SHAMBHU KUMAR AGARWAL, KOTA V. DEPUTY COMMISSIONER OF INCOME TAX , KOTA

ITA 1381/JPR/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0126 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2019
• 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: Gift; Opportunity of being heard; Principle of natural justice; Initiation of penalty proceedings; Reasonable cause; Block assessment
• Section: 132; 271(1)(c); 11; 139; 143(3); 153A; 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 A 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. 1381/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2016-17 SHAMBHU KUMAR AGARWAL A-780, INDIRA VIHAR, 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/GIR NO.: ABQPA2058P 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 : 28/03/2019. VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)-2, UDAIPUR DATED 05.10.2018 FOR ASSESSMENT Y EAR 2016-17 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND S OF 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 PENALT Y ORDER AS WRONG, BAD IN LAW, INVALID AND VOID-AB-INITIO AS T HE LD. AO INITIATED THE PENALTY U/S 271AAB OF INCOME TAX ACT, 1961 WITHOUT SPECIFYING THE CLAUSE OF SECTION 271AAB OF THE ACT IN THE PENALTY NOTICE UNDER WHICH THE PENALTY WAS INITIATE D I.E. WHETHER ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 2 IT IS FOR CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF SECTION 271AAB(1) BECAUSE THE CONDITIONS FOR IMPOSING THE P ENALTY 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 PROVISION S 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 REQUIR ED 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. 4,44,570/- U/S 271AAB(1)(A) OF THE ACT OUT OF PENAL TY OF RS. 13,33,710/- IMPOSED BY THE AO U/S 271AAB(1)(C) OF T HE ACT MORE SO WHEN :- A) THE APPELLANT WAS NOT HAVING ANY UNDISCLOSED INCOME WITHIN THE MEANING OF SECTION 271AAB OF THE ACT, THEREFORE, NO PENALTY UNDER THIS SECTION CAN BE IMP OSED ON ASSESSEE. 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 EVIDE NCE WAS FOUND DURING SEARCH TO PROVE THAT THE ASSESSEE WAS HAVING UNDISCLOSED INCOME. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT (A) ERRED IN HOLDING THAT THE PENAL TY U/S 271AAB 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 ALLEGATION OF AO THAT THE APPELLANT FIND IN THE POS ITION OF MENS REA AND INTENTION WAS OF WRONG DOING THAT CONSTITUT ES 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 BE FORE THE HEARING OF APPEAL. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A SEARCH & SEIZURE ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 3 OPERATIONS U/S 132(1) WERE CARRIED OUT ON 02.07.201 5 AT THE VARIOUS PREMISES OF M/S KOTA DAL MILL GROUP INCLUDING THE R ESIDENTIAL PREMISES OF THE ASSESSEE. IN HIS RETURN OF INCOME FILED ON 1 9.09.2016, THE ASSESSEE HAS DECLARED TOTAL INCOME OF RS. 84,27,110 /- WHICH INCLUDES UNDISCLOSED INCOME OF RS. 44,45,700/- WHICH WAS SUR RENDERED BY THE ASSESSEE DURING THE SEARCH ACTION CARRIED OUT ON 02 .07.2015 AT HIS RESIDENTIAL PREMISES. THE SAID UNDISCLOSED INCOME R EPRESENTS EXCESS CASH AMOUNTING TO RS. 13,42,300/-, GOLD JEWELLERY V ALUED AT RS. 13,88,400/-, DIAMOND JEWELLERY VALUED AT RS. 13 ,15,000/-, CHINESE CURRENCY YUWAN EQUIVALENT TO INDIAN RS. 4,00,000/-. THE ASSESSMENT PROCEEDINGS WERE COMPLETED U/S 143(3) R.W.S. 153B(1 )(B) OF THE ACT. AND THE ASSESSEED INCOME WAS DETERMINED AT RS. 1,65 ,11,990/-. PENALTY PROCEEDINGS U/S 271AAB WERE SIMULTANEOUSLY INITIATED VIDE SHOW CAUSE DATED 29.12.2017 IN RESPECT OF UNDISCLOS ED INCOME SURRENDERED DURING THE COURSE OF SEARCH AMOUNTING T O RS. 44,45,700/-. 3. DURING THE COURSE OF PENALTY PROCEEDINGS, THE AS SESSING OFFICER HAS GIVEN A FINDING THAT THE ASSESSEE SATISFIES ALL THE CONDITIONS SPECIFIED IN SECTION 271AAB(1)(A) EXCEPT THE CONDIT ION RELATING TO SUBSTANTIATING THE MANNER IN WHICH UNDISCLOSED INCO ME WAS DERIVED BY THE ASSESSEE. ACCORDINGLY, PENALTY U/S 271AAB(1)(C) ON THE UNDISCLOSED INCOME OF RS. 44,45,700/- WAS LEVIED @ 30% VIDE ORD ER DATED 27.06.2018. BEING AGGRIEVED, THE ASSESSEE CARRIED T HE MATTER IN APPEAL BEFORE THE LD. CIT(A). THE LD CIT(A) HAS RETURNED A FINDING THAT THE ASSESSEE HAS OFFERED THE INCOME IN THE STATEMENT RE CORDED U/S 132(4), OFFERED THE SAME IN THE RETURN OF INCOME AND PAID T HE DUE TAX THEREON AND THUS, THE ASSESSEE HAS SATISFIED ALL THE CONDIT IONS SPECIFIED U/S 271AAB(1)(A) OF THE ACT. ACCORDINGLY, HE MODIFIED/R EDUCED THE PENALTY ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 4 @ 10% OF UNDISCLOSED INCOME AS AGAINST 30% LEVIED B Y THE ASSESSING OFFICER. NOW, AGAINST THE SAID FINDING OF THE LD. C IT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT IN THE SHOW CAUSE NOTICE, THE AO HAS NOT SPECIFIED THE LIM B UNDER WHICH HE PROPOSES TO LEVY THE PENALTY U/S 271AAB OF THE ACT WHICH SHOWS LACK OF APPLICATION OF MIND ON THE PART OF THE AO AND BASIS SUCH UNCERTAIN CHARGE, THE CONSEQUENT PROCEEDINGS ARE BAD IN LAW. IT WAS FURTHER SUBMITTED THAT THE AO HAS NOT RECORDED HIS SATISFAC TION IN THE ASSESSMENT ORDER THAT THE PROVISIONS OF SECTION 271 AAB(1)(C) WERE ATTRACTED IN THE CASE OF THE ASSESSEE. THE LD. A/R HAS FURTHER SUBMITTED THAT THE LEVY OF PENALTY UNDER SECTION 271AAB(1) OF THE ACT IS NOT AUTOMATIC BUT THE AO HAS TO TAKE A DECISION BY CONS IDERING ALL THE CONDITIONS TO BE SATISFIED AS PROVIDED UNDER THE SA ID SECTION. SINCE THE DISCLOSURE AND SURRENDER OF THE AMOUNT DOES NOT FAL L IN THE DEFINITION OF UNDISCLOSED INCOME, THEREFORE, THE PENALTY UNDER SE CTION 271AAB IS NOT LEVIABLE IN THE CASE OF THE ASSESSEE MERELY BECAUSE THE ASSESSEE HAS DECLARED AND SURRENDERED SOME INCOME TO TAX. REGA RDING CASH OF RS. 13,42,300/- FOUND AT THE RESIDENCE OF THE ASSESSEE, IT WAS SUBMITTED THAT THE SAME REPRESENT THE SAVINGS OF THE ASSESSEE AND HIS FAMILY WHICH WAS KEPT BY THE ASSESSEE TO MEET OUT ANY EVEN TUALITY OR UNTOWARD INCIDENT IN THE FAMILY AND THE SAID SAVING S WERE MADE DURING LAST 20-25 YEARS FROM THE HOUSEHOLD EXPENSES OF THE ASSESSEE FAMILY WHICH CANNOT BE TERMED AS UNDISCLOSED INCOME WITHIN THE MEANING OF SECTION 271AAB. REGARDING GOLD AND DIAMOND JEWELLER Y, IT WAS SUBMITTED THAT THE SAID JEWELLERY WAS THE PARENTAL JEWELLERY GIVEN TO THE ASSESSEE FOR THE MARRIAGE OF HIS SON AND IT DID NOT FIND PLACE IN THE ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 5 WEALTH TAX RETURN OF THE ASSESSEE AND WIFE OF THE A SSESSEE, THE SAID JEWELLERY WAS OFFERED FOR TAX JUST TO BUY MENTAL PE ACE. HOWEVER, THE SAID JEWELLERY CANNOT BE TREATED AS UNDISCLOSED INC OME. REGARDING THE CHINESE CURRENCY FOUND IN POSSESSION OF THE ASSESSE E, IT WAS SUBMITTED THAT DURING THE COURSE OF STATEMENT RECORDED U/S 13 1(1) ON 21.08.2015, THE ASSESSEE IN REPLY TO QUESTION NO. 12 SUBMITTED THAT HE HAS PURCHASED CHINESE YUAN WORTH RS. 4,00,000/- DURING APRIL, 2015 FOR ENSUING CHINA TOUR, WHICH SUBSEQUENTLY CANNOT BE CA RRIED OUT FOR ONE OR ANOTHER REASON. IT WAS SUBMITTED THAT THE SAID C HINESE YUAN WAS PURCHASED OUT OF THE SAVING OF ASSESSEE AND WERE OF FERED FOR TAX JUST TO BUY MENTAL PEACE AND THE SAME CANNOT BE TREATED AS UNDISCLOSED INCOME. IT WAS ACCORDINGLY SUBMITTED THAT THE PENA LTY IMPOSED BY THE AO AND SO SUSTAINED BY THE LD. CIT(A) SHOULD BE DEL ETED. 5. THE LD DR IS HEARD WHO HAS RELIED ON THE FINDING S OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE CASE OF THE ASSE SSEE CLEARS FALLS IN THE DEFINITION OF UNDISCLOSED INCOME AND THE LD CIT (A) HAS ALREADY GRANTED RELIEF TO THE ASSESSEE BY REDUCING THE PENA LTY FROM 30% TO 10% AND GIVEN THE FACTS OF THE CASE, THE ORDER OF T HE LD CIT(A) DESERVES TO BE SUSTAINED. 6. HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THIS TRIBUNAL IS TAKING A CONSISTENTLY VIEW THAT LEVY OF PENALTY U/S 271AAB IS NOT AUTOMATIC IN NATURE AND THE LEVY OF PENALTY WILL DEPEND UPON THE SATISFACTION OF THE PRIMARY CONDITI ON AS TO WHETHER THERE IS ANY UNDISCLOSED INCOME WHICH HAS BEEN FOUN D DURING THE COURSE OF SEARCH AND ONCE THE SAID PRIMARY CONDITIO N IS SATISFIED, THE SATISFACTION OF OTHER CONDITIONS NEEDS TO BE ANALYS ED FOR LEVY OF PENALTY ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 6 AT RATES VARYING FROM 10%- 30% SO SPECIFIED IN SECT ION 271AAB OF THE ACT. THEREFORE, THE QUESTION OF DIFFERENT LIMBS IN SECTION 271AAB AND NOT SPECIFYING THE SAME IN THE SHOW-CAUSE NOTICE DO ESNT ARISE FOR CONSIDERATION. UNLIKE SECTION 271(1)(C), THERE IS ONLY ONE CHARGE WHICH HAS BEEN SPECIFIED IN SECTION 271AAB WHICH IS UNDIS CLOSED INCOME FOUND DURING THE COURSE OF SEARCH IN THE HANDS OF THE ASS ESSEE. IN ANY CASE, THE PENALTY ORDER IS VERY CLEAR AND SPECIFIC WHERE THE AO HAS INVOKED THE PROVISIONS OF SECTION 271AAB(1)(C) OF THE ACT. SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN CASE OF SHRI RAJA RAM MAHESHWARI VS. DCIT (ITA NO. 992/JP/2017 DATED 10/01/2019) WHEREIN IT WAS HELD AS UNDER: 7. THE QUESTION THAT ARISES FOR CONSIDERATION IS T HE NATURE OF CHARGE(S) SPECIFIED UNDER SECTION 271AAB OF THE ACT . WHETHER IT PROVIDES FOR A SINGULAR CHARGE OF UNDISCLOSED INCOM E FOR THE SPECIFIED PREVIOUS YEAR FOUND DURING THE COURSE OF SEARCH INI TIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012 OR IT PRO VIDES FOR MULTIPLES CHARGES AS SO CONTENDED BY THE LD AR IN TERMS OF CL AUSE (A), CLAUSE (B) OR CLAUSE (C) TO SUB-SECTION (1) TO SECTION 271AAB OF THE ACT. 8. ON CLOSE READING OF PROVISIONS OF SECTION 271AAB , WE FIND THAT THE PRIMARY CONDITION OR CHARGE FOR LEVY OF PENALTY IS THE EXISTENCE OF UNDISCLOSED INCOME FOR THE SPECIFIED PREVIOUS YEAR FOUND DURING THE COURSE OF SEARCH IN THE CASE OF ASSESSEE. ONCE THE SAID PRIMARY CONDITION OR CHARGE IS SATISFIED, FOR THE PURPOSES OF QUANTIFYING THE PENALTY, THE ASSESSING OFFICER HAS TO EXAMINE THE S ATISFACTION OF ANCILLARY CONDITIONS AS SPECIFIED UNDER CLAUSE (A), CLAUSE (B) OR CLAUSE (C) TO SUB-SECTION (1) TO SECTION 271AAB. MERELY BE CAUSE THE QUANTUM ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 7 OF PENALTY VARIES FROM 10% TO 30% SUBJECT TO COMPLI ANCES WITH THE ANCILLIARY CONDITIONS, IT CANNOT BE SAID THAT WHERE THE AO HAS INITIATED THE PENALTY UNDER SECTION 271AAB, THERE IS ANY AMBI GUITY IN THE CHARGE OR THERE IS ANY LACK OF APPLICATION OF MIND ON PART OF THE ASSESSING OFFICER. FURTHER, THE LEVY OF PENALTY UNDER SECTIO N 271AAB IS NOT BASED ON ADDITION MADE AND INVESTIGATION/ENQUIRY CONDUCTE D DURING THE COURSE OF ASSESSMENT PROCEEDINGS, RATHER IT IS BASE D ON SEARCH CONDUCTED ON THE ASSESSEE ON OR AFTER THE 1ST DAY O F JULY, 2012, IN SUCH A SITUATION, WHERE THE PENALTY SHOW-CAUSE NOTICE IS ISSUED U/S 271AAB, THE ASSESSING OFFICER IS MAKING THE ASSESSEE AWARE OF THE CHARGE AGAINST HIM IN TERMS OF UNDISCLOSED INCOME FOUND DU RING THE COURSE OF SEARCH AND THUS, THE ASSESSEE IS GRANTED AN OPPORTU NITY TO REFUTE SUCH CHARGE AND FILE HIS EXPLANATIONS/SUBMISSIONS. UNLIK E PROVISIONS OF SECTION 271(1)(C) WHICH PROVIDES FOR SEPARATE CHARG E OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCUR ATE PARTICULARS OF INCOME, THERE IS A SINGULAR CHARGE UNDER SECTION 2 71AAB I.E, OF THE EXISTENCE OF UNDISCLOSED INCOME FOR THE SPECIFIED P REVIOUS YEAR FOUND DURING THE COURSE OF SEARCH. THEREFORE, IN THE INS TANT CASE, WHERE THE NOTICE DATED 15.3.2016 IS ISSUED TO THE ASSESSEE TO SHOW-CAUSE WHY PENALTY SHOULD NOT BE LEVIED U/S 271AAB OF THE ACT, THE ASSESSEE IS MADE AWARE OF THE SPECIFIC CHARGE AGAINST HIM AND A N OPPORTUNITY HAS THUS BEEN GIVEN TO HIM TO REBUT SUCH CHARGE AND THE REFORE, WE DONOT SEE ANY INFIRMITY IN THE INITIATION OF THE PENALTY PROCEEDINGS AND CONSEQUENT PENALTY ORDER SO PASSED BY THE AO. A SI MILAR VIEW HAS BEEN TAKEN BY THE CO-ORDINATE BENCH IN CASE OF MAHESH KU MAR JAIN & OTHERS (ITA NO. 630/JP/17 & OTHERS DATED 27.11.2017) WHERE IN IT WAS HELD AS UNDER: ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 8 10. THE FIRST AND FOREMOST QUESTION THAT ARISES FOR CONSIDERATION IS THE NATURE OF PENALTY PROVISIONS AS CONTAINED IN SECTIO N 271AAB(1)(A) AND 271AAB(1)(C). IN OTHER WORDS, WHETHER THESE PROVISI ONS PROVIDE FOR LEVY OF PENALTY ON ACCOUNT OF SEPARATE AND INDEPENDENT C HARGES OR THESE PROVISION PROVIDE FOR LEVY OF PENALTY FOR THE SAME CHARGE UNDER SECTION 271AAB, HOWEVER, SUBJECT TO SATISFACTION OF THE PRE SCRIBED CONDITIONS, THE QUANTUM OF PENALTY MAY VARY AS SPECIFIED IN THE RESPECTIVE SUB- CLAUSES OF 271AAB OF THE ACT. 11. IN THIS REGARD, WE REFER TO THE PROVISIONS OF SECTION 271AAB WHICH ARE REPRODUCED AS UNDER: 271AAB. (1) THE ASSESSING OFFICER MAY, NOTWITHSTAN DING ANYTHING 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 U NDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSE SSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT U NDER SUB- SECTION (4) OF SECTION 132 , ADMITS THE UNDISCLOSED INCOME AND SPECIFIES THE M ANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II) SUBSTA NTIATES 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 RESPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECI FIED PREVIOUS YEAR ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 9 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 (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT U NDER SUB-SECT ION (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 THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME; (C) A SUM WHICH SHALL NOT BE LESS THAN THIRTY PERCENT B UT WHICH SHALL NOT EXCEED NINETY PERCENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED BY THE PROVISIO NS OF CLAUSES (A ) AND (B). (2) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN RESPECT OF T HE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTION (1) O R SUB-SECTION (1A). (3) THE PROVISIONS OF SECTIONS 274 AND 275 SHALL, AS FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED TO IN THI S SECTION. EXPLANATION.FOR THE PURPOSES OF THIS SECTION, (A) 'SPECIFIED DATE' MEANS THE DUE DATE OF FURNISHING O F RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 OR THE DATE ON WHICH THE PERIOD SPECIFIED IN THE NOTICE ISSUED UNDER SECTION 153A FOR FURNISHING OF RETURN OF INCOME EXPIRES, AS THE CASE MAY BE; (B) 'SPECIFIED PREVIOUS YEAR' MEANS THE PREVIOUS YEAR ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 10 (I) WHICH HAS ENDED BEFORE THE DATE OF SEARCH, BUT THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 FOR SUCH YEAR HAS NOT EXPIRED BEFORE THE DATE OF SEARCH AND THE ASSESSEE HAS NOT FURNISHED THE RETURN OF INCOME FOR THE PREVIOUS YEAR BEFORE THE DATE OF SEARCH; OR (II) IN WHICH SEARCH WAS CONDUCTED; (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 V ALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOC UMENTS 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 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] CO MMISSIONER BEFORE THE DATE OF SEARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENTED, EITHER WHO LLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RECOR DED 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 NOT BEEN CO NDUCTED. 12. ON READING OF THE ABOVE PROVISIONS, IT PROVID ES THAT THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHERE SEARCH HA S BEEN INITIATED UNDER ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 11 SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012, THE ASSESSE E SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYA BLE BY HIM, A SUM COMPUTED AT THE RATE OF 10% OF THE UNDISCLOSED INCO ME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE, IN THE COURSE OF T HE SEARCH, IN A STATEMENT UNDER SUB-SECTION (4) OF SECTION 132 , ADMITS THE UNDISCLOSED INCOME AND SATISFIES OTHER CONDITIONS AS PROVIDED I N 271AAB(1)(A). IT FURTHER PROVIDES THAT WHERE THE DECLARATION OF UNDI SCLOSED INCOME IS NOT MADE BY THE SEARCHED PERSON IN THE COURSE OF SEARCH BUT IS DECLARED IN THE RETURN OF INCOME FURNISHED FOR THE SPECIFIED PR EVIOUS YEAR AND SUBJECT TO SATISFACTION OF OTHER CONDITIONS, PENALT Y @ 20% IS PAYABLE BY HIM. IT FURTHER PROVIDES THAT WHERE THE DECLARATIO N OF UNDISCLOSED INCOME IS NEITHER MADE BY THE SEARCHED PERSON IN TH E COURSE OF SEARCH NOR DECLARED IN THE RETURN OF INCOME FURNISHED FOR THE SPECIFIED PREVIOUS YEAR AND ADDITIONS ARE MADE DURING THE COURSE OF AS SESSMENT PROCEEDINGS, PENALTY WHICH CAN VARY FROM 30% TO 90% IS PAYABLE BY HIM. 13. BOTH THE PROVISIONS AS CONTAINED IN SECTION 271 AAB(1)(A) AND 271AAB(1)(C) THUS PROVIDES FOR LEVY OF PENALTY IN C ASES WHERE SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012 AND QUANTUM OF PENALTY HAS BEEN KEPT AT 10% WH ERE THERE IS DECLARATION IN THE STATEMENT RECORDED DURING THE CO URSE OF SEARCH, AND WHERE THERE IS NEITHER A DECLARATION IN THE STATEME NT U/S 132(4) RECORDED DURING THE COURSE OF SEARCH NOR A DECLARAT ION IN THE RETURN OF INCOME, THE PENALTY HAS BEEN KEPT AT A HIGHER PEDES TAL WHICH CAN VARY FROM 30% TO 90%. FURTHER, IT IS NOTED THAT THE PRO VISIONS OF SECTION 271AAB OVERRIDES SECTION 271(1)(C) WHICH INFACT CON TAIN PROVISIONS FOR LEVY OF PENALTY UNDER TWO SEPARATE LIMBS- CONCEALME NT OF PARTICULARS OF ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 12 INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME. FURTHER, THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF SA S EMERALD MEADOWS (SUPRA) RENDERED IN THE CONTEXT OF TWO SEPARATE LIM BS/CHARGES UNDER SECTION 271(1)(C) THEREFORE DOESNT SUPPORT THE CAS E OF THE ASSESSEE COMPANY. IN OUR CONSIDERED VIEW, BOTH THE PROVISION S OF SECTION 271AAB(1)(A) AND 271AAB(1)(C) PROVIDES FOR LEVY OF PENALTY FOR AN IDENTICAL CHARGE I.E, UNDISCLOSED INCOME FOR THE SP ECIFIED PREVIOUS YEAR WHICH IS FOUND DURING THE COURSE OF SEARCH INITIATE D UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012. THEREFORE, WE ARE UNABLE TO ACCEDE TO THE CONTENTION OF THE LD AR THAT THE LD C IT(A) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY U/S 271AAB(1)(A) WHI CH PROVIDES FOR A SEPARATE AND INDEPENDENT CHARGE AND COMES UNDER DIF FERENT SECTION THAN THE PROVISIONS OF SECTION 271AAB(1)(C) WHICH H AS BEEN SPECIFICALLY INVOKED BY THE AO. 9. FURTHER, EVEN FOR SAKE OF ARGUMENT, IF IT IS ASS UMED THAT PRIMARY CHARGE OF UNDISCLOSED INCOME HAS TO BE READ ALONG W ITH ANCILLARY CONDITIONS AND THUS MULTIPLES CHARGES HAVE BEEN PRE SCRIBED IN TERMS OF CLAUSE (A), CLAUSE (B) OR CLAUSE (C) TO SUB-SECTION (1) TO SECTION 271AAB AND WHERE THE ASSESSING OFFICER HAS NOT STATED THE SPECIFIED CHARGE AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS, IN O UR CONSIDERED VIEW, SUCH UNCERTAIN CHARGE AT THE STAGE OF INITIATION OF PENALTY PROCEEDINGS CAN BE MADE GOOD WITH A CLEAR-CUT CHARGE IN THE PEN ALTY ORDER. IN ANY CASE, EXISTENCE OF A CLEAR-CUT CHARGE IN PENALTY OR DER IS A MUST SO AS TO VALIDATE ANY PENALTY ORDER AND SO LONG AS THERE IS A CLEAR FINDING IN THE PENALTY ORDER, NO INFIRMITY CAN BE SAID TO ARISE IN TERMS OF INITIATING OF SUCH PROCEEDINGS AND SUBSEQUENT PENALTY ORDER. IN THIS REGARD, REFERENCE CAN BE MADE TO THE THREE MEMBER BENCH DEC ISION IN CASE OF ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 13 HPCL MITTAL ENERGY VS ADD. CIT REPORTED IN 97 TAXMA NN.COM 03 WHERE THE ISSUE FOR CONSIDERATION. THOUGH THE SAID DECIS ION HAS BEEN RENDERED IN CONTEXT OF SECTION 271(1)(C), IT HAS LA ID DOWN CERTAIN LEGAL PROPOSITION REVOLVING AROUND INITIATION OF PENALTY PROCEEDING AND CHARGES TOWARDS LEVY OF PENALTY AND WE, THEREFORE, DEEM IT RELEVANT TO CONSIDER THE SAME FOR THE PURPOSES OF PRESENT APPEA L. 10. IN THE SAID DECISION, THE COORDINATE BENCH AFTE R ANALYZING CATENA OF JUDICIAL PRONOUNCEMENTS, INCLUDING THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) WHICH HAS BEEN CITED BY THE LD AR IN THE INSTANT CA SE, IT WAS HELD AS UNDER: 15. THE MOOT QUESTION IS THAT WHAT SHOULD BE THE NATUR E OF SPECIFICATION OF A CHARGE BY THE AO AT THE STAGE OF INITIATION OF PENALTY PROCEEDINGS AND AT THE TIME OF PASSING THE PENALTY ORDER. IS THE AO REQUIRED TO SPECIFY IN THE PENALTY NOTICE /ORDER AS TO WHETHER IT IS A CASE OF 'CONCEALMENT OF PARTICULARS OF INCOME'; OR 'FURNISHING OF INACCURATE PARTICULARS OF INCOME'; O R BOTH OF THEM, WHICH CAN BE EXPRESSED BY USING THE WORD 'AND' BETW EEN THE TWO EXPRESSIONS. WHEN THE AO IS SATISFIED THAT IT IS A CLEAR-CUT CASE OF CONCEALMENT OF PARTICULARS OF INCOME, HE MUST SPECI FY IT SO IN THE NOTICE AT THE TIME OF INITIATION OF PENALTY PROCEED INGS AND ALSO IN THE PENALTY ORDER. THE AO CANNOT INITIATE PENALTY O N THE CHARGE OF 'CONCEALMENT OF PARTICULARS OF INCOME', BUT ULTI MATELY FIND THE ASSESSEE GUILTY IN THE PENALTY ORDER OF 'FURNISHING INACCURATE PARTICULARS OF INCOME'. IN THE SAME MANNER, HE CANN OT BE UNCERTAIN IN THE PENALTY ORDER AS TO CONCEALMENT OR FURNISHING OF ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 14 INACCURATE PARTICULARS OF INCOME BY USING SLASH BET WEEN THE TWO EXPRESSIONS. WHEN THE AO IS SATISFIED THAT IT IS A CLEAR-CUT CASE OF 'FURNISHING OF INACCURATE PARTICULARS OF INCOME', H E MUST AGAIN SPECIFY IT SO IN THE NOTICE AT THE TIME OF INITIATI ON OF PENALTY PROCEEDINGS AND ALSO IN THE PENALTY ORDER. AFTER IN ITIATING PENALTY ON THE CHARGE OF 'FURNISHING OF INACCURATE PARTICUL ARS OF INCOME', HE CANNOT IMPOSE PENALTY BY FINDING THE ASSESSEE GU ILTY OF 'CONCEALMENT OF PARTICULARS OF INCOME'. AGAIN, HE C ANNOT BE UNCERTAIN IN THE PENALTY ORDER AS TO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME BY USING SLASH BET WEEN THE TWO EXPRESSIONS. WHEN THE AO IS SATISFIED THAT IT IS A CLEAR-CUT CASE OF IMPOSITION OF PENALTY U/S. 271(L)(C) OF THE ACT ON TWO OR MORE ADDITIONS/DISALLOWANCES, ONE OR MORE FALLING UNDER THE EXPRESSION 'CONCEALMENT OF PARTICULARS OF INCOME' AND THE OTHE R UNDER THE 'FURNISHING OF INACCURATE PARTICULARS OF INCOME', H E MUST SPECIFY IT SO BY USING THE WORD 'AND' BETWEEN THE TWO EXPRESSI ONS IN THE NOTICE AT THE TIME OF INITIATION OF PENALTY PROCEED INGS. IF HE REMAINS CONVINCED IN THE PENALTY PROCEEDINGS THAT T HE PENALTY WAS RIGHTLY INITIATED ON SUCH COUNTS AND IMPOSES PE NALTY ACCORDINGLY, HE MUST SPECIFICALLY FIND THE ASSESSEE GUILTY OF 'CONCEALMENT OF PARTICULARS OF INCOME' AND ALSO 'FU RNISHING OF INACCURATE PARTICULARS OF INCOME' IN THE PENALTY OR DER. IF THE CHARGE IS NOT LEVIED IN THE ABOVE MANNER IN ALL THE THREE CLEAR-CUT SITUATIONS DISCUSSED ABOVE IN THE PENALTY NOTICE AN D ALSO IN THE PENALTY ORDER, THE PENALTY ORDER BECOMES UNSUSTAINA BLE IN LAW. 16. THE HON'BLE KARNATAKA HIGH COURT IN CIT V. MANJUNA THA COTTON AND GINNING FACTORY HAS HELD THAT A PERSON W HO IS ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 15 ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND I MPOSING PENALTY ON HIM AS SECTION 274 MAKES IT CLEAR THAT A SSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE F ULL OPPORTUNITY TO MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(L)(C) DO N OT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE HON'BLE HIGH C OURT WENT ON TO HOLD THAT: 'CLAUSE (C) DEALS WITH TWO SPECIFIC OFFE NCES, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME.... BUT DRAWING UP PENALTY PR OCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOT HER OFFENCE OR FINDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW.. THUS ONCE THE PROCEEDINGS ARE I NITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON T HE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALT Y PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID'. 17. IN MANU ENGG. WORKS (SUPRA) PENALTY WAS IMPOSED BY NOTING: 'THAT THE ASSESSEE HAD CONCEALED ITS INCOME AND/OR THAT IT HAD FURNISHED INACCURATE PARTICULARS OF SUCH INCOME '. STRIKING DOWN THE PENALTY, THE HON'BLE HIGH COURT HELD THAT: 'IT WAS INCUMBENT UPON THE IAC TO COME TO A POSITIVE FINDIN G AS TO WHETHER THERE WAS CONCEALMENT OF INCOME BY THE ASSE SSEE OR WHETHER ANY INACCURATE PARTICULARS OF SUCH INCOME H AD BEEN FURNISHED BY THE ASSESSEE. NO SUCH CLEAR-CUT FINDIN G WAS REACHED BY THE IAC AND, ON THAT GROUND ALONE, THE ORDER OF PENALTY PASSED BY THE IAC WAS LIABLE TO BE STRUCK DOWN.' ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 16 18. IN PADMA RAM BHARALI (SUPRA), THE HON'BLE HIGH COU RT DID NOT SUSTAIN PENALTY LEVIED U/S. 271(L)(C) WHEN: 'TH E INITIATION OF THE PENALTY PROCEEDING WAS FOR CONCEALMENT OF THE P ARTICULARS OF INCOME. BUT THE TRIBUNAL FINALLY HELD THAT THE ASSE SSEE WOULD BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF INCOME OR TO HAVE FURNISHED INACCURATE PARTICULARS OF SUCH INCOME.' 19. THUS IT IS EVIDENT THAT WHEN THE AO IS SATISFIED A T THE STAGE OF INITIATION OF PENALTY PROCEEDINGS OF A CLEAR-CUT CHARGE AGAINST THE ASSESSEE IN ANY OF THE THREE SITUATIONS DISCUSS ED ABOVE (SAY, CONCEALMENT OF PARTICULARS OF INCOME), BUT IMPOSES PENALTY BY HOLDING THE ASSESSEE AS GUILTY OF THE OTHER CHARGE (SAY, FURNISHING OF INACCURATE PARTICULARS OF INCOME) OR AN UNCERTAI N CHARGE (CONCEALMENT OF PARTICULARS OF INCOME/FURNISHING OF INACCURATE PARTICULARS OF INCOME), THE PENALTY CANNOT BE SUSTA INED. 20. ANOTHER CRUCIAL FACTOR TO BE KEPT IN MIND IS THAT THE SATISFACTION OF THE AO AS TO A CLEAR-CUT CHARGE LEV ELED BY HIM IN THE PENALTY NOTICE OR THE PENALTY ORDER MUST CONCUR WITH THE ACTUAL DEFAULT. IF THE CLEAR-CUT CHARGE IN THE PENA LTY NOTICE OR THE PENALTY ORDER IS THAT OF 'CONCEALMENT OF PARTICULAR S OF INCOME', BUT IT TURNS OUT TO BE A CASE OF 'FURNISHING OF INACCUR ATE PARTICULARS OF SUCH INCOME' OR VICE-VERSA, THEN ALSO THE PENALTY O RDER CANNOT LEGALLY STAND. 21. APART FROM THE ABOVE THREE SITUATIONS IN WHICH THE AO HAS CLEAR-CUT SATISFACTION, THERE CAN BE ANOTHER FOURTH SITUATION AS ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 17 WELL. IT MAY BE WHEN IT IS DEFINITELY A CASE OF UND ER-REPORTING OF INCOME BY THE ASSESSEE FOR WHICH AN ADDITION/DISALL OWANCE HAS BEEN MADE, BUT THE AO IS NOT SURE AT THE STAGE OF I NITIATION OF PENALTY PROCEEDINGS OF THE PRECISE CHARGE AS TO 'CO NCEALMENT OF PARTICULARS OF INCOME' OR 'FURNISHING OF INACCURATE PARTICULARS OF INCOME'. IN SUCH CIRCUMSTANCES, HE MAY USE SLASH BE TWEEN THE TWO EXPRESSIONS AT THE TIME OF INITIATION OF PENALT Y PROCEEDINGS. HOWEVER, DURING THE PENALTY PROCEEDINGS, HE MUST GE T DECISIVE, WHICH SHOULD BE REFLECTED IN THE PENALTY ORDER, AS TO WHETHER THE ASSESSEE IS GUILTY OF 'CONCEALMENT OF PARTICULARS O F INCOME' OR 'FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOM E'. UNCERTAIN CHARGE AT THE TIME OF INITIATION OF PENALTY, MUST N ECESSARILY BE SUBSTITUTED WITH A CONCLUSIVE DEFAULT AT THE TIME O F PASSING THE PENALTY ORDER. IF THE PENALTY IS INITIATED WITH DOU BT AND ALSO CONCLUDED WITH A DOUBT AS TO THE CONCEALMENT OF PAR TICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF S UCH INCOME ETC., THE PENALTY ORDER IS VITIATED. IF ON THE OTHER HAND , IF THE PENALTY IS INITIATED WITH AN UNCERTAIN CHARGE OF 'CONCEALMENT OF PARTICULARS OF INCOME/FURNISHING OF INACCURATE PARTICULARS OF I NCOME' ETC., BUT THE ASSESSEE IS ULTIMATELY FOUND TO BE GUILTY OF A SPECIFIC CHARGE OF EITHER 'CONCEALMENT OF PARTICULARS OF INCOME' OR 'FURNISHING OF INACCURATE PARTICULARS OF INCOME', THEN NO FAULT CA N BE FOUND IN THE PENALTY ORDER. 22. IN MANU ENGINEERING WORKS (SUPRA), THE HON'BLE GUJ ARAT HIGH COURT NOTICED THAT THE CHARGE AT THE STAGE OF INITI ATION OF PENALTY PROCEEDINGS AS WELL IN THE PENALTY ORDER WAS UNCERT AIN AND THE EXPRESSION USED AT BOTH THE STAGES WAS CONCEALMENT OF ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 18 PARTICULARS OF INCOME AND/OR FURNISHING OF INACCURA TE PARTICULARS OF SUCH INCOME. IT STRUCK DOWN THE PENALTY BY HOLDI NG THAT THE ASSESSEE MUST HAVE BEEN FOUND TO BE GUILTY OF A CER TAIN CHARGE IN THE PENALTY ORDER. IT, HOWEVER, DID NOT FIND ANYTHI NG AMISS WITH THE INITIATION OF PENALTY ON SUCH UNCERTAIN CHARGE, WHICH IS VIVID FROM THE FOLLOWING OBSERVATIONS : 'WE FIND FROM THE ORDER OF THE IAC, IN THE PENALTY PROCEEDINGS, THAT IS, THE FINAL CONCLUSION AS EXPRESSED IN PARA. 4 OF THE ORDER: 'I AM OF THE OPINION THAT IT WILL HAVE TO BE SAID T HAT THE ASSESSEE HAD CONCEALED ITS INCOME AND/OR THAT IT HAD FINISHE D INACCURATE PARTICULARS OF SUCH INCOME'. NOW, THE LANGUAGE OF ' AND/OR' MAY BE PROPER IN ISSUING A NOTICE AS TO PENALTY ORDER O R FRAMING OF CHARGE IN A CRIMINAL CASE OR A QUASI-CRIMINAL CASE, BUT IT WAS INCUMBENT UPON THE IAC TO COME TO A POSITIVE FINDIN G AS TO WHETHER THERE WAS CONCEALMENT OF INCOME BY THE ASSE SSEE OR WHETHER ANY INACCURATE PARTICULARS OF SUCH INCOME H AD BEEN FURNISHED BY THE ASSESSEE.' 23. IT IS THUS EVIDENT THAT UNCERTAIN CHARGE AT THE STAGE OF INITIATION OF PENALTY PROCEEDINGS CAN BE MADE GOOD WITH A CLEAR- CUT CHARGE IN THE PENALTY ORDER. IN ANY CASE, EXIST ENCE OF A CLEAR- CUT CHARGE IN PENALTY ORDER IS A MUST SO AS TO VALI DATE ANY PENALTY ORDER. 11. IN THE INSTANT CASE, THE NOTICE INITIATING THE PENALTY PROCEEDINGS TALKS ABOUT INITIATION OF PENALTY PROCEEDINGS U/S 2 71AAB OF THE ACT. HOWEVER, WHILE PASSING THE PENALTY PROCEEDINGS, THE ASSESSING OFFICER ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 19 HAS GIVEN A FINDING AS REFLECTED IN THE PENALTY ORD ER THAT THE ASSESSEE IS LIABLE FOR PENALTY U/S 271AAB(1)(A) WHICH PROVIDES FOR LEVY OF PENALTY @ 10% OF THE UNDISCLOSED INCOME. AS HELD BY THE COORD INATE BENCH (SUPRA), THE UNCERTAIN CHARGE AT THE TIME OF INITIA TION OF PENALTY HAS BEEN MADE GOOD AND SUBSTITUTED WITH A CONCLUSIVE DE FAULT AT THE TIME OF PASSING THE PENALTY ORDER AND THAT IN SUCH A CAS E, NO FAULT CAN BE FOUND IN THE PENALTY ORDER. IN SUCH A CASE, WE DONO T SEE ANY INFIRMITY IN THE INITIATION OF PENALTY PROCEEDINGS AND CONSEQUEN T PENALTY ORDER SO PASSED BY THE ASSESSING OFFICER AND THE CONTENTIONS SO RAISED BY THE LD AR IN THIS REGARD CANNOT BE ACCEPTED. FURTHER, WE F IND THAT THE DECISION OF THE COORDINATE BENCH IN CASE OF RAVI MATHUR (SUP RA) SO RELIED UPON BY THE LD AR, HAS BEEN RENDERED WITHOUT TAKING INTO CONSIDERATION EARLIER DECISION OF THE CO-ORDINATE BENCH IN CASE O F MAHESH JAIN (SUPRA) AND EARLIER DECISION OF THE LARGER BENCH OF THE TRI BUNAL IN CASE OF ONGC MITTAL (SUPRA) AND THUS DOESNT ACT AS A BINDING PR ECEDENT. ALSO THE DECISION OF THE CO-ORDINATE BENCH IN CASE OF SANDEE P CHANDAK (SUPRA) SO RELIED UPON BY THE LD AR DOESNT SUPPORT THE CAS E OF THE ASSESSEE AS THE SAME HAS BEEN SUBSEQUENTLY OVERRULED BY HONBLE ALLAHABAD HIGH COURT IN CASE OF PCIT VS SANDEEP CHANDAK REPORTED IN 93 TAXMANN.COM 409. IN LIGHT OF ABOVE DISCUSSIONS, TH E ADDITIONAL GROUND SO RAISED BY THE ASSESSEE IS HEREBY DISMISSED. 12. NOW, COMING TO ANOTHER CONTENTION OF THE LD AR 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 ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 20 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 SECTION 158BFA (2) WHEREIN SIMILAR PHRASELOGY HAS BEEN USED BY THE LEGISLATURE AND DEC ISION OF HONBLE A.P HIGH COURT IN CASE OF RADHAKRISHNA VIHAR (ITA NO. 7 40/2011). 13. IN THIS REGARD, WE REFER TO THE PROVISIONS OF S ECTION 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 TH E ASSESSEE. THUS, THE LEVY OF PENALTY IS NOT AUTOMATIC BUT THE ASSESS ING OFFICER HAS TO DECIDE BASED ON FACTS AND CIRCUMSTANCES OF THE CASE . SIMILAR VIEW HAS BEEN TAKEN BY THE VARIOUS CO-ORDINATE BENCHES AND U SEFUL REFERENCE CAN BE DRAWN TO THE DECISION OF THE CO-ORDINATE BEN CH 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. FURTHE R STATED THAT PENALTY U/S 271AAB OF THE ACT IS NOT MANDATORY BUT DISCRETIONARY. THE PROVISIONS OF SECTION 271AAB OF THE ACT IS PARI MATERIA WITH ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 21 THAT OF SECTION 158BFA OF THE ACT RELATING TO BLOCK ASSESSMENT AND ACCORDINGLY ARGUED THAT THE LEVY OF PENALTY UND ER SECTION 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 SECTIO N 158BFA(2) OF THE ACT AND ARGUED THAT THE WORDS USED IN SECTIO N 271AAB OF THE ACT AND THE WORDS USED IN SECTION 158BFA(2) OF THE ACT ARE IDENTICAL. HENCE, ARGUED THAT THE PENALTY SECTION 2 71AAB OF THE ACT PENALTY IS NOT AUTOMATIC AND IT IS ON THE MERIT S OF EACH CASE. FOR READY REFERENCE, WE REPRODUCE HEREUNDER SECTION 158BFA (2) OF THE ACT AND SECTION 271AAB OF THE ACT WHICH READ S 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 O N OR AFTER THE 1ST DAY OF JULY, 2012, THE ASSESSEE SHALL PAY BY WA Y OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM (A) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF THE U NDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSE SSEE (I) IN THE COURSE OF SEARCH, IN A STATEMENT UNDER SUB- SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME A ND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED. (II) S UBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSED IN COME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 22 (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 ASSE SSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDER S UB - SECTION (4_) OF SECTION 132, DOES NOT ADMIT THE UND ISCLOSED 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 THE TAX, TOGETHER WITH INTER EST, 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 SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED BY THE PROVISIONS OF CLAU SES (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 ASSESS EE IN RESPECT ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 23 OF THE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTIO N (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 ASSESSEE OF FERS THE MONEY SO SEIZED TO BE ADJUSTED AGAINST THE TAX PAYABLE. (III) EVIDENCE OF TAX PAID IS FURNISHED ALONG WITH THE RE TURN; AND (IV) AN APPEAL IS NOT FILED AGAINST THE ASSESSMENT OF TH AT PART OF INCOME WHICH IS SHOWN IN THE RETURN: PROVIDED FURTHER THAT THE PROVISIONS OF THE 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 ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 24 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. FURTHER, SUB SECTION (3) OF SECTION 271AAB OF THE ACT, FORTI FIES 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 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 DIRECTS THAT NO ORDER IMPOSING PENALTY SHALL BE MADE UNLESS THE ASS ESSEE HAS BEEN HEARD OR HAS BEEN GIVEN A REASONABLE OPPORTUNI TY OF BEING HEARD. THEREFORE, FROM PLAIN READING OF SECTION 271 AAB OF THE ACT, IT IS EVIDENT THAT THE PENALTY CANNOT BE IMPOS ED UNLESS THE ASSESSEE IS GIVEN A REASONABLE OPPORTUNITY AND ASSE SSEE IS BEING HEARD. ONCE THE OPPORTUNITY IS GIVEN TO THE ASSESSE E, THE PENALTY CANNOT BE MANDATORY AND IT IS ON THE BASIS OF THE F ACTS AND MERITS PLACED BEFORE THE A.O. ONCE THE A.O. IS BOUND BY TH E ACT TO HEAR THE ASSESSEE AND TO GIVE REASONABLE OPPORTUNITY TO EXPLAIN HIS CASE, THERE IS NO MANDATORY REQUIREMENT OF IMPOSING PENALTY, BECAUSE THE OPPORTUNITY OF BEING HEARD AND REASONAB LE OPPORTUNITY IS NOT A MERE FORMALITY BUT IT IS TO AD HERE TO THE PRINCIPLES OF NATURAL JUSTICE. HON'BLE A.P. HIGH CO URT IN THE CASE OF RADHAKRISHNA VIHAR IN ITTA NO.740/2011 WHILE DEALIN G WITH THE PENALTY U/S 158BFA HELD THAT 'WE ARE OF THE OPINION THAT WHILE THE WORDS SHALL BE LIABLE UNDER SUB SECTION (1) OF SECT ION 158BFA OF THE ACT THAT ARE ENTITLED TO BE MANDATORY, THE WORD S MAY DIRECT IN ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 25 SUB SECTION 2 THERE OF INTENDED TO DIRECTORY'. IN O THER WORDS, WHILE PAYMENT OF INTEREST IS MANDATORY LEVY OF PENA LTY IS DISCRETIONARY. IT IS TRITE POSITION OF LAW THAT DIS CRETION IS VESTED AND AUTHORITY HAS TO BE EXERCISED IN A REASONABLE A ND RATIONAL MANNER DEPENDING UPON THE FACTS AND CIRCUMSTANCES O F THE EACH 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 TH AT THE PENALTY U/S 271AAB IS NOT MANDATORY BUT TO BE IMPOSED ON ME RITS 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 MANDATO RY. IN THE INSTANT CASE, IT THEREFORE NEEDS TO BE EXAMINED WHETHER THE RE IS ANY BASIS FOR LEVY OF PENALTY OR NON-LEVY THEREOF AND THE SAME WI LL DEPEND UPON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WHICH W E SHALL DISCUSS IN SUBSEQUENT PARAGRAPHS. 7. NOW, COMING TO THE CONTENTION OF THE LD AR REGAR DING AMOUNT SURRENDERED DURING THE COURSE OF SEARCH NOT QUALIFY ING AS UNDISCLOSED INCOME U/S 271AAB OF THE ACT. FOR THE PURPOSES OF L EVY OF PENALTY, WHAT HAS TO BE SEEN IS THAT WHETHER THE SURRENDER S O MADE, IN TERMS OF STATEMENT OF THE ASSESSEE RECORDED U/S 132(4) DURIN G THE COURSE OF SEARCH, FALLS IN THE DEFINITION OF UNDISCLOSED INC OME WHICH HAS BEEN SPECIFICALLY LAID DOWN IN TERMS OF CLAUSE (C) OF EX PLANATION TO SECTION 271AAB. IN THE INSTANT CASE, THE AMOUNT FOUND DURIN G THE COURSE OF SEARCH AT THE PREMISES OF THE ASSESSEE AND SURRENDE RED BY THE ASSESSEE IN HIS STATEMENT U/S 132(4) CONSIST OF CAS H AMOUNTING TO RS. ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 26 13,42,300/-, GOLD JEWELLERY VALUED AT RS. 13,88,400 /-, DIAMOND JEWELLERY VALUED AT RS. 13,15,000/-, AND CHINESE CU RRENCY EQUIVALENT TO RS. 4,00,000 AND THERE CANNOT BE ANY DISPUTE THAT T HE SAME REPRESENTS UNDISCLOSED INCOME SO DEFINED IN SECTION 271AAB AND WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSES SEE AT THE TIME OF SEARCH. REGARDING THE CONTENTION OF THE LD AR THAT SUCH CASH AND FOREIGN CURRENCY PURCHASED IS OUT OF PAST SAVINGS O F THE ASSESSEE AND THE JEWELLERY SO FOUND HAS BEEN GIFTED TO THE ASSES SEE, THESE ARE CONTENTIONS WHICH ARE RELEVANT FOR DETERMINING THE NATURE AND SOURCE OF SUCH UNDISCLOSED INCOME FOR THE PURPOSES OF DETERMI NING THE QUANTUM OF PENALTY WHICH THE LD CIT(A) HAS DULY CONSIDERED AND HAS UPHELD THE LEVY OF PENALTY @ 10% AS AGAINST 30% LEVIED BY THE AO. IN THE RESULT, WE CONFIRM THE LEVY OF PENALTY @ 10% ON THE UNDISCL OSED INCOME OF RS 44,45,700 SO SUSTAINED BY THE LD CIT(A). IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 28/03/2019 . 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 TK;IQJ@ JAIPUR FNUKAD@ DATED:- 28/03/2019 *GANESH KR VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHAMBHU KUMAR AGARWAL, KOTA 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CENTRAL CIRCLE, KOTA 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) ITA NO. 1381/JP/2018 SH. SHAMBHU KUMAR AGARWAL, KOTA VS. DCI T, KOTA 27 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 1381/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR