Dev Bhoomi Apartments (AOP), V. DCIT, Chandigarh

ITA 1402/CHANDI/2016

AI Insights

The case involves two appeals by Dev Bhoomi Apartments against the orders of the Commissioner of Income Tax (Appeals) concerning the assessment year 2010-11. The primary issues in the appeals were the additions made under sections 69C and 68 of the Income Tax Act, which pertained to unexplained expenditures and unexplained cash credits, respectively. The Tribunal examined the evidence, including seized documents and affidavits, and found that the additions were not substantiated. The Tribunal also considered the precedents set in similar cases and the principles laid down under section 271AAA of the Income Tax Act regarding penalties for undisclosed income.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127794 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-10-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 15-12-2016
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Depreciation; Additional evidence; Set aside
• Section: 68; 132; 69C; 133A; 139(1)

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “बी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ी संजय गग , या यक सद य एवं ी "व#म %संह यादव, लेखा सद य BEFORE: SHRI. SANJAY GARG, JM & SHRI. VIKRAM SINGH YADAV, AM ITA NO. 181/Chd/ 2014 Assessment Year : 2010-11 Dev Bhoomi Apartments Kalka Shimla Road Deonghat, Solan, H.P The ACIT Central Circle-II Chandigarh PAN NO: AAAAD5685P Appellant Respondent ITA NO. 1402/Chd/ 2016 Assessment Year : 2010-11 Dev Bhoomi Apartments (AOP) Kalka Shimla Road Deonghat, Solan, H.P The DCIT Central Circle-II Chandigarh PAN NO: AAAAD5685P Appellant Respondent ! " Assessee by : Shri Raj Kumar, CA # ! " Revenue by : Shri Akashdeep, JCIT, Sr. DR $ % ! & Date of Hearing : 17/10/2022 '()* ! & Date of Pronouncement : 12/01/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : Both the above appeals filed by the assessees are directed against the separate orders of different Ld. Commissioners of Income Tax (Appeal) as per following details: Sl.No. Appeal No. Name of Case CIT(Appeal / s ) Order dt. 1. ITA No. 181/Chd/2014 Dev Bhoomi Apartment CIT(A)Central, Gurgaon-1, 26/12/2013 1. ITA No. 1402/Chd/2016 Dev Bhoomi Apartment CIT(A)-3, Gurgaon-1, 28/10/2016 2 2. Firstly, we shall deal with ITA No. 181/Chd/2014 wherein the assessee has taken the following grounds of appeal: 1. That under the facts and circumstances, addition of Rs. 7,40,704/- u/s. 69 C as un - explained expenditure on the basis of seized Pg. 20 is un - sustainable in law as well as on merits. 2. That under the facts and circumstances, estimation of N.P. @5.89% resulting into consequential addition of Rs. 4,48,754/- is absolutely unsustainable in law as well as on merits. 3 (a) That under the facts and circumstances, CIT (A) grossly erred in law as well as on merits in sustaining addition to the extent of Rs. 9.30,000/- u/s. 68 on the seized Pgs. 58 & 59. (b) That without prejudice. Ld. CIT (A) erred in law as well as on merits in not admitting the additional evidences induced U/R. 46 A of the I.T. rules. 3. First ground of appeal relates to addition of Rs. 7,40,704/- under section 69C of the Act towards unexplained expenses in housing project by the name of “Power House”. 4. During the course of assessment proceedings, the AO issued a show cause basis document A-3 page no. 20 impounded from the business premises of the assessee. The reply so filed by the assessee was considered but not found acceptable to the AO. As per the AO, the assessee has failed to reconcile the expenses recorded on page no. 20 of the siezed documents with his regular books of account. It has been further held by the AO that the assessee has not brought any material fact on record to prove that the expenses incurred for installation of kitchen accessories on the said documents did not related to this project. Hence the expenses of Rs. 7,40,704/- as recorded in the said document was treated as unexplained expenditure under section 69C of the Act. 5. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) who confirmed the said addition. Against the said findings the assessee is in appeal before us. 3 6. During the course of hearing, the Ld. AR referred to the explanation submitted to the AO vide letter dt. 25/11/2011 and 07/12/2011. It was submitted that the details on the seized papers is apparently a rough estimate for extra work in few kitchens of Power House project which was undertaken by the owner of the flats themselves through one Sanjeev Angra Parnter of Mehak Enterprises who directly did this work for owners and no connection with the assessee. 6.1 It was submitted that the affidavit of Sanjeev Angra was filed before the AO wherein he clearly admit this paper and the contents thereon. It was submitted that the assessee also explained in his letter dt. 07/12/2011 that it was to provide kitchen with simple work which was got done through Koncept Kitchen & Decorators, Delhi and he also filed copy of the ledger account of Koncept before the AO. However the AO did not consider and discuss the affidavit and submissions so filed while passing the assessment order. 6.2 It was further submitted that during the appellate proceeding, the Ld. CIT(A) disbelieved the affidavit by holding that in said affidavit Shri Angra has been shown as a partner of M/s Mehak Enterprises while as per assessee’s letter dt. 07/12/2011, the supplier who carried out the kitchen work was Koncept Kitchen and Decorators therefore the affidavit cannot be believed. In this regard, it was submitted that apparently the Ld. CIT(A) got confused with the “simple” kitchen work and the “extra” kitchen work. It was submitted that the simple kitchen work was done by the assessee through Koncept Kitchen and Decorators whereas Shri Angra who is partner of M/s Mehak Enterprises did the extra kitchen work separately and there is no connection between the two. It was accordingly submitted that in view of the affidavit and other facts on record, the assessee has duly submitted its explanation corroborated by the affidavit of Shri Angra and therefore the addition so made and confirmed by the Ld. CIT(A) be deleted. 4 6.3 Per contra, the Ld. DR relied on the findings of the AO as well as that of the Ld. CIT(A) and our reference was drawn to the findings of the Ld. CIT(A) which are contained at para 7.1 of the impugned order which read as under: “7.1. I have considered the submission of the assessee and the impugned order. This document is a hand written page containing the details of payment received on various dates. Scanned copies of the both front and back, are placed in the body of the order. Assessee was asked to explain the nature and mode of receipts as well as reconcile these entries. The assessee stated the entries on back of page 20 are rough estimates as clearly mentioned which are in connection with installation of kitchen accessories etc. and other additional work to be carried out by some kitchen accessories' supplier. It was also stated that the documents are neither written by the assessee nor its employees and neither was it related to any project carried out by the assessee and its members. However, the AO observed that on the top of the document "Power House" has been mentioned which clearly implies that the said document was related to the Power House project of Sh. Pawan Sahni, carried out by him in individual capacity. Consequently as the assessee to reconcile the entries recorded on the said document with regular books of accounts, the amount of Rs. 7,40,704/- was treated as unexplained expenditure u/s 69C and added back in the hands of the assessee. In appeal, the assessee reiterated that the document did not belong to him, stating that the affidavit of Shri Angra filed during the assessment proceedings, deposing that the document belonged to him was ignored by the AO. Be that as it may, I find that the affidavit referred to states that Shri Angra is a partner of M/s Mehak Enterprises of near DC Office, Solan. On the other hand the written submission of the assessee dated 07.12.2011, the supplier who carried out the kitchen accessories work is stated to be M/s Koncept Kitchens and Decorators, Delhi. Thus, the explanation offered by the assessee lacks credibility. However the assessee in the sub-ground 6.2 has contended that the same addition has been also made in the hands of Shri Pawan Sahni, member of the AOP. On a perusal of the assessment order of Shri Pawan Sahni, for AY 2010-11, it is seen that addition of Rs.7,40,704/- has also been made based on the same seized papers at para 8. So the question arises as to in whose hand the same should be taxed. The document concerned was impounded from the business premises of M/s Dev Bhoomi Apartments (AOP) in the course of survey u/s 133A conducted on 11.9.2009. The back of the document specifically mentions 'Power House Project' which AO contended was a project of Shri Pawan Sahni carried out in his individual capacity. On a perusal of the reply of dated 7.12.2011, the assessee has admitted that the pages pertained to estimates made in connection with installation of kitchen accessories etc i.r.o Dev Bhoomi Apartment Power House Project and Dev Bhoomi Apartment (AOP). It also stated that the said pages had no relevance to the expenses booked/incurred by the assessee, but on a perusal of the front of page 20, it is seen that the figure Rs.3,91,204/- which is the total of the estimate of the back-side is added to another figure to come to the total of Rs.7,40,704/-. An amount of Rs.6,50,000/- stands reduced and so on. Thus it is very clear that 5 Rs.7,40,704/- was expended and as it is definitely not a dumb document, the assessee was required to reconcile the entries with the books of accounts. Merely filing reply without supporting documents does not help. Thus, I am inclined to hold that the addition has been rightly made u/s 69C here as the paper was seized from the business premises and presumption u/s 292C remains undischarged. Consequently, the addition in the hands of Shri Pawan Sahni is directed to be deleted. Assessee fails on this ground of appeal” 7. We have heard the rival contentions and purused the material available on record. From perusal of records and the affidavit placed on record, we find that there are two-set of work being carried out. One relates to regular kitchen work as part of the arrangement between the assessee and the customers and secondly, where there is requirement of any additional or specific kitchen work to be done as so required by the customers. The regular kitchen work was done by the assessee through Koncept Kitchen and Decorators, and the specific kitchen work was got done by the respective customers through M/s Mehak Enterprises which the assessee might have facilitated. The affidavit of Shri Sanjeev Angra, the partner of M/s Mehak Enterprises is on record at page 15 of the paperbook where he admits this fact and also the contents of the paper which has been found and impounded and the fact that the payments have been made directly by the Customers. Nothing has been brought on record to rebut the same. Though the paper has been found from the premises of the assessee, where the assessee has given an explanation that the work has been got done by the customers through M/s Mehak Enterprises which is corroborated by the affidavit of Shri Sanjeev Angra, the same cannot be held against the assessee and thus, the addition cannot be made in the hands of the assessee. In the result, the ground of appeal is allowed. 8. In Ground No. 2, the assessee has challenging the sustenance of addition of Rs. 4,48,754/-. 9. In this regard, it was submitted that this addition has been made by the AO purely on estimate basis for enhancing the N.P. rate by Rs. 4,48,754/-. It was 6 submitted that the similar addition was made by the AO for A.Y. 2009-10 and the same has been deleted by the Coordinate Chandigarh Benches vide its order dt. 11/11/2016 in ITA No. 584/Chd/2013 wherein the relevant findings read as under: “25. On ground No.3, assessee challenged the addition of Rs. 18,77,319/- on account of estimation of net profit. Briefly the facts of the case are that Assessing Officer noted NP chart of the assessee for the assessment years 2007-08 to 2010- 11 in assessment order and found that the net profit rate of the assessee for assessment year 2010-11 and 2009-10 (after excluding the surrender income of Rs. 25 lacs) comes to 1.80% and 1.60% respectively which is on lower side as compared to NP rates of the earlier years. The NP rate for assessment year 2007- 08 and 2008-09 are 8.65% and 3.14% respectively. Therefore, claim of the assessee that he has not claimed any expenses against the surrendered income is not correct. The Assessing Officer asked the assessee as to why its net profit result should not be re-casted by rejecting Profit & Loss Account to the extent of net profit ratio. The submission of the assessee is reproduced in the assessment order in which the assessee explained that it has commenced its commercial activities during the financial year 2006-07 and the comparison of sales and net profit for financial year 2006-07 to 2009-10 was explained. It was explained that the net profit rate for the financial year 2006-07 is 8.65%, for financial year 2007-08 is 3.15%, financial year 2008-09 is 1.67% and for the financial year 2009-10, it is 1.80%. The reasons for high net profit ratio in the financial year 2006-07 was due to the fact that this was the initial year of the commercial operation and the fixed expenses such as staff salary of the assessee quite low and no depreciation has been claimed by the assessee on fixed assets. It was also explained that the main reason for low net profit percentage in financial year 2008-09 and 2009-10 as compared to earlier years was due to the fact that assessee has not claimed any depreciation on fixed assets in financial year 2006-07 and 2007-08. The assessee has claimed depreciation to the tune of Rs. 4,92,375/- during financial year 2008- 09 and Rs. 3,35,188/- during financial year 2009-10. This has resulted in less net profit rate in financial year 2008-09 and 2009-10. In the absence of depreciation in financial year 2008-09 and 2009-10, the net profit ratio would have been 2.78% and 4.85% respectively which is almost same as in earlier years. 25(i) It was further submitted that later on projects of the assessee were at partial completion stage and sales have been booked and the fixed expenses such as staff salary, electricity expenses etc. cannot be avoided as they occur through out the year. Therefore, net profit shown by the assessee is correct. The Assessing Officer, however, did not accept explanation of the assessee and noted that NP rate remained high in earlier year is not acceptable and by rejecting the Profit & Loss Account, recasted the profit and by applying average net profit rate of two years, made above addition of Rs. 18,77,319/-. 26. The ld. CIT(Appeals) also confirmed the addition and dismissed this ground of appeal of the assessee. 27. After considering rival submissions, we are of the view addition is wholly unjustified. The ld. counsel for the assessee contended that Assessing Officer has 7 not rejected the books of account and no specific defects in maintenance of the books of account have been found. He has, however, admitted that during the course of search, assessee surrendered Rs. 25 lacs in assessment year under appeal. It would show that the book results declared by the assessee were not correct, otherwise, there was no reason for the assessee to have declare/surrender the additional income of Rs. 25 lacs. However, Assessing Officer merely on comparison of the NP rate of assessee from earlier years, made addition by rejecting the Profit & Loss Account to that extent. The Assessing Officer has not investigated and enquired into the explanation of the assessee given at assessment stage that there was higher expenses claimed in assessment year under appeal as compared to earlier years. No other reasons have been given by the Assessing Officer for re-casting the profit declared by the assessee. 28. Hon'ble Punjab & Haryana High Court in the case of CIT Vs K.S.Bhatia 269 ITR 577 held that, “Mere f act that the prof its were low compared to the earlier years was not a circumstance or material which could justif y an estimate in the circumstances of the case”. As noted above, since the assessee has already surrendered additional income of Rs. 25 lacs in assessment year under appeal and no other reasons have been given by the Assessing Officer for estimating higher profit rate. Therefore, mere low NP rate shown in assessment year under appeal by itself is no ground to make addition of this nature against the assessee. We, therefore, do not justify the orders of authorities below in making and upholding this addition. We, accordingly, set aside the orders of authorities below and delete the addition of Rs. 18,77,319/-. This ground of appeal of the assessee is allowed.” 10. It was submitted that the facts and circumstances of the case are exactly similar to A.Y. 2009-10 and identical order has been passed by the AO for both the years. In A.Y. 2009-10, the declared N.P. rate of 1.68% was modified and estimated at 5.89%, and applying the same analogy, the declared N.P. of 1.80% was modified and estimated at 5.89% for the impugned assessment year. It was submitted that the Coordinate Chandigarh Bench has deleted the estimation addition and confirmed the declared N.P. for A.Y. 2009-10 and the ratio laid down therein squarely applied in the instant case. 11. Per contra, the Ld. DR relied on the order of the lower authorities. 12. We have heard the rival contentions and purused the material available on record. Admittedly, the facts and circumstances of the case are identical to A.Y 2009-10 as can be seen from the order of the lower authorities, therefore, the order and the findings of the Coordinate Bench in assessee’s own case for A.Y 8 2009-10, the addition so made by estimating a higher NP rate is directed to be deleted. The ground of appeal is thus allowed in favour of the assessee. 13. In Ground No. 3, the assessee has challenged the sustenance of addition of Rs. 9,30,000/- under section 68 of the Act. 14. In this regard, it was submitted by the ld R during the course of hearing that the AO has made an addition of Rs. 72,86,000/- on the basis of seized documents referred as Annexure A-2 page 58 & 59 out of which 63,56,000/- has been deleted by the Ld. CIT(A) and the remaining amount of Rs. 9,30,000/- has been sustained by the Ld. CIT(A) against which the assessee is in appeal before the Tribunal. It was submitted that the seized paper shows that the working of sale of five flats by the assessee to Shri Pankaj Goel and Shri Neeraj Goel for which the payments were received as under: • Rs. 50,00,000/- was received @ Rs. 10,00,000/- per flat for five flats • Rs. 9,30,000/- was received toward expenses of registration and stamp paper etc. 15. It was submitted that the Ld. CIT(A) accepted the explanation partly to the extent of Rs. 50,00,000/- and the balance addition of Rs. 9,30,000/- has been sustained by him. In this regard, it was submitted that all these flats were sold and registered on 25/08/2007 pertaining to A.Y 2008-09. All the payments were also received in A.Y. 2008-09 and therefore Rs. 9,30,000/- which also relates to sale of said flats cannot be received after 25/08/2007 and same can only be considered in A.Y 2008-09 and not in the impugned assessment year 2010-11. 16. It was further submitted that Rs. 9,30,000/- was received towards expenses of registration of five flats sold to Goyal brothers which were registered on 24/08/2007, copy of the sale deed are submitted as part of the paper book and the payment made by them amounting to Rs. 9,30,000/- is clearly coming out from the seized documents and the explanation so submitted before the lower 9 authorities. It was further submitted that in this regard, an affidavit of Shri Sahaj Shahbad Goyal was also submitted before the Ld. CIT(A) by way of additional evidence. However the Ld. CIT(A) rejected the application under Rule 46A. It was submitted that the Ld. CIT(A) was not justified in rejecting the application as the assessee was prevented by reasonable cause from producing these documents during the assessment proceedings. It was accordingly submitted that in the light of the above submissions and the documentation so filed indicating the sale and the registration, the payments so received by the assessee from the Goyal Brothers relates to A.Y. 2008-09 and not to impugned assessment year and therefore the addition so made by the AO and sustained by the Ld. CIT(A) be deleted. 17. Per contra, the Ld. DR relied on the order of the lower authorities and our reference was drawn to the findings of the Ld. CIT(A) which are contained at para 8.2 of the impugned order. 18. We have heard the rival contentions and purused the material available on record. On perusal of records, we find that the payment of Rs 9,30,000/- relates to sale of flats which have been sold by the assessee to Goyal brothers. The sale deeds in respect of these flats were registered on 24/08/2007 and all the payments totaling to 59,30,000/- including the payment of 9,30,000/- was received prior to registration of the sale deed. Therefore, we agree with the contention of the ld AR that the payment of Rs. 9,30,000/- can only be considered in A.Y 2008-09 and not in the impugned assessment year 2010-11. The addition so made in the impugned assessment year is therefore directed to be deleted. 19. In the result, the appeal of the assessee is allowed. ITA No. 1402/Chd/2016 10 20. This appeal is against the levy of penalty under section 271AAA for A.Y. 2010-11 wherein the assessee has taken the following grounds of appeal: “1. That under the facts and circumstances, penalty levied u/s. 271 AAA / 271 (1) (c) is unsustainable in law as well as on merits 2. That the show cause notice issued is fatally defective thereby making the whole order illegal and un- sustainable. 3. That under the facts and circumstances, penalty levied on amount of Rs. 25 lacs surrendered as WIP (work - in - progress) u/s. 132 (4) of the I.T. Act is un - sustainable in law as well as on merits, more so the same was declared in the return, assessed also and all conditions of Sec. 271 AAA (2) stands satisfied. 4. That under the facts and circumstances, no penalty should have been levied in law as well as on merits on addition of Rs. 4,48,754/- for alleged low N.P. 5. That under the facts and circumstances, Ld. CIT (A) erred in law as well as on merits in holding that penalty on addition of Rs. 7,40,704/- made U/s. 69 C stands sustained, while, no penalty was levied on this addition and consequently there was no ground of appeal on this issue before CIT (A). Without prejudice, no penalty should be levied on this amount. 6. That under the facts and circumstances, no penalty should have been levied for addition u/s.68 of Rs.9,30,000/-,sustained by the CIT (A) on the basis of seized pages 58 & 59 whereby out of total addition of Rs. 72,86,000/- made by the AO, CIT (A) deleted to the extent of Rs.63.56.000/- thereby sustaining the addition of Rs. 9.30.000/-.” 21. During the course of hearing, the Ld. AR submitted that the assessee is in appeal in respect of levy of penalty by the AO @10% on WIP (Work in Progress) amounting to Rs. 25,00,000/- surrendered under section 132(4) which was declared in returned income and duly accepted and assessed by the AO. Secondly, the assessee is in appeal against estimation of N.P. rate which has resulted in sustenance of addition by the Ld. CIT(A) against which the assessee is in appeal in ITA No. 181/Chd/2014 amounting to Rs. 4,48,754/-. Thirdly, the assessee is in appeal against the levy of penalty in respect of Rs. 9,30,000/- addition sustained by the Ld. CIT(A) under section 68 of the Act. Besides the assessee has also challenged the penalty on addition of Rs. 7,40,704/- which has wrongly been confirmed by the Ld. CIT(A) wherein the fact is that the AO has not initiated and levied any penalty in respect of the same. 11 22. Regarding levy of penalty on surrendered amount of Rs. 25,00,000/- as WIP under section 132(4) of the Act, it was submitted that the search was conducted on 11/09/2009 and the assessee surrendered WIP amounting to Rs. 25,00,000/- subsequently the same was declared in the returned income filed under section 139(1) on 30/09/2010, paid the taxes as applicable and same was duly accepted and assessed by the AO. However the AO initiated the penalty @ 10% under section 271AAA of the Act. It was submitted that the similar surrender and consequent levy of penalty has been made in A.Y. 2009-10 wherein the Ld. CIT(A) deleted the same vide his order dt. 09/06/2017 and which stands accepted by the Department. It was submitted that the facts and circumstances of the case are exactly identical and therefore the findings of the Ld. CIT(A) are equally applicable in the instant case and following the same, the penalty levied for the impugned assessment year should be directed to be deleted. 23. It was further submitted that in the whole penalty order upto Para-34, the A.O. has copied the assessment order and has mentioned for initiation of penalty proceedings only. The findings of levy of penalty are in few lines in Para- 35 (last Pg.) only. These findings are in extremely generalized manner. He has simply stated the law that the onus was on the assessee to prove the manner of deriving additional undisclosed income and to be corroborated with documentary evidence. However the A.O. has not mentioned as to how he has not discharge his onus. It was submitted that the assessee, duly disclosed the manner i.e. "on account of variation of work in progress", which duly stood accepted by the A.O. on being self declared in the ITR. The assessee duly satisfied all the conditions of Sec.271AAA (2) for not subjecting the said amt. U/s.271AAA. The A.O. has also not levelled any allegation that the assessee do not satisfied conditions of Sec.271 AAA (2) of the Act. Hence no penalty on this self surrendered / self declared can be levied. 12 24. It was submitted that on income surrendered u/s. 132 (4) if the 03 conditions stands satisfied as provided in scc.271AAA (2), no penalty can be levied. In this case all the 03 conditions stood satisfied namely, the undisclosed income stood admitted during search u/s. 132 (4) and the manner also specified being variation in the valuation of WIP, the manner also stood substantiated and the taxes alongwith interest if any also paid thereon. The findings of conditions being satisfied has been given by ld CIT (A) in penalty appeal of A.Y.2009-10 also which stands accepted by the deptt. Hence, the assessee has satisfied all the 3 conditions, therefore, penalty U/s. 271 AAA (1) cannot be levied. 25. Regarding levy of penalty on addition of Rs. 4,48,754/- for lower N.P, it was submitted that it is only an estimated addition and not covered in the definition of “undisclosed income” as provided under section 271AAA and on such estimated addition, no penalty can be levied. 26. Regarding penalty on addition of Rs. 7,40,704/-, it was submitted that firstly no penalty has been levied by the AO and therefore this issue was not before the Ld. CIT(A) however the Ld. CIT(A) in conclusion confirmed the penalty of Rs. 7,40,704/- by wrongly assuming that the penalty has been levied by the AO. It was accordingly submitted that when the AO has not levied the penalty at first place and therefore the assessee has not taken up the issue before the Ld. CIT(A) then he could not had given findings for confirming the penalty which was never levied. 27. Regarding levy of penalty of addition of Rs. 9,30,000/- it was submitted that the addition of Rs. 72,86,000/- was made by the AO on the basis of seized documents and the Ld. CIT(A) sustained the addition of Rs. 9,30,000/- in quantum appeal on which penalty stood confirmed by the Ld. CIT(A) in the impugned order. It was submitted that firstly the submissions made in the quantum appeal in ITA No. 181/Chd/2014 may be considered. Secondly, it was 13 submitted that the addition has been made on the basis of seized material and not on the basis of unexplained credit in the books hence the addition cannot be made under section 68 of the Act. Consequently no penalty can be levied on the addition made under section 68 of the Act. Thirdly, it was submitted that the figures of Rs. 9,30,000/- does not relate to A.Y. 2010-11 but A.Y. 2008-09 and therefore it cannot be subjected to penalty under section 271AAA of the Act in A.Y. 2010-11. It was further submitted that this amount does not represent any undisclosed income as per the Explanation A to Section 271AAA and therefore cannot be subjected to levy of penalty under section 271AAA of the Act. 28. Per contra, the Ld. DR relied on the order of the lower authorities and our reference was drawn to the findings of the AO and the same reads as under: “35. In view of the above, it is not found acceptable and sufficient to hold the assessee as not fit for levying of penalty u/s 271AAA. The onus was on the assessee to prove and specify the manner in which he had; derived the additional undisclosed income. The submission had to be corroborated with documentary evidence. Further, the books of accounts of the assessee were not complete at the time of search. Mere passing of entries in books of accounts is not sufficient to explain the source of cash found. The assessee had to explain all the deposits and withdrawals along with documentary evidences. 36. Based on the above discussion, I am satisfied that this is a fit case for imposition of penalty in terms of Sec. 271 AAA of the I.T.Act,1961. The quantum of penalty to be levied in this case is calculated as below after considering the present legal status on the above issues: Undisclosed Income Rs. 1,48,29,971/- 10% of the undisclosed income Rs. 14,82,997/- 37. The assessee is hereby directed to pay a sum of Rs. 14,83,000/- by way of penalty in terms of Sec. 271AAA of the IT. Act 1961, which is equivalent to 10 per cent of the undisclosed income.” 29. Further, our reference was drawn to the findings of the ld CIT(A) which reads as under: “The AO has levied penalty on surrender income amounting Rs. 25,00,000/- for the year under consideration as the appellant could not substantiate the manner in which this income has been earned and hence, penalty u/s 271 AAA [typographical error on page 1 stating penalty u/s 271(1)(C)] imposed @ 10% of the undisclosed income as per provisions of section 271AAA of the Act is leviable 14 in this case as the appellant has not fulfilled the conditions specified in 271AAA(2)(ii). No submission with this regard to this has been filed during the appellate proceedings. In view of the same, penalty on this surrendered income is sustained. Further, it is seen that the CIT(Appeals) has confirmed the following additions:- (i) Addition on a/c of low net profit shown by appellant-Rs. 4,48,754/- (ii) Addition u/s 69C- Rs. 7,40,704/] (iii) Addition u/s 68- Rs. 9,30,000/- The AO in the penalty order has discussed elaborately the reasons for levying penalty on these additions on the basis of discrepancies found in documents found during the search. No, submissions have been filed during the penalty proceedings. In view of the same, the penalty is confirmed on the above mentioned additions confirmed by CIT(Appeals) amounting Rs. 46,19,458/-. The AO is directed to recomputed the penalty accordingly.” 30. We have heard the rival contentions and purused the material available on record. For the purposes of levy of penalty u/s 271AAA, what is required to be examined is whether any undisclosed income of the specified previous year has been found during the course of search in case of the assessee and the term “Undisclosed income” has been defined under explanation to section 271AAA of the Act and any undisclosed so found thus has to satisfy the parameters laid down therein. Further, under sub-section (2), it has been provided that no penalty under sub-section (1) shall be levied provided the assessee satisfies the conditions specified therein. In the instant case, we find that the AO has passed a very creptic and non-speaking order as so the satisfaction of the conditions for levy of penalty u/s 271AAA of the Act. Secondly, there is no finding that the conditions under sub-section (2) of section 271AAA are satisfied or not satisfied in the instant case. Similarly, we donot see any clear finding recorded by the ld CIT(A). The ld AR has raised various contentions as we have noted above and have also referred to the order of the ld CIT(A) for the immediately preceding year 2009-10. However, we are of the considered view that the matter needs to be examined by the AO afresh and he is directed to pass a speaking out in this regard taking into considerations various contentions raised by the ld AR as above as well as the findings in our 15 order in ITA No. 181/CHD/2014 after providing reasonable opportunity to the assessee. 31. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 12/01/2023. Sd/- Sd/- संजय गग "व#म %संह यादव (SANJAY GARG) ( VIKRAM SINGH YADAV) या यक सद य / JUDICIAL MEMBER लेखा सद य/ ACCOUNTANT MEMBER AG Date: 12/01/2023 ( + ! , - . - Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. $ / CIT 4. $ / 0 1 The CIT(A) 5. - 2 ग 4 5 & 4 5 678 ग9 DR, ITAT, CHANDIGARH 6. ग 8 : % Guard File ( + $ By order, ; # Assistant Registrar