SMT. APARNA AGRAWAL, KOTA V. DEPUTY COMMISSIONER OF INCOME TAX, KOTA

ITA 1379/JPR/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0757 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 04-12-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA
• Keywords: Search and seizure; Opportunity of being heard; Reasonable cause; Wrong claim; Block assessment; Capital Gains; Bogus
• Section: 27; 132; 143(3); 153A; 274; 139(1); 158BC; 13; 158BFA

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH A JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH FOE FLAG ;K NO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA NO. 1379/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2016-17 SMT. APARNA AGRAWAL, 1-TA-12, VIGYAN NAGAR, KOTA. CUKE VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, ROOM NO. 212, 2 ND FLOOR, C.R. BUILDING, RAWAT BHATA ROAD, KOTA. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAVPA 5425 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 1439/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2016-17 THE DEPUTY COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE, KOTA CUKE VS. SMT. APARNA AGRAWAL, 1-TA-12, VIGYAN NAGAR, KOTA. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAVPA 5425 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI VIJAY GOYAL (CA) & SHRI GULSHAN AGARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI VARINDER MEHTA (CIT-DR) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 28/02/2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 25/03/2019. VKNS'K@ ORDER PER BENCH : THESE TWO CROSS APPEALS ARE DIRECTED AGAINST THE OR DER DATED 5 TH OCTOBER, 2018 OF LD. CIT (A)-2, UDAIPUR ARISING FROM THE PEN ALTY ORDER PASSED UNDER SECTION 271AAB OF THE IT ACT FOR THE ASSESSMENT YEAR 2016-1 7. THE ASSESSEE IS AN INDIVIDUAL AND BELONGS TO M/S. KOTA DALL MILL GROUP . THE ASSESSEE FILED HER RETURN OF INCOME UNDER SECTION 139(1) OF THE IT ACT ON 22.07. 2016 DECLARING TOTAL INCOME AT RS. 5,72,65,200/- WHICH INCLUDES SURRENDERED INCOME OF RS. 3,85,30,241/- ON 2 ITA NO. 1379 & 1439/JP/2018 SMT. APARNA AGARWAL, KOTA VS. DCIT, KOTA ACCOUNT OF LONG TERM CAPITAL GAIN AND RS 82,50,000/ - ON ACCOUNT OF CASH FOUND DURING THE COURSE OF SEARCH. THE ASSESSMENT WAS CO MPLETED UNDER SECTION 143(3) READ WITH SECTION 153B(1)(B) OF THE IT ACT ON 27.12 .2017 AT THE TOTAL INCOME OF RS. 5,73,90,530/- IN WHICH ADDITION OF RS 82,655 WAS MA DE ON ACCOUNT OF INTEREST AND RS 42,677 ON ACCOUNT OF UNDISCLOSED TURNOVER. THE A O THEN INITIATED THE PROCEEDINGS FOR LEVY OF PENALTY UNDER SECTION 271AAB OF THE IT ACT BY ISSUING A SHOW CAUSE NOTICE DATED 27.12.2017. THE AO WHILE PASSING THE PENALTY ORDER DATED 27TH JUNE, 2018 HAS LEVIED THE PENALTY UNDER SECTION 271AAB(1) OF THE IT ACT @ 30% OF THE UNDISCLOSED INCOME OF RS. 4,68,22,918/- WHICH WAS A DMITTED DURING THE SEARCH . THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A). THE LD. CIT (A) HAS REDUCED THE LEVY OF PENALTY UNDER SECTION 271AAB FR OM 30% TO 10%. HENCE BOTH THE ASSESSEE AS WELL AS THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER OF THE LD. CIT (A) BY FILING THESE CROSS APPEALS. THE GROUNDS RAISED BY THE ASSESSEE AS WELL AS BY THE REVENUE IN THE CROSS APPEALS ARE AS UNDER:- ITA NO.1379/JP/2018 (ASSESSEES APPEAL) : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT (A) ERRED IN NOT HOLDING THE PENALTY ORDER AS W RONG, BAD IN LAW, INVALID AND VOID-AB-INITIO AS THE LD. AO INITIATED THE PENA LTY U/S 271AAB OF INCOME TAX ACT, 1961 WITHOUT SPECIFYING THE CLAUSE OF SECT ION 271AAB OF THE ACT IN THE PENALTY NOTICE UNDER WHICH THE PENALTY WAS INIT IATED I.E. WHETHER IT IS FOR CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF SECTION 2 71AAB(1) BECAUSE THE CONDITIONS FOR IMPOSING THE PENALTY UNDER EACH SUCH CLAUSES ARE SEPARATE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT (A) ERRED IN APPLYING THE PROVISIONS OF SECTION 271AAB(1)(A) AS AGAINST LEVY OF PENALTY U/S 271AAB(1)(C) OF I.TAX ACT BY LD AO WITHOUT ISSUING NOTICE AS REQUIRED U/S 251(2) OF I. TAX ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT (A) ERRED IN CONFIRMING THE PENALTY OF RS. 46,8 2,292/- U/S 271AAB(1)(A) OF THE ACT OUT OF PENALTY OF RS. 1,40,46,875/- IMPO SED BY THE AO U/S 271AAB(1)(C) OF THE ACT MORE SO WHEN :- A) THE LONG TERM CAPITAL GAIN OF SHARES OFFERED BY APP ELLANT FOR TAXATION IS NOT AN UNDISCLOSED INCOME WITHIN THE MEANING OF SECTION 271AAB OF THE ACT, THEREFORE NO PENALTY UNDER THIS SECTION CAN BE IMPO SED THEREON. 3 ITA NO. 1379 & 1439/JP/2018 SMT. APARNA AGARWAL, KOTA VS. DCIT, KOTA B) THE PENALTY WAS LEVIED BY DRAWING THE INFERENCE ONL Y FROM THE STATEMENT RECORDED U/S 132(4) OF THE ACT WHEREAS THERE IS NO INCRIMINATING MATERIAL OR EVIDENCE WAS FOUND DURING SEARCH TO PROVE THAT T HE ASSESSEE WAS HAVING UNDISCLOSED INCOME. C) DOCUMENTS AND EVIDENCES WERE FILED TO PROVE THE GEN UINENESS OF EXEMPTED LTCG WHICH WERE REMAINED UNCONTROVERTED. D) THERE IS NO FINDING/REASON/CONCLUSION IN THE PENALT Y ORDER REGARDING IMPOSING THE PENALTY ON INCOME OF RS. 82,50,000/- D ECLARED IN INCOME TAX RETURN. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT (A) ERRED IN HOLDING THAT THE PENALTY U/S 271AA B OF THE ACT IS MANDATORY. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT (A) ERRED IN NOT GIVING THE FINDING ON THE ALLE GATION OF AO THAT THE APPELLANT FIND IN THE POSITION OF MENS REA AND INTE NTION WAS OF WRONG DOING THAT CONSTITUTES PART OF A CRIME. 6. THE APPELLANT PRAYS FOR LEAVE TO ADD, TO AMEND, TO DELETE OR MODIFY THE ALL OR ANY GROUNDS OF APPEAL ON OR BEFORE THE HEARI NG OF APPEAL. ITA NO.1439/JP/2018 (DEPARTMENTAL APPEAL) : WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) WAS RIGHT IN REDUCING THE PENALTY OF RS. 1,40,46,87 5/- LEVIED BY THE AO @ 30% OF THE UNDISCLOSED INCOME UNDER CLAUSE 1(C) OF SECTION 271AAB OF THE INCOME TAX ACT TO RS. 46,82,291/- UNDER CLAUSE 1(A) OF THAT SECTION DESPITE THE FACT THAT MANNER OF EARNING OF UNDISCLOSED INCO ME WAS NOT DISCLOSED BY THE ASSESSEE. 2. DURING THE COURSE OF HEARING, THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE TRANSACTION OF PURCHASE AND SALE OF SHARES WHIC H HAS RESULTED IN LONG TERM CAPITAL GAINS ARE DULY RECORDED IN THE BOOKS OF ACC OUNT OF THE ASSESSEE. THOUGH THE LTCG ARISING ON SALE OF SHARES OF LISTED COMPANIES IS EXEMPT UNDER SECTION 10(38) OF THE IT ACT, HOWEVER, DURING THE COURSE OF SEARCH AN D SEIZURE ACTION ON 2 ND JULY, 2015 THE ASSESSEE IN THE STATEMENT RECORDED UNDER S ECTION 132(4) HAS SURRENDERED THE LTCG TO TAX. THE LD. A/R HAS FURTHER CONTENDED THAT THE SHARES PURCHASED IN THE FINANCIAL YEAR 2012-13 WERE DULY SHOWN IN THE BALAN CE SHEET AS ON 31 ST MARCH 2015 AND THE AO HAS NOT DISTURBED THE TRANSACTION OF PUR CHASE OF SHARES. THE PURCHASE CONSIDERATION AS WELL AS SALE CONSIDERATION HAS BEE N PAID AND RECEIVED RESPECTIVELY 4 ITA NO. 1379 & 1439/JP/2018 SMT. APARNA AGARWAL, KOTA VS. DCIT, KOTA THROUGH BANKING CHANNEL. THE FACT OF PURCHASE OF S HARES AS WELL AS SALE OF SHARES AND PAYMENT AND RECEIPT OF CONSIDERATION ARE INDEPE NDENTLY VERIFIABLE FROM THE DEMAT ACCOUNT, BANK ACCOUNT STATEMENT AS WELL AS TH E RECORD OF THE STOCK EXCHANGE. THE LD. A/R HAS FURTHER CONTENDED THAT TH E ASSESSEE PRODUCED ALL THE SUPPORTING DOCUMENTARY EVIDENCES OF PURCHASE AND SA LE OF THESE SHARES THROUGH STOCK EXCHANGE AS THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES ARE OF LISTED COMPANIES THROUGH REGISTERED BROKERS. THE SHARES W ERE DULY REFLECTED IN THE DEMAT ACCOUNT OF THE ASSESSEE AND THE SALE OF THESE SHARE S WERE ALSO FROM THE DEMAT ACCOUNT OF THE ASSESSEE. THEREFORE, WHEN THE TRANS ACTIONS OF PURCHASE AND SALES ARE THROUGH STOCK EXCHANGE AND PAYMENT OF PURCHASE CONSIDERATION AS WELL AS RECEIPT OF SALE CONSIDERATION IS THROUGH BANKING CH ANNEL AND DULY RECORDED IN THE BOOKS OF ACCOUNTS, THEN THE TRANSACTIONS RECORDED I N THE SEPARATE SLIPS WILL NOT CHANGE THE CHARACTER OF THE TRANSACTION AND THE INC OME FROM DISCLOSED TO UNDISCLOSED. THE LD. A/R HAS POINTED OUT THAT THE ASSESSEE SUBMITTED ALL THE DOCUMENTS AND RECORDS PERTAINING TO PURCHASE AND SA LE OF EQUITY SHARES OF LISTED COMPANIES THROUGH RECOGNIZED STOCK EXCHANGE. THE D OCUMENTS ALSO INCLUDE CONTRACT NOTES SHOWING PAYMENT OF STT, BILLS, DEPOS ITORY STATEMENT, REGISTERED STOCK BROKERS LEDGER ACCOUNT AND BANK STATEMENT EVI DENCING THE PAYMENT OF PURCHASE CONSIDERATION AS WELL AS THE RECEIPT OF TH E SALE CONSIDERATION THROUGH PROPER BANKING CHANNEL. ALL THESE DOCUMENTS DULY S UBSTANTIATED THE GENUINENESS OF THE LTCG EARNED DURING THE YEAR UNDER CONSIDERATION AND THE DOCUMENTS PRODUCED BY THE ASSESSEE WERE NOT EITHER DETECTED OR CONTROV ERTED BY THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS. FURTHER, DURING THE COURSE OF SEARCH AND SEIZURE OPERATION, NO INCRIMINATING MATERIAL, EVIDENCE OR D OCUMENT WHATSOEVER WAS FOUND BUT ONLY THE CALCULATION OF LTCG RECORDED IN THE SE PARATE SLIPS CANNOT BE SAID TO BE INCRIMINATING MATERIAL WHEN ALL THESE TRANSACTIONS ARE DULY RECORDED IN THE BOOKS OF ACCOUNT. THE LD. A/R HAS FURTHER SUBMITTED THAT TH E LEVY OF PENALTY UNDER SECTION 271AAB(1) OF THE ACT IS NOT AUTOMATIC BUT THE AO HA S TO TAKE A DECISION BY CONSIDERING ALL THE CONDITIONS TO BE SATISFIED AS P ROVIDED UNDER THE SAID SECTION. SINCE THE DISCLOSURE AND SURRENDER OF THE AMOUNT DO ES NOT FALL IN THE DEFINITION OF UNDISCLOSED INCOME, THEREFORE, THE PENALTY UNDER SE CTION 271AAB IS NOT LEVIABLE IN 5 ITA NO. 1379 & 1439/JP/2018 SMT. APARNA AGARWAL, KOTA VS. DCIT, KOTA THE CASE OF THE ASSESSEE MERELY BECAUSE THE ASSESSE E HAS DECLARED AND SURRENDERED SOME INCOME TO TAX. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL DATED 24 TH JULY, 2018 IN CASE OF SHRI DINESH KUMAR AGARWAL VS. ACIT IN ITA NO. 855 & 856/JP/2017 AS WELL AS DECISION DATED 13.06.2018 IN CASE OF SHRI RAVI MATHUR VS. DCIT IN ITA NO. 969/JP/2017 AND SUBMITTED THAT THE TRIBUNAL HAS HELD THAT THE PENAL TY UNDER SECTION 271AAB IS NOT AUTOMATIC BUT THE AO HAS TO ISSUE A SHOW CAUSE NOTI CE AND GIVE A PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE AND, THEREAF TER TAKE A DECISION TO IMPOSE THE PENALTY. IT IS STATUTORY REQUIREMENT THAT THE EXPL ANATION OF THE ASSESSEE FOR NOT FULFILLING THE CONDITIONS AS PRESCRIBED UNDER SECTI ON 271AAB OF THE IT ACT IS REQUIRED TO BE CONSIDERED BY THE AO WHILE PASSING THE PENALT Y ORDER. THE PENALTY UNDER SECTION 271AAB IS NOT CONSEQUENTIAL TO THE ASSESSME NT OR SURRENDER OF INCOME DURING THE COURSE OF SEARCH BUT THE AO HAS TO FIRST INITIATE PROCEEDINGS BY ISSUING A SHOW CAUSE NOTICE AND AFTER CONSIDERING THE EXPLANA TION AND REPLY OF THE ASSESSEE HAS TO TAKE A DECISION. THE LD. A/R HAS CONTENDED THAT IT IS SETTLED LAW THAT PENALTY SHOULD NOT BE IMPOSED UNLESS THE CASE FALLS UNDER T HE FOUR CORNERS OF LAW MANDATING THE PENALTY. THE LD. A/R HAS REFERRED TO THE DEFINI TION OF UNDISCLOSED INCOME AS PROVIDED IN THE EXPLANATION TO SECTION 271AAB AND S UBMITTED THAT THE MERE SURRENDER OF INCOME WOULD NOT AUTOMATICALLY BECOME UNDISCLOSED INCOME BUT THE AO HAS TO TAKE A DECISION AS PER THE DEFINITION GIVEN IN THE EXPLANATION TO SECTION 271AAB. IN THE CASE OF THE ASSESSEE, WHEN THE SURR ENDER IS NOT FALLING UNDER THE CATEGORY OF UNDISCLOSED INCOME AS PRESCRIBED UNDER SECTION 271AAB AS THE ASSESSEE HAS ALREADY RECORDED THESE TRANSACTIONS IN THE BOOK S OF ACCOUNT AND ALSO FURNISHED THE SUPPORTING DOCUMENTS TO PROVE THE GENUINENESS O F THE TRANSACTION OF PURCHASE AND SALE OF THE SHARES OF LISTED COMPANIES ON THE S TOCK EXCHANGE THROUGH REGISTERED BROKERS, THEREFORE, WHILE PASSING THE PENALTY ORDER THE AO HAS TO DECIDE WHETHER THE SURRENDER MADE BY THE ASSESSEE IS COVERED UNDER THE DEFINITION OF UNDISCLOSED INCOME FOR THE PURPOSE OF SECTION 271AAB. THE AO H AS IMPOSED THE PENALTY BASED ON THE STATEMENT RECORDED DURING THE SEARCH WHEREAS THE INCOME SURRENDERED BY THE ASSESSEE IS NOT COVERED UNDER THE DEFINITION OF UNDISCLOSED INCOME PROVIDED UNDER SECTION 271AAB OF THE ACT. THE LD. A/R HAS A SSERTED THAT THE REVENUE 6 ITA NO. 1379 & 1439/JP/2018 SMT. APARNA AGARWAL, KOTA VS. DCIT, KOTA AUTHORITIES HAVE EXAGGERATED UNDUE PRESSURE AND OBT AINED SURRENDER FROM THE ASSESSEE AND THIS FACT IS MANIFEST FROM ALL THE SUP PORTING DOCUMENTS PRODUCED BY THE ASSESSEE AS WELL AS THE TRANSACTIONS WERE RECOR DED IN THE BOOKS OF ACCOUNT AND THE SHARES HELD BY THE ASSESSEE WERE REFLECTED IN T HE BALANCE SHEET AS ON 31 ST MARCH, 2015. THUS THE LD. A/R HAS SUBMITTED THAT T HE MERE STATEMENT RECORDED UNDER SECTION 132(4) DOES NOT BY ITSELF CONSTITUTE INCRIMINATING MATERIAL AS HELD BY THE HONBLE DELHI HIGH COURT IN CASE OF CIT VS. HAR JEEV AGGARWAL, 290 CTR 263 (DELHI) AS WELL AS IN CASE OF PR. CIT VS. BEST INFR ASTRUCTURE (INDIA) PVT. LTD., 397 ITR 82 (DELHI). THE LD. A/R HAS ALSO REFERRED TO A SER IES OF DECISIONS ON THE POINT THAT THE PENALTY UNDER SECTION 271AAB CANNOT BE IMPOSED MERELY ON THE SURRENDER MADE UNDER SECTION 132(4) IN THE ABSENCE OF ANY INCRIMIN ATING MATERIAL FOUND DURING THE SEARCH. HE HAS REFERRED TO THE VARIOUS DOCUMENTS P RODUCED BY THE ASSESSEE BEFORE THE AO AND SUBMITTED THAT THE AO HAS NOT POINTED OU T ANY DEFECT OR GIVEN THE FINDING THAT THE DOCUMENTS PRODUCED BY THE ASSESSEE ARE NOT GENUINE, THEN TREATING THE SURRENDER MADE BY THE ASSESSEE ON ACCOUNT OF LT CG AS UNDISCLOSED INCOME AND LEVYING THE PENALTY UNDER SECTION 271AAB IS NOT SUS TAINABLE IN LAW. 3. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T IT WAS A CASE OF BOGUS CLAIM OF LTCG EXEMPT UNDER SECTION 10(38) OF THE IT ACT. HOWEVER, DURING THE COURSE OF SEARCH AND SEIZURE ACTION, IT WAS FOUND T HAT THE CLAIM WAS BOGUS AND CONSEQUENTLY THE ASSESSEE DECLARED THE INCOME AND S URRENDERED TO TAX. THEREFORE, BOGUS CLAIM WAS DETECTED ONLY DURING THE COURSE OF SEARCH AND SEIZURE ACTION WHICH WAS ADMITTED BY THE ASSESSEE IN THE STATEMENT RECOR DED UNDER SECTION 132(4). THE DISCLOSURE OF UNDISCLOSED INCOME IS IN REFERENCE TO THE SEIZED MATERIAL WHICH WAS FOUND DURING THE COURSE OF SEARCH. ONCE THE ASSESS EE HAS SURRENDERED THE UNDISCLOSED INCOME BASED ON THE INCRIMINATING MATER IAL FOUND AND SEIZED DURING THE SEARCH, THEN THE SAID INCOME WAS RIGHTLY TREATED BY THE AO AS UNDISCLOSED INCOME IN TERMS OF PROVISIONS OF SECTION 271AAB OF THE ACT. FURTHER, THE ASSESSEE HAS NOT SUBSTANTIATED THE MANNER IN WHICH THE UNDISCLOSED I NCOME WAS DERIVED DURING THE STATEMENT UNDER SECTION 132(4) OR DURING THE ASSESS MENT OR PENALTY PROCEEDINGS. THEREFORE, THE PENALTY @ 30% IS LEVIABLE IN THE CAS E OF THE ASSESSEE WHEN THE 7 ITA NO. 1379 & 1439/JP/2018 SMT. APARNA AGARWAL, KOTA VS. DCIT, KOTA ASSESSEE FAILED TO SATISFY THE CONDITION (A)(II) OF SECTION 271AAB(1) OF THE IT ACT. THE LD. CIT (A) HAS COMMITTED AN ERROR WHILE RESTRI CTING THE PENALTY TO 10% FROM 30% OF THE SURRENDERED INCOME LEVIED BY THE AO. HE HAS RELIED UPON THE PENALTY ORDER PASSED UNDER SECTION 271AAB OF THE IT ACT. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS LEVIED THE PENALTY UNDER SECTIO N 271AAB OF THE ACT IN RESPECT OF THE INCOME SURRENDERED BY THE ASSESSEE ON ACCOUNT O F LTCG FROM PURCHASE AND SALE OF EQUITY SHARES. THE QUESTION ARISES WHETHER THE SURRENDER MADE BY THE ASSESSEE IN THE STATEMENT RECORDED UNDER SECTION 132(4) WILL BE REGARDED AS UNDISCLOSED INCOME WITHOUT TESTING THE SAME WITH THE DEFINITION AS PROVIDED UNDER CLAUSE (C) OF EXPLANATION TO SECTION 271AAB OF THE ACT. THERE IS NO DISPUTE THAT IN THE STATEMENT RECORDED UNDER SECTION 132(4), THE ASSESSEE HAS DIS CLOSED THE INCOME UNDER CONSIDERATION AS UNDISCLOSED INCOME ON ACCOUNT OF L TCG. HOWEVER, FOR THE PURPOSE OF LEVYING THE PENALTY UNDER SECTION 271AAB, THE PR IMARY CONDITION IS THAT THE ASSESSEE SHALL PAY THE PENALTY EQUIVALENT TO 10%, 2 0% OR 30% OF UNDISCLOSED INCOME OF SPECIFIED PREVIOUS YEAR DEPENDING UPON TH E SATISFACTION OF THE CONDITION AS PROVIDED UNDER SECTION 271AAB. THE TERM UNDISC LOSED INCOME HAS BEEN DEFINED IN THE EXPLANATION TO SECTION 271AAB AND, T HEREFORE, THE PENALTY UNDER THE SAID PROVISION HAS TO BE LEVIED ONLY WHEN THE INCOM E SURRENDERED BY THE ASSESSEE FALLS IN THE AMBIT OF UNDISCLOSED INCOME AS DEFINED UNDER THIS SECTION. THE MERE DISCLOSURE OF INCOME IN THE STATEMENT RECORDED UNDE R SECTION 132(4) WOULD NOT IPSO FACTO BE REGARDED AS UNDISCLOSED INCOME UNLESS AND UNTIL IT IS TESTED AS PER THE DEFINITION PROVIDED IN THE EXPLANATION TO SECTION 2 71AAB OF THE ACT. IN THE CASE IN HAND, THERE IS NO DISPUTE THAT THE ASSESSEE HAS DUL Y RECORDED THE TRANSACTION OF PURCHASE AND SALE OF EQUITY SHARES OF THE LISTED CO MPANIES IN THE BOOKS OF ACCOUNT WHICH HAS YIELDED THE CAPITAL GAIN IN QUESTION OF R S. 3,85,30,241/-. THE ASSESSEE HAS ALSO SHOWN THESE SHARES IN THE BALANCE SHEET AS ON 31 ST MARCH, 2015 AND THE AO HAS NOT DOUBTED OR DISTURBED THE HOLDING OF SHAR ES BY THE ASSESSEE ON THE DATE OF BALANCE SHEET ENDED ON 31 ST MARCH, 2015. ONCE THE TRANSACTIONS ARE DULY RECORDED IN THE BOOKS OF ACCOUNT, THEN THE DOCUMENT S IN THE SHAPE OF SLIPS 8 ITA NO. 1379 & 1439/JP/2018 SMT. APARNA AGARWAL, KOTA VS. DCIT, KOTA CONTAINING THE DETAILS OF LTCG FOUND DURING THE SEA RCH WOULD NOT AMOUNT TO INCRIMINATING MATERIAL DISCLOSING ANY UNDISCLOSED I NCOME. THE DEFINITION OF UNDISCLOSED INCOME AS PER CLAUSE (C) OF EXPLANATION TO SECTION 271AAB READS AS UNDER :- (C) 'UNDISCLOSED INCOME' MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENT ED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR 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 SEARC H 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 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 REL ATING TO THE SPECIFIED PREVIOUS YEAR WHICH IS FOUND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCTED.] THE LEVY OF PENALTY UNDER SECTION 271AAB DOES NOT D EPENDENT ON THE ADDITION MADE DURING THE ASSESSMENT PROCEEDINGS BUT THE CONDITION S PROVIDED UNDER SECTION 271AAB ARE PRECEDENT FOR LEVY OF PENALTY. THE ASSE SSMENT ORDER IS RELEVANT ONLY FOR THE PURPOSE OF LIMITATION PROVIDED UNDER SECTION 27 5 OF THE IT ACT WHEREAS THE PENALTY UNDER SECTION 271AAB HAS TO BE IMPOSED ONLY WHEN THE INCOME DISCLOSED BY THE ASSESSEE FALLS IN THE AMBIT OF UNDISCLOSED INCO ME AS DEFINED UNDER SECTION 271AAB OF THE ACT. THE DEFINITION OF UNDISCLOSED I NCOME CONTEMPLATES VARIOUS FORMS AND THE PRIMARY CONDITION IS THAT THE INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENTED BY ANY MONEY, BULLION, JEWELLERY OR OTH ER VALUABLE ARTICLE OR THING OR ANY 9 ITA NO. 1379 & 1439/JP/2018 SMT. APARNA AGARWAL, KOTA VS. DCIT, KOTA ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND DURING THE COURSE OF SEARCH WHICH HAS NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN T HE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR. IN THE CASE IN HAND, SINCE THE SURRENDER WAS MADE IN RESPECT OF THE LTCG RECORDED IN THE SEIZED MATERIAL, THEREFORE , IT IS BASED ON THE ENTRIES IN THE OTHER DOCUMENTS FOUND DURING THE COURSE OF SEARCH. THE INCOME IN THE SHAPE OF ENTRIES IN OTHER DOCUMENTS FOUND DURING THE COURSE OF SEARCH WOULD BE CONSIDERED AS UNDISCLOSED INCOME IF THE SAID INCOME HAS NOT BE EN RECORDED IN THE BOOKS OF ACCOUNT ON OR BEFORE THE DATE OF SEARCH. IN THE CA SE IN HAND, IT IS UNDISPUTED FACT THAT ALL THE TRANSACTIONS OF PURCHASE AND SALE AND LTCG ARISING FROM THE SALE OF EQUITY SHARES OF THE LISTED COMPANIES ARE DULY RECO RDED IN THE BOOKS OF ACCOUNT. THEREFORE, IT IS NOT THE CASE OF ANY INCOME OF THE SPECIFIED YEAR REPRESENTING THE ENTRY IN THE OTHER DOCUMENTS WHICH HAS NOT BEEN REC ORDED IN THE BOOKS OF ACCOUNT ON THE DATE OF SEARCH. THEREFORE, THE PRIMARY CO NDITION OF UNDISCLOSED INCOME THAT THE INCOME REPRESENTED BY THE ENTRY IN THE OTHER RE CORD IS NOT RECORDED IN THE BOOKS OF ACCOUNT ON THE DATE OF SEARCH IS NOT SATISFIED. THE DEFINITION OF UNDISCLOSED INCOME IS SUBJECTED TO TWO CONDITIONS THAT THE SAI D INCOME HAS NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACC OUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PR EVIOUS YEAR. THE SECOND CONDITION IS NOT RELEVANT FOR OUR PURPOSE SINCE THE SE ENTRIES ARE UNDISPUTEDLY DULY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. WE FURTHER NOTE THAT THE SEIZED MATERIAL DOES NOT REVEAL THE NATURE OF TRANSACTION BEING GENUINE OR BOGUS BUT THE ENTRY IN THE SEIZED MATERIAL IS ONLY THE COMPUTATIO N OF LONG TERM CAPITAL GAIN ON SALE OF SHARES. THEREFORE, THE DOCUMENTS WHICH WERE FOU ND AND SEIZED DURING THE COURSE OF SEARCH AND SEIZURE ACTION CONTAINS THE DE TAILS OF LTCG WOULD NOT BE REGARDED AS INCRIMINATING MATERIAL DISCLOSING ANY I NCOME NOT RECORDED IN THE BOOKS OF ACCOUNT. HENCE THE PRIMARY CONDITION FOR TREATIN G SUCH INCOME AS UNDISCLOSED INCOME IN TERMS OF SECTION 271AAB IS NOT SATISFIED. APART FROM THE FACT THAT THESE TRANSACTIONS WERE DULY RECORDED IN THE BOOKS OF ACC OUNT, THE ASSESSEE HAS ALSO PRODUCED RELEVANT DOCUMENTS, THE DETAILS OF WHICH A RE AS UNDER :- 10 ITA NO. 1379 & 1439/JP/2018 SMT. APARNA AGARWAL, KOTA VS. DCIT, KOTA (A) IN RELATION TO SHARES PURCHASE : SUMMARY OF SHARES PURCHASED DURING THE FY 2012 - 13 (PAGE NO. 87 OF PAPER BOOK) COPY OF SHARE ALLOTMENT ADVICE IN SUPPORT OF SHARE PURCHASED (PAGE NO. 88 OF PAPER BOOK. COPY OF RELEVANT PAGE OF BANK STATEMENT SHOWING THE PAYMENT MADE AGAINST PURCHASES OF SHARES (PAGE NO. 89 OF PAPER BOOK) COPY OF CORPORATE ACTION OF THE COMPANY INFORMED TO BOMBAY STOCK EXCHANGE (EFFECT OF STOCK SPLIT)(PA GE NO. 90 OF PAPER BOOK) ACKNOWLEDGEMENT OF ITR FILED ON 0 7 . 1 0.2013 U/S 139(1) OF INCOME T4AX ACT, 1961 ALONG WITH COMPUTATION SHEET OF TOTAL INCOME O F THE A.Y. 2013-14 (PAGE NOS. 91-93 OF PAPER BOOK). ACKNOWLEDGEMENT OF ITR FILED ON 0 2 .0 2 .2016 U/S 153A OF INCOME TAX ACT, 1961 ALONG WITH COMPUTATION SHEET OF TOTAL INCOME O F THE A.Y. 2013-14. (PAGE NOS. 94-97 OF PAPER BOOK) COPY OF BALANCE SHEET AND CAPITAL ACCOUNT OF ASSESSMENT YEAR 2013 - 14 (PAGE NO. 98 OF PAPER BOOK) COPY OF ASSESSMENT ORDER DATED 22.12.2017 U/S 143(3 ) R.W.S. 153A PASSED BY DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCL E KOTA (RAJ.) FOR THE ASSESSMENT YEAR 2013-14 (PAGE NOS. 99-105 OF PAPER BOOK) COPY OF LEDGER A/C OF FOLLOWING SHARES BROKERS FROM THE BOOKS OF ACCOUNT OF ASSESSEE DEPICTING THE DETAILS OF EQUITY SHARES PUR CHASED BY THE ASSESSEE ARE ENCLOSED : (PAGE NO. 102 -105 OF PAPER BOOK) RELIGARE SECURITIES LIMITED HEM SECURITIES LIMITED SURESH RATHI SECURITIES PRIVATE LIMITED. (B) IN RELATION TO SHARES SALES: SUMMARY OF SHARES SALE DURING THE YEAR UNDER CONSID ERATION (PAGE NO. 1 10 OF PAPER BOOK) COPY OF SALES BILLS/CONTRACT NOTES OF SHARES (PAGE NOS. 1 11 - 158 OF PAPER BOOK) COPY OF LEDGER ACCOUNT OF ASSESSEE IN BOOKS OF ACCO UNTS OF SHARE BROKERS THROUGH WHOM THE SHARES WERE SOLD (PAGE NOS. 159 OF PAPER BOOK) COPY OF RELEVANT PAGE OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT RECEIVED AGAINST SALES OF SHARES (PAGE NOS. 160-169 OF PAPER BOOK) (C) DEMAT ACCOUNT STATEMENT OF FOLLOWING SHARES BROKERS IN RESPECT OF SALES & PURCHASE OF SHARES (PAGE NOS. 17 0-172A OF PAPER BOOK) : ARIHANT CAPITAL MARKETS LIMITED SURESH RATHI SECURITIES PRIVATE LIMITED HEM SECURITIES LIMITED 11 ITA NO. 1379 & 1439/JP/2018 SMT. APARNA AGARWAL, KOTA VS. DCIT, KOTA THUS, THE PURCHASE BILL FOR THE PURCHASE OF SHARES ALONG WITH LEDGER ACCOUNT IN THE BOOKS OF THE SHARE BROKER CLEARLY REVEAL THE DATE O F PURCHASE AND ALSO PAYMENT OF PURCHASE CONSIDERATION THROUGH BANKING CHANNEL AS R EFLECTED IN THE BANK ACCOUNT STATEMENT OF THE ASSESSEE. ALL THE ABOVE MENTIONED DOCUMENTS ARE INDEPENDENTLY VERIFIABLE EVIDENCE WITHOUT HAVING ANY CONTROL OR I NFLUENCE OF THE ASSESSEE EXCEPT THE BOOKS OF ACCOUNT OF THE ASSESSEE WHICH WERE NOT DISPUTED BY THE AO. FURTHER, THE REVENUE HAS NOT DISPUTED THE CORRECTNESS OF THE DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE BUT THE AO HAS PROCEEDED ON THE ASSUM PTION THAT THE INCOME DISCLOSED BY THE ASSESSEE UNDER SECTION 132(4) IS UNDISCLOSED INCOME FOR THE PURPOSE OF SECTION 271AAB OF THE ACT. THE AO WHILE PASSING THE ASSESSMENT ORDER UNDER SECTION 153A FOR THE ASSESSMENT YEAR 2015-16 HAS NOT DISTURBED THE HOLDING OF THE SHARES SHOWN IN THE BALANCE SHEET AS ON 31 ST MARCH, 2014. THESE TRANSACTIONS WERE ALSO CARRIED OUT FROM THE CAPITAL ACCOUNT OF THE ASSESSEE WHICH WAS ALSO PART OF THE RECORD OF THE ASSESSMENT YEAR 2014-15. BUT THE AO HAS ACCEPTED ALL THESE DETAILS WITHOUT ANY ADVERSE FIND ING OR COMMENTS WHILE PASSING THE ASSESSMENT ORDER UNDER SECTION 153A OR THE ACT. THE ASSESSEE HAS ALSO PRODUCED SALE BILLS/CONTRACT NOTES REGARDING SALE O F SHARES, COPY OF LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF SHARE BROKER IN RESPEC T OF SALE TRANSACTIONS, BANK STATEMENT SHOWING RECEIPT OF SALE CONSIDERATION AND DEMAT ACCOUNT HAVING THE ENTRIES OF CREDIT OF SHARES AT THE TIME OF PURCHASE AND DEBIT OF SHARES AT THE TIME OF SALE. THE EQUITY SHARES IN QUESTION ARE OF LISTED COMPANIES IN THE STOCK EXCHANGE AND WERE PURCHASED AND SOLD BY THE ASSESSEE THROUGH STOCK EXCHANGE. THEREFORE, THE TRANSACTIONS OF PURCHASE AND SALE ARE VERIFIABL E FROM THE INDEPENDENT SOURCE INCLUDING THE RECORD OF THE STOCK EXCHANGE WITHOUT HAVING ANY INFLUENCE OF THE ASSESSEE. HENCE THE DOCUMENT PRODUCED BY THE ASSES SEE IS THE EVIDENCE WHICH CANNOT BE MANIPULATED AND ALSO CAN BE VERIFIED FROM THE INDEPENDENT SOURCES. ONCE THE ASSESSEE HAS ESTABLISHED THE FACT THAT ALL THESE TRANSACTIONS ARE RECORDED IN THE BOOKS OF ACCOUNT AND ALSO PRODUCED, THE RELE VANT DOCUMENTARY EVIDENCE TO ESTABLISH THE GENUINENESS OF THE PURCHASE AND SALE OF SHARES THROUGH STOCK EXCHANGE, THEN THE MERE DISCLOSURE AND SURRENDER OF INCOME WOULD NOT IPSO FACTO LEAD TO THE CONCLUSION THAT THE AMOUNT SURRENDERED BY THE ASSESSEE IS UNDISCLOSED 12 ITA NO. 1379 & 1439/JP/2018 SMT. APARNA AGARWAL, KOTA VS. DCIT, KOTA INCOME IN TERMS OF SECTION 271AAB OF THE ACT. FOR BRINGING THE INCOME SURRENDERED BY THE ASSESSEE IN THE FOLD OF UNDISCLOSED INCOME A S PER THE DEFINITION OF UNDISCLOSED INCOME IN EXPLANATION TO SECTION 271A AB, THE SAID INCOME MUST REPRESENT EITHER ANY MONEY, BULLION, JEWELLERY OR O THER VALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENT S BUT HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT AS ON THE DATE OF SEARCH. THE REFORE, THE PRIMARY CONDITION FOR TREATING AN INCOME AS UNDISCLOSED INCOME IS THAT IT SHOULD REPRESENT INTER ALIA ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS FO UND DURING THE SEARCH BUT THE SAID INCOME IS NOT RECORDED IN THE BOOKS OF ACCOUNT . IN THE CASE IN HAND, THE DOCUMENT FOUND DURING THE SEARCH IS NOT AN INCRIMIN ATING MATERIAL WHEN THE ENTRY AND THE INCOME WERE DULY RECORDED IN THE BOOKS OF A CCOUNT. THEREFORE, THE STATEMENT OF THE ASSESSEE RECORDED UNDER SECTION 13 2(4) WOULD NOT CONSTITUTE INCRIMINATING MATERIAL. THEREFORE, THE SAID INCOME DISCLOSED BY THE ASSESSEE CANNOT BE CONSIDERED AS UNDISCLOSED INCOME IN TERMS OF SEC TION 271AAB OF THE ACT. THE THE TRIBUNAL HAS TAKEN A CONSISTENT VIEW THAT THE PENAL TY UNDER SECTION 271AAB IS NOT AUTOMATIC BUT THE AO HAS TO TAKE A DECISION AS PER THE PROVISIONS OF SECTION 271AAB AND PARTICULARLY IN THE LIGHT OF THE DEFINITION OF THE UNDISCLOSED INCOME AS PRESCRIBED IN THE EXPLANATION TO SECTION 271AAB OF THE ACT. W E FURTHER NOTE THAT THIS TRIBUNAL HAS CONSIDERED THIS ISSUE IN CASE OF SHRI RAJA RAM MAHESHWARI VS. DCIT VIDE ORDER DATED 10 TH JANUARY, 2019 IN ITA NO. 992/JP/2017 IN PARA 12 TO 14 AS UNDER :- 12. NOW, COMING TO ANOTHER CONTENTION OF THE LD A R WHERE HE HAS CHALLENGED THE FINDINGS OF THE LD. CIT(A) THAT PENA LTY 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 SUBMITTED THAT IT IS SETTLED POSITION OF LAW THAT PENALTIES ARE NOT COMPULSORY, NOT MANDATORY BUT ARE ALSO DISCRETIONARY 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 13 ITA NO. 1379 & 1439/JP/2018 SMT. APARNA AGARWAL, KOTA VS. DCIT, KOTA DECISION OF HONBLE A.P HIGH COURT IN CASE OF RADHA KRISHNA VIHAR (ITA NO. 740/2011). 13. IN THIS REGARD, WE REFER TO THE PROVISIONS OF S ECTION 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) TO SECTION 2 71AAB. FURTHER, AS PER SUB-SECTION (3) OF SECTION 271AAB, THE PROVISIO NS OF SECTION 274 AND SECTION 275 AS FAR AS MAY BE APPLIED IN RELATIO N TO PENALTY UNDER THIS SECTION WHICH MEANS THAT BEFORE LEVYING THE PE NALTY, THE ASSESSING OFFICER HAS TO ISSUE A SHOW-CAUSE GRANTING AN OPPOR TUNITY TO THE ASSESSEE. THUS, THE LEVY OF PENALTY IS NOT AUTOMAT IC BUT THE ASSESSING OFFICER HAS TO DECIDE BASED ON FACTS AND CIRCUMSTAN CES OF THE CASE. SIMILAR VIEW HAS BEEN TAKEN BY THE VARIOUS CO-ORDIN ATE BENCHES AND USEFUL REFERENCE CAN BE DRAWN TO THE DECISION OF TH E CO-ORDINATE BENCH IN CASE OF ACIT VS MARVEL ASSOCIATES 92 TAXMANN.COM 109 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 L D. A.R. VEHEMENTLY ARGUED THAT THE A.O. HAS LEVIED THE PENA LTY UNDER THE IMPRESSION THAT THE LEVY OF PENALTY IN THE CASE OF ADMISSION OF INCOME U/S 132(4) IS MANDATORY. THE LD. A.R. FUR THER 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 ASSESSMENT AND ACCORDINGLY ARGUED THAT THE LE VY OF PENALTY UNDER SECTION 271AAB IS NOT MANDATORY 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 AND ARGUE D THAT THE 14 ITA NO. 1379 & 1439/JP/2018 SMT. APARNA AGARWAL, KOTA VS. DCIT, KOTA WORDS USED IN SECTION 271AAB OF THE ACT AND THE WOR DS USED IN SECTION 158BFA(2) OF THE ACT ARE IDENTICAL. HENCE, ARGUED THAT THE PENALTY SECTION 271AAB OF THE ACT PENALTY IS NO T AUTOMATIC AND IT IS ON THE MERITS OF EACH CASE. FOR READY REF ERENCE, WE REPRODUCE HEREUNDER SECTION 158BFA (2) OF THE ACT A ND 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 SECTION 132 ON OR AFTER THE 1ST 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 THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF SEARCH, IN A STATEMENT UNDER SUB- SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPEC IFIES 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 PREVIOUS YEA R 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 ASSE SSEE 15 ITA NO. 1379 & 1439/JP/2018 SMT. APARNA AGARWAL, KOTA VS. DCIT, KOTA (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 WHICH SHALL NOT BE LESS THAN THIRTY PER CENT 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 R ESPECT 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 DIRECT T HAT A PERSON SHALL PAY BY WAY OF PENALTY A SUM WHICH SHALL NOT BE LESS THAN THE AMOUNT OF TAX LEVIABLE BUT WHICH SHALL NOT EXCEED THREE TI MES THE AMOUNT OF TAX SO LEVIABLE IN RESPECT OF THE UNDISCLOSED INCOM E DETERMINED BY THE ASSESSING OFFICER UNDER CLAUSE (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 ASSESSEE OFFERS THE MONEY SO SEIZED 16 ITA NO. 1379 & 1439/JP/2018 SMT. APARNA AGARWAL, KOTA VS. DCIT, KOTA 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 PRECEDI NG PROVISO 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 SUC H CASES THE PENALTY SHALL BE IMPOSED ON THAT PORTION OF UNDISCLOSED INCOME DE TERMINED 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 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 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 INTENTIO N TO CONSIDER THE IMPOSITION OF PENALTY JUDICIALLY. SECTION 274 DEALS WITH THE P ROCEDURE 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 T HE ASSESSEE IS GIVEN A REASONABLE OPPORTUNITY AND ASSESSEE IS BEING HEARD. ONCE THE OPPORTUNITY IS GIVEN TO THE ASSESSEE, THE PENALTY CANNOT BE MANDAT ORY AND IT IS ON THE BASIS OF THE FACTS AND MERITS PLACED BEFORE THE A.O. ONCE THE A.O. IS BOUND BY THE ACT TO HEAR THE ASSESSEE AND TO GIVE REASONABLE OPP ORTUNITY TO EXPLAIN HIS CASE, THERE IS NO MANDATORY REQUIREMENT OF IMPOSING PENALTY, BECAUSE THE OPPORTUNITY OF BEING HEARD AND REASONABLE OPPORTUNI TY IS NOT A MERE FORMALITY 17 ITA NO. 1379 & 1439/JP/2018 SMT. APARNA AGARWAL, KOTA VS. DCIT, KOTA BUT IT IS TO ADHERE TO THE PRINCIPLES OF NATURAL JU STICE. HON'BLE A.P. HIGH COURT IN THE CASE OF RADHAKRISHNA VIHAR IN ITTA NO.740/20 11 WHILE DEALING 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 O F 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 PAYMENT OF INTERE ST IS MANDATORY LEVY OF PENALTY IS DISCRETIONARY. IT IS TRITE POSITION OF L AW THAT DISCRETION IS VESTED AND AUTHORITY HAS TO BE EXERCISED IN A REASONABLE AND R ATIONAL MANNER DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF THE EACH CASE. PLAIN READING OF SECTION 271AAB AND 274 OF THE ACT INDICATES THAT THE IMPOSI TION 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 BUT TO BE I MPOSED ON MERITS OF THE EACH CASE. 14. 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 DEPEND UPON T HE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WHICH WE SHALL DI SCUSS IN SUBSEQUENT PARAGRAPHS. 5. HENCE IN VIEW OF THE FACTS AND CIRCUMSTANCES AS DISCUSSED IN DETAIL IN FOREGOING PARAS AS WELL AS FOLLOWING THE EARLIER DE CISION OF THIS TRIBUNAL, WE HOLD THAT THE INCOME SURRENDERED OF RS. 3,85,30,241/- ON ACCO UNT OF LONG TERM CAPITAL GAIN BY THE ASSESSEE IN THE STATEMENT RECORDED UNDER SEC TION 132(4) DOES NOT FALL IN THE AMBIT OF DEFINITION OF UNDISCLOSED INCOME AS CONTEM PLATED IN EXPLANATION TO SECTION 271AAB OF THE ACT. REGARDING CASH OF RS 82,50,000/ - FOUND DURING THE COURSE OF SEARCH, THERE CANNOT BE ANY DISPUTE THAT THE SAME F ALLS IN THE DEFINITION OF UNDISCLOSED INCOME AND THE SAME IS SUBJECT TO PENAL TY U/S 271AAB OF THE ACT ACCORDINGLY, THE PENALTY LEVIED BY THE AO AND SUSTA INED BY THE LD. CIT (A) ON LTCG IS DELETED AND PENALTY SUSTAINED BY THE LD CIT(A) O N CASH FOUND DURING THE COURSE OF SEARCH IS UPHELD. 18 ITA NO. 1379 & 1439/JP/2018 SMT. APARNA AGARWAL, KOTA VS. DCIT, KOTA IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25/03/2019. 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 JAIPUR DATED:- 25/03/2019. GANESH KR. VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SMT. APARNA AGARWAL, KOTA. 2. THE RESPONDENT THE DCIT, CENTRAL CIRCLE, KOTA. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 1379 & 1439/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 19 ITA NO. 1379 & 1439/JP/2018 SMT. APARNA AGARWAL, KOTA VS. DCIT, KOTA