFLOW OF FUNDS WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS ON OR BEFORE THE DATE OF SEARCH AND NOT AN OUTFLOW OF FUNDS. FURTHER, THE DEEMING FICTION SO ENVISAGED IN SECTION 69 AND 69B CANNOT BE EXTENDED AND APPLIED AUTOMATICALLY IN CON TEXT OF SECTION 271AAB WHICH CONTAINS A SPECIFIC DEFINITION OF UNDI SCLOSED INCOME. AN IDENTICAL MATTER HAS COME UP FOR CONSIDERATION BEFO RE 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 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 NOTIN GS RECORDED U/S 132(4), LD CIT(A) HAS GIVEN A FINDING THAT THE ASSESSEE HAS GIVEN A GENERALIZED STATEMENT WITHOUT SPECIFYING THE COMPLETE PARTICULARS OF PERSONS TO W HOM LOANS WERE GIVEN AND ALSO FAILED TO SUBSTANTIATE TH E SAME. ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 19 THE SAID FINDINGS HAVE NOT BEEN DISPUTED BY THE REV ENUE AND THEREFORE, MERELY BASED ON SURRENDER AND GENERA LIZED STATEMENT OF THE ASSESSEE, IN ABSENCE OF ANYTHING S PECIFIC TO CORROBORATE SUCH ENTRIES, CAN IT BE SAID THAT SU CH 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, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING. WHETHER IT CAN TH EN BE SAID THAT SUCH UNDISCLOSED CASH ADVANCES REPRESENTS 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 INCOME PER SE REPRESENTS AN INFLOW OF FUNDS IN THE HANDS OF THE ASSESSEE. THEREFORE, ONC E THERE IS AN INFLOW OF FUNDS BY WAY OF INCOME, THERE CAN BE SUBS EQUENT OUTFLOW BY WAY OF AN ADVANCE TO ANY THIRD PARTY. G IVING AN ADVANCE AND INCOME THUS CONNOTES DIFFERENT MEANING AND CONNOTATION AND THUS CANNOT BE USED INTER-CHANGEABL Y. IN THE DEFINITION OF UNDISCLOSED INCOME, WHERE IT TALKS AB OUT INCOME BY WAY OF ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER D OCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHAT PERHAPS HAS BEEN ENVISAGED BY THE LEGISLATURE IS AN INFLOW OF FUNDS IN THE HANDS OF THE ASSESSEE WHICH HAS BEE N FOUND BY WAY OF ANY ENTRY IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS, AND WHICH HAS NOT BEEN RECORDED BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED BY THE ASSESSEE IN THE NORMAL COURSE AND NOT VICE-VERSA. W E ARE ALSO ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 20 CONSCIOUS OF THE FACT THAT THERE ARE DEEMING PROVIS IONS IN TERMS OF SECTION 69 AND 69B WHEREIN SUCH AMOUNTS MAY BE D EEMED 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 CON TEXT OF SECTION 271AAB. IT IS A WELL-SETTLED LEGAL PROPOSI TION THAT THE DEEMING PROVISIONS ARE LIMITED FOR THE PURPOSES THA T HAVE BEEN BROUGHT ON THE STATUTE BOOK AND HAVE THEREFORE TO B E APPLIED IN THE CONTEXT OF PROVISIONS WHEREIN THEY HAVE BEEN BR OUGHT ON THE STATUE BOOK AND NOT OTHERWISE. IN THE INSTANT CASE , THE DEEMING PROVISIONS CONTAINED IN SECTION 69 AND SECTION 69B COULD HAVE BEEN APPLIED IN THE CONTEXT OF BRINGING TO TAX SUCH INVESTMENTS TO TAX IN THE QUANTUM PROCEEDINGS, THOUGH THE FACT OF THE MATTER IS THAT THE AO HAS NOT EVEN INVOKED THE SAID DEEMING P ROVISIONS IN THE QUANTUM PROCEEDINGS. THEREFORE, EVEN ON THIS AC COUNT, THE DEEMING FICTION CANNOT BE EXTENDED TO THE PENALTY P ROCEEDINGS WHICH ARE SEPARATE AND DISTINCT FROM THE ASSESSMENT PROCEEDINGS AND MORE SO, WHERE THE PROVISIONS OF SECTION 271AAB PROVIDE FOR A SPECIFIC DEFINITION OF UNDISCLOSED INCOME. WHERE A SPECIFIC DEFINITION OF UNDISCLOSED INCOME HAS BEEN PROVIDED IN SECTION 271AAB, BEING A PENAL PROVISION, THE SAME MUST BE S TRICTLY CONSTRUED AND IN LIGHT OF SATISFACTION OF CONDITION S SPECIFIED THEREIN AND IT IS NOT EXPECTED TO EXAMINE OTHER PRO VISIONS WHERE THE SAME HAS BEEN DEFINED OR DEEMED FOR THE PURPOSE S OF BRINGING THE AMOUNT TO TAX. IN LIGHT OF THE SAME, THE UNDISCLOSED INVESTMENT BY WAY OF ADVANCES CAN BE SUBJECT MATTER OF ADDITION IN THE QUANTUM PROCEEDINGS, AS THE SAME HAS BEEN SU RRENDERED DURING THE COURSE OF SEARCH IN THE STATEMENT RECORD ED U/S 132(4) ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 21 AND OFFERED IN THE RETURN OF INCOME, HOWEVER THE SA ME CANNOT BE SAID TO QUALIFY AS AN UNDISCLOSED INCOME IN THE CON TEXT OF SECTION 271AAB READ WITH THE EXPLANATION THERETO AND PENALT Y 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 RAJENDRA KUMAR GUPTA (SUPRA), WE DELETE THE PENALTY LEVIED UNDER S ECTION 271AAB OF 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 TH E ACT HAS BEEN DECIDED ON MERITS, THEREFORE, THE ISSUE OF VALIDITY OF INITIATION OF THE PENALTY PROCEEDING DUE TO DEFECTIVE SHOW CAUSE NOTI CE BECOME ACADEMIC IN NATURE AND WE DO NOT PROPOSE TO ADJUDIC ATE 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 C ASE ARE IDENTICAL EXCEPT THE FACT THAT BESIDES THE SURRENDER OF ADDIT IONAL INCOME DURING THE COURSE OF SEARCH CONSIST OF CASH ADVANCES OF RS 1,00,50,000 TOWARDS PURCHASE OF LAND, THERE IS SURRENDER ON ACC OUNT OF JEWELLERY VALUED AT RS 49,62,554 FOUND DURING THE COURSE OF S EARCH. 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 IN EXCESS OF WHAT HAS BEEN DISCLOSED IN THE WEALTH TAX RETURN, D URING THE COURSE OF ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 22 SEARCH IS CONCERNED, THERE CANNOT BE ANY DISPUTE TH AT THE SAME REPRESENTS UNDISCLOSED INCOME SO DEFINED IN SECTION 271AAB AND WHICH HAS NOT BEEN DISCLOSED ON OR BEFORE THE DATE OF SEA RCH. REGARDING THE CONTENTION OF THE LD AR THAT SUCH JEWELLERY IS PERS ONAL JEWELLERY OF THE ASSESSEE AND HIS FAMILY MEMBERS AND HAS BEEN PURCHA SED OUT OF PAST SAVINGS AND/OR HAS BEEN RECEIVED AS GIFT IN THE PAS T ON VARIOUS FESTIVITIES AND OTHER AUSPICIOUS OCCASIONS, THESE A RE CONTENTIONS WHICH ARE RELEVANT FOR DETERMINING THE NATURE AND SOURCE OF SUCH UNDISCLOSED INCOME FOR THE PURPOSES OF DETERMINING THE QUANTUM OF PENALTY WHICH CAN BE LEVIED AND WHICH WE FIND THAT THE LOWER AUTH ORITIES HAVE DULY CONSIDERED WHILE LEVYING PENALTY @ 10%. IN THE RES ULT, WE CONFIRM THE LEVY OF PENALTY @ 10% ON THE UNDISCLOSED INCOME OF RS 49,62,554. 18. REGARDING LEVY OF PENALTY ON CASH ADVANCES OF R S 1,00,50,000 TOWARDS PURCHASE OF LAND BASIS THE STATEMENT OF THE ASSESSEE RECORDED DURING THE COURSE OF SEARCH, THE FACTS AND CIRCUMST ANCES OF THE CASE ARE EXACTLY IDENTICAL AND SIMILAR CONTENTIONS HAVE BEEN RAISED BY BOTH THE PARTIES. HENCE, OUR FINDINGS AND DIRECTIONS CONTAI NED IN ITA NO 124/JP/2018 SHALL EQUALLY APPLY IN THIS CASE AND FO LLOWING THE SAME, THE PENALTY SO LEVIED ON SUCH CASH ADVANCES IS HEREBY D IRECTED TO BE DELETED. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ITA NO. 126-127/JP/18 20. IN ITA NO. 126/JP/18, THE AO HAS SIMILARLY LEV IED PENALTY ON CASH ADVANCES OF RS 2,05,00,000 TOWARDS PURCHASE OF LAND BASIS THE ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 23 STATEMENT OF THE ASSESSEE RECORDED U/S 132(4) DURIN G THE COURSE OF SEARCH. IN ITA NO. 127/JP/18, THE AO HAS LEVIED PE NALTY ON CASH ADVANCES OF RS 2,25,00,000 TOWARDS PURCHASE OF LAND BASIS THE STATEMENT OF THE ASSESSEE RECORDED U/S 132(4) DURIN G THE COURSE OF SEARCH. BOTH THE PARTIES FAIRLY SUBMITTED THAT THE FACTS AND CIRCUMSTANCES OF THESE TWO CASES ARE EXACTLY IDENTI CAL TO CASE IN ITA NO. 124/JP/18 AND SIMILAR CONTENTIONS HAVE BEEN RAI SED BY BOTH THE PARTIES. HENCE, OUR FINDINGS AND DIRECTIONS CONTAI NED IN ITA NO 124/JP/2018 SHALL EQUALLY APPLY IN THIS CASE AND FO LLOWING THE SAME, THE PENALTY SO LEVIED ON SUCH CASH ADVANCES IS DIRECTED TO BE DELETED. IN THE RESULT, BOTH THESE APPEALS ARE ALLOWED. 21. IN THE RESULT, THE APPEALS OF THE RESPECTIVE A SSESSEES IN ITA NO. 124/JP/18, 126/JP/18 AND 127/JP/18 ARE ALLOWED AND THE APPEAL OF THE ASSESSEE IN ITA NO. 125/JP/18 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/04/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 08/04/2019. *GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI SURAJMAL BANSAL HUF, KOTA SHRI ASHOK BANSAL, KOTA M/S CHANDRA BIHARI BANSAL HUF, KOTA SHRI NAVNEET BANSAL, KOTA 2. IZR;FKHZ@ THE RESPONDENT- THE DCIT, CENTRAL CRICLE-3, JAIPUR 3. VK;DJ VK;QDR@ CIT ITA NO. 124-127/JP/2018 SHRI SURAJMAL BANSAL HUF AND OTHERS VS. DCIT, CENT RAL CIRCLE-3, JAIPUR 24 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. 124-127/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR