DEPUTY COMMISSIONER OF INCOME TAX, KOTA V. SHRI VASUDEV AGRAWAL, KOTA

ITA 1436/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9362 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 12-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA
• Keywords: Gift; Search and seizure; Bogus
• Section: 69; 27; 143(3); 69B; 251; 13

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. 1436/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2016-17 THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOTA CUKE VS. SHRI VASUDEV AGARWAL BUNGLOW NO. 3, J. K. NAGAR, KOTA, RAJASTHAN LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAVPA5418K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA. NO. 1377/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2016-17 SHRI VASUDEV AGARWAL BUNGLOW NO. 3, J. K. NAGAR, KOTA, RAJASTHAN CUKE VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAVPA5418K 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 : 04/04/2019. VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THESE ARE CROSS APPEALS FILED BY THE REVENUE AND T HE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-2, UDAIPUR DATED 05 .10.2018 FOR ITA NO. 1436 & 1377/JP/2018 THE DCIT, KOTA VS. SHRI VASUDEV AG ARWAL, KOTA 2 ASSESSMENT YEAR 2016-17. ITA NO. 1436/JP/2018 (GROUNDS OF APPEAL TAKEN BY TH E REVENUE): 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) WAS RIGHT IN REDUCING THE PENALTY O F RS. 2,25,53,134/- LEVIED BY THE AO @ 30% OF THE UNDISCL OSED INCOME UNDER CLAUSE 1(C) OF SECTION 271AAB OF THE INCOME T AX ACT TO RS. 75,17,711/- UNDER CLAUSE 1(A) OF THAT SECTION DESPI TE THE FACT THAT MANNER OF EARNING OF UNDISCLOSED INCOME WAS NOT DIS CLOSED BY THE ASSESSEE. ITA NO. 1377/JP/2018 (GROUNDS OF APPEAL TAKEN BY TH E ASSESSEE): 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN NOT HOLDING THE PENALTY ORDER AS WRONG, BAD IN LAW, IN-VALID 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 INITIATED I.E. W HETHER IT IS FOR CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) OF SECTION 2 71AAB(1) BECAUSE THE CONDITIONS FOR IMPOSING THE PENALTY UND ER 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 REQUI RED 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. 75,17,711/- U/S 271AAB(1)(A) OF THE ACT OUT OF PENA LTY OF RS. 2,25,53,134/- IMPOSED BY THE AO U/S 271AAB(1)(C) OF THE ACT ITA NO. 1436 & 1377/JP/2018 THE DCIT, KOTA VS. SHRI VASUDEV AG ARWAL, KOTA 3 MORE SO WHEN:- A) THE APPELLANT WAS NOT HAVING ANY UNDISCLOSED INC OME WITHIN THE MEANING OF SECTION 271AAB OF THE ACT, TH EREFORE NO PENALTY UNDER THIS SECTION CAN BE IMPOSED ON ASSESS EE. B) THE PENALTY WAS LEVIED BY DRAWING THE INTERFEREN CE ONLY FROM THE STATEMENT RECORDED U/S 132(4) OF THE ACT W HEREAS THERE IS NO INCRIMINATING MATERIAL OR EVIDENCE WAS FOUND DURING SEARCH TO PROVE THAT THE ASSESSEE WAS HAVING UNDISCLOSED I NCOME. C) THE PENALTY WAS IMPOSED BY HOLDING THAT THE APPE LLANT SURRENDERED THE BOGUS LONG TERM CAPITAL GAIN WHILE NO LONG TERM CAPITAL GAIN WAS SURRENDERED BY THE APPELLANT. THER EFORE THE PENALTY WAS IMPOSED ON INCORRECT AND MISCONCEIVED F INDING. D) THERE IS NO FINDING/REASON/CONCLUSION IN THE PEN ALTY ORDER REGARDING IMPOSING THE PENALTY ON INCOME OF RS. 7,5 1,77,115/- DECLARED IN INCOME TAX RETURN. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE CIT(A) ERRED IN HOLDING THAT THE PENALTY U/ S 271AAB OF THE ACT IS MANDATORY. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE CIT(A) ERRED IN NOT GIVING THE FINDING ON T HE ALLEGATION OF AO THAT THE APPELLANT FIND IN THE POSITION OF MENS REA AND INTENTION WAS OF WRONG DOING THAT CONSTITUTES PART OF A CRIME. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A SEARCH & SEIZURE 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 3.09.2016, THE ASSESSEE HAS DECLARED TOTAL INCOME OF RS. 8,32,88,9 10/- WHICH INCLUDES ITA NO. 1436 & 1377/JP/2018 THE DCIT, KOTA VS. SHRI VASUDEV AG ARWAL, KOTA 4 UNDISCLOSED INCOME OF RS. 7,51,77,115/- WHICH WAS S URRENDERED BY THE ASSESSEE DURING THE SEARCH ACTION CARRIED OUT ON 02 .07.2015 AT HIS RESIDENTIAL PREMISES. THE SAID UNDISCLOSED INCOME R EPRESENTS ADVANCES GIVEN TO VARIOUS SUPPLIERS AMOUNTING TO RS. 7,43,79 ,200/- AND CASH OF RS 7,97,915. THE ASSESSMENT PROCEEDINGS WERE COMPL ETED U/S 143(3) R.W.S. 153B(1)(B) OF THE ACT. AND THE ASSESSEED INC OME WAS DETERMINED AT RS. 8,32,88,910/-. PENALTY PROCEEDINGS U/S 271A AB WERE SIMULTANEOUSLY INITIATED VIDE SHOW CAUSE DATED 27.1 2.2017 IN RESPECT OF UNDISCLOSED INCOME SURRENDERED DURING THE COURSE OF SEARCH AMOUNTING TO RS. 7,51,77,115/-. 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. 7,51,77,115/- WAS LEVIED @ 30% VIDE O RDER 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 @ 10% OF UNDISCLOSED INCOME AS AGAINST 30% LEVIED B Y THE ASSESSING OFFICER. NOW, AGAINST THE SAID FINDING OF THE LD. C IT(A), BOTH THE REVENUE AND THE ASSESSEE ARE IN APPEAL BEFORE US. 4. DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT IN THE ITA NO. 1436 & 1377/JP/2018 THE DCIT, KOTA VS. SHRI VASUDEV AG ARWAL, KOTA 5 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. IT WAS FURTHER SUBMITTED THAT IT IS UNDISPUTED THAT PENALTY IS IMPOSABLE UND ER SECTION 271AAB ON 'UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR' . THE WORD 'UNDISCLOSED INCOME' HAS BEEN DEFINED IN THE EXPLAN ATION (C) OF THE SUB SECTION-3 OF SECTION-271AAB. 5. IT WAS SUBMITTED THAT ON BARE PERUSAL OF THE DEF INITION OF 'UNDISCLOSED INCOME' GIVEN IN THE INCOME TAX ACT, F OR THE PURPOSE OF APPLICABILITY OF SECTION 271AAB(1), THE CHARACTERIS TICS, AS PRESCRIBED THEREIN SHALL HAVE TO BE FULFILLED. HOWEVER, BEFORE TESTING UPON THE CASE OF APPELLANT IN THE FOUR CORNERS OF DEFINITION OF 'UNDISCLOSED INCOME' AS APPLICABLE FOR THE PURPOSE OF SECTION-27 1AAB, IT IS SUBMITTED THAT CASE OF APPELLANT IS NOT RELATED WIT H ANY EXPENSES, AS SUCH, THERE APPEARS NO NEED FOR ANY DISCUSSION PERT AINING TO THE ITA NO. 1436 & 1377/JP/2018 THE DCIT, KOTA VS. SHRI VASUDEV AG ARWAL, KOTA 6 EXPLANATION (C)(II) OF SECTION 271AAB. THUS, FOR CO VERING THE CASE OF APPELLANT UNDER SECTION 271AAB, THE CHARACTERISTICS PRESCRIBED UNDER EXPLANATION (C) (I) IS TO BE EXAMINED. AT THE COST OF REPETITION IT IS SUBMITTED THAT FOR SUSTAINING THE CASE OF APPELLANT UNDER SECTION- 271AAB(1) OF THE ACT, THERE MUST BE 'UNDISCLOSED IN COME', AS PER EXPLANATION (C)(I). THEREFORE, CONSIDERING THE PROV ISIONS, AS PRESCRIBED BY PARLIAMENT UNDER EXPLANATION (C) (I) OF SECTION 271AAB, FOR DEFINING ANY INCOME AS 'UNDISCLOSED INCOME', IT MUS T FULFILL FOLLOWING CHARACTERISTICS: (A) THE INCOME SHOULD NOT HAVE BEEN RECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN NORMAL COURSE. (B) THE INCOME SHOULD NOT HAVE BEEN DISCLOSED BEFOR E THE DATE OF SEARCH. IN SO FAR AS ABOVE (B) I.E. EXPLANATION (C)(I)(B), IS CONCERNED, THE SAME IS NOT APPLICABLE TO THE CASE OF APPELLANT INASMUCH AS THE ASSESSMENT YEAR UNDER CONSIDERATION IS CONCERNED. THE SEARCH W AS CARRIED OUT ON 02.07.2015 AND THE DATE OF FILING OF RETURN FOR THE ASSESSMENT YEAR 2016-17 WAS AFTER THE DATE OF SEARCH. THEREFORE, DI SCLOSURE BEFORE THE DATE OF SEARCH FOR THE ASSESSMENT YEAR 2016-17 WAS NOT APPLICABLE IN THE CASE OF APPELLANT AND THEREFORE, THE CASE OF AP PELLANT IS BEYOND THE PURVIEW OF EXPLANATION (C)(I)(B) OF SUB SECTION (3) OF SECTION 271AAB. NOW, THE ONLY AND ONLY POINT TO COVER THE CASE OF A PPELLANT UNDER DEFINITION OF 'UNDISCLOSED INCOME' IS WHETHER THE C ASE OF APPELLANT FALLS UNDER EXPLANATION (C)(I)(A) OF SECTION 271AAB, WHIC H INTER ALIA PROVIDES THAT INCOME SHOULD NOT HAVE BEEN RECORDED IN THE BO OKS OF ACCOUNTS OR ITA NO. 1436 & 1377/JP/2018 THE DCIT, KOTA VS. SHRI VASUDEV AG ARWAL, KOTA 7 OTHER DOCUMENTS. IT IS UNDISPUTED FACT ON RECORD TH AT THE ADVANCE PROVIDED BY THE APPELLANT TO THE FARMER FOR AGRICUL TURE PURPOSE FOR SUBSEQUENT PURCHASE OF WHEAT WAS DULY RECORDED IN T HE DIARY MAINTAINED BY THE APPELLANT (COPY OF SEIZE DIARY IS AT PB PAGE 13-73), WHICH FALLS UNDER THE DEFINITION OF 'OTHER DOCUMENT ' AND THE SAME WAS TAKEN INTO ACCOUNT BY THE SEARCH AND SEIZURE TEAM S O AS BY LD. AO. THEREFORE, CONSIDERING THE FACTS ON RECORD THAT THE ADVANCE PROVIDED BY THE APPELLANT WAS RECORDED IN THE OTHER DOCUMENTS O F APPELLANT BEFORE THE DATE OF SEARCH, THUS, CASE OF APPELLANT IS ALSO OUT OF THE PURVIEW OF EXPLANATION (C) (I) (A) TO THE SUB SECTION (3) OF T HE SECTION-271AAB(1). THUS, IT IS ALTOGETHER WELL ESTABLISHED AND CLEAR T HAT ADVANCE PROVIDED BY THE APPELLANT DURING THE IMPUGNED ASSESSMENT YEA R IS NOT COVERED UNDER DEFINITION OF 'UNDISCLOSED INCOME' FOR THE PU RPOSE OF SECTION 271AAB(1), AS PRESCRIBED UNDER EXPLANATION (C) TO S UB SECTION (3) OF SECTION 271AAB. EVEN OTHERWISE, IT IS NO MATTER AS TO WHAT IS ALLEGED BUT IT IS IN FACT HAS TO BE PROVED THAT THE APPELLA NT IS HAVING UNDISCLOSED INCOME, WITHIN THE MEANING OF SECTION 271AAB, WHICH IS NOT IN THE INSTANT CASE OF APPELLANT, RESULTING PROCEEDING AB INITIO VOID AND DESERVES TO BE QUASHED. 6. IT WAS FURTHER SUBMITTED THAT THE CONTENTION OF THE APPELLANT THAT ADVANCE FOR PURCHASE OF WHEAT PROVIDED TO THE FARME RS, WHICH WAS DULY RECORDED IN THE DIARY AND OFFERED FOR TAX DURING TH E COURSE OF SEARCH AND SEIZURE OPERATION DOES NOT FALL UNDER THE DEFIN ITION OF UNDISCLOSED INCOME AS PRESCRIBED UNDER EXPLANATION (C) TO SECT ION 271AAB (1), HAS ALSO BEEN ENDORSED IN A NUMBER OF JUDICIAL PRONOUNC EMENTS SUCH AS THAT OF ITAT KOLKATA IN CASE OF DY. COMMISSIONER OF INCO ME TAX, CIRCLE-2 (2), KOLKATA V. MANISH AGARWAL, REPORTED IN (2018) 92 TAXMAN.COM 81 ITA NO. 1436 & 1377/JP/2018 THE DCIT, KOTA VS. SHRI VASUDEV AG ARWAL, KOTA 8 (KOLKATA-TRIB) WHEREIN IT WAS HELD AS UNDER: 'ACCORDING TO THE LD. AR, FROM THE FACTS AND CIRCUM STANCES DESCRIBED ABOVE, SINCE THE ASSESSEE IS NOT ENGAGED IN BUSINESS OR PROFESSION, HE DOES NOT REQUIRE TO MAINTAIN THE BOOKS OF ACCOUNT AS PER SEC. 44AA OR SEC. 44AA(2) OF THE ACT , THEREFORE, THE ASSESSEE'S CASE FALLS IN THE SECOND LIMB I.E. ' OR OTHER DOCUMENTS' AS STIPULATED U/S. 271AAB EXPLANATION (C ) (SUPRA) WHICH DESCRIBES UNDISCLOSED INCOME FOR THE PURPOSES OF THIS SECTION WHICH IS VERY IMPORTANT TO ADJUDICATE THIS ISSUE. THEREFORE, THE QUESTION IS WHEN THE SEARCH TOOK PLA CE, THE ASSESSEE'S TRANSACTIONS (IN THIS CASE, THE SPECULAT IVE TRANSACTION) HAS BEEN FOUND TO BE RECORDED IN THE ' OTHER DOCUMENTS' WHICH IS (RETRIEVED FROM THE ASSESSEE'S ACCOUNTANT'S DRAWER) AND BASED ON THAT THE ASSESSEE DECLARED RS. 3 CR. DURING SEARCH AND LATER RETURNED INCOME O F RS. 3 CR. AS INCOME UNDER THE HEAD 'INCOME FROM OTHER SOURCES' W HICH WAS ACCEPTED BY THE AO IN TOTO. WE NOTE THAT SINCE THE INCOME UNDER QUESTION (RS. 3 CR.) WAS IN FACT ENTERED IN T HE OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE AY 2013-14, WHICH DOCUMENT WAS RETRIEVED DURING SEARCH . HENCE, THE AMOUNT OF RS. 3 CR. OFFERED BY THE ASSESSEE DOE S NOT FALL IN THE KEN OF UNDISCLOSED INCOME DEFINED IN SEC. 271 AAB OF THE ACT. SO, RS. 3 CR. WHICH WAS COMMODITY PROFIT RECOR DED IN THE OTHER DOCUMENT MAINTAINED BY THE ASSESSEE WHICH WAS RETRIEVED DURING SEARCH CANNOT BE TERMED AS UNDISC LOSED INCOME IN THE DEFINITION GIVEN U/S 271AAB OF THE A CT. SINCE RS. 3 CR. CANNOT BE TERMED AS UNDISCLOSED INCOME AS P ER SEC. ITA NO. 1436 & 1377/JP/2018 THE DCIT, KOTA VS. SHRI VASUDEV AG ARWAL, KOTA 9 271AAB OF THE ACT, NO PENALTY CAN BE LEVIED AGAINST THE ASSESSEE. THEREFORE, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THE AFORESAID REASONING RENDERED BY US. 7. IT WAS FURTHER SUBMITTED THAT THE ADVANCES RECO RDED IN DOCUMENTS ARE OUT OF PURVIEW OF PROVISIONS OF SECTI ON 271AAB OF THE ACT. IN THIS REGARD WE WILL LIKE TO REFER THE FINDI NG OF JAIPUR ITAT GIVEN IN THE CASE OF M/S RAMBHAOS V/S ACIT, CENTRA L CIRCLE-1, JAIPUR ITA NO. 991/JP/2017 DATED 12.10.2018 WHEREIN IN THE IDENTICAL ISSUE, IT WAS DECIDED IN FAVOUR OF THE ASSESSEE. IN VIEW OF FINDINGS OF ITAT, JAIPUR BENCH, JAIPUR, THE ADVANCES GIVEN TO PARTIES CANNOT BE SAID TO QUALIFY AS AN UNDISCLOSED INCOME IN THE CONTEXT OF SECTION 271AAB. 8. IT WAS FURTHER SUBMITTED THAT THE SAVING OF APPE LLANT FAMILY SINCE LONG BEING RS. 7,97,915/- WAS ALSO OFFERED FOR TAX THOUGH IT WAS KEPT BY THE APPELLANT TO MEET OUT ANY EVENTUALITY OR UNTOWA RD INCIDENT IN THE FAMILY AND THE SAID SAVINGS WERE MADE DURING 20-25 YEARS FROM THE HOUSEHOLD EXPENSES OF THE APPELLANT FAMILY AND FROM PETTY GIFTS RECEIVED TIME TO TIME, WHICH CANNOT TERMED AS UNDI SCLOSED INCOME WITHIN THE MEANING OF SECTION 271AAB. THE SAME WAS OFFERED FOR TAXATION ONLY TO AVOID LITIGATION. IT WAS ACCORDINGLY SUBMITTED THAT THE PENALTY IMPOS ED BY THE AO AND SO SUSTAINED BY THE LD. CIT(A) SHOULD BE DELETED. 9. 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 ITA NO. 1436 & 1377/JP/2018 THE DCIT, KOTA VS. SHRI VASUDEV AG ARWAL, KOTA 10 10% AND GIVEN THE FACTS OF THE CASE, THE ORDER OF T HE LD CIT(A) DESERVES TO BE SUSTAINED. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THIS TRIBUNAL IS TAKING A CONS ISTENT VIEW THAT LEVY OF PENALTY U/S 271AAB IS NOT AUTOMATIC IN NATURE BUT T HE AO HAS DISCRETION TO TAKE A DECISION AFTER ARRIVING TO THE CONCLUSION THAT THE INCOME DISCLOSED BY THE ASSESSEE IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT IS AN UNDISCLOSED INCOME IN TERMS OF SECTION 27 1AAB(1) R.W. EXPLANATION DEFINING THE UNDISCLOSED INCOME. FOR TH E PURPOSES OF LEVY OF PENALTY, WHAT HAS TO BE SEEN IS THAT WHETHER THE SURRENDER SO MADE, IN TERMS OF STATEMENT OF THE ASSESSEE RECORDED U/S 132(4) DURING THE COURSE OF SEARCH, FALLS IN THE DEFINITION OF UNDIS CLOSED INCOME WHICH HAS BEEN SPECIFICALLY LAID DOWN IN TERMS OF CLAUSE (C) OF EXPLANATION TO SECTION 271AAB. 11. IN THE INSTANT CASE, THE AMOUNT FOUND DURING TH E COURSE OF SEARCH AT THE PREMISES OF THE ASSESSEE AND SURRENDERED BY THE ASSESSEE IN HIS STATEMENT U/S 132(4) CONSIST OF CASH ADVANCES TO FA RMERS FOR PURCHASE OF WHEAT AMOUNTING TO RS. 7,43,79,200/-, AND CASH O F RS 7,97,915. AS FAR AS CASH OF RS 7,97,915 FOUND IN POSSESSION OF T HE ASSESSEE DURING THE COURSE OF SEARCH IS CONCERNED, THERE CANNOT BE ANY DISPUTE THAT THE SAME REPRESENTS UNDISCLOSED INCOME SO DEFINED IN SE CTION 271AAB AND WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT S OF THE ASSESSEE AT THE TIME OF SEARCH. REGARDING THE CONTENTION OF THE LD AR THAT SUCH CASH IS OUT OF PAST SAVINGS OF THE ASSESSEE, THESE ARE CONTENTIONS WHICH ARE RELEVANT FOR DETERMINING THE NATURE AND SOURCE OF SUCH UNDISCLOSED INCOME FOR THE PURPOSES OF DETERMINING THE QUANTUM OF PENALTY WHICH ITA NO. 1436 & 1377/JP/2018 THE DCIT, KOTA VS. SHRI VASUDEV AG ARWAL, KOTA 11 THE LD CIT(A) HAS DULY CONSIDERED AND HAS UPHELD TH E LEVY OF PENALTY @ 10% AS AGAINST 30% LEVIED BY THE AO. IN THE RESULT, WE CONFIRM THE LEVY OF PENALTY @ 10% ON THE UNDISCLOSED INCOME OF RS 7,97,915 SO SUSTAINED BY THE LD CIT(A). 12. REGARDING CASH ADVANCES TO FARMERS FOR PURCHASE OF WHEAT AMOUNTING TO RS. 7,43,79,200/-, IT IS NOTED THAT TH E ASSESSEE IS PROPRIETOR OF M/S JAGDAMBA KIRANA STORES AND IS ENG AGED IN BUSINESS OF WHOLESALE AND RETAIL TRADING OF AATA, MAIDA, SUJI A ND KIRANA ITEMS AND WAS REQUIRED TO MAINTAIN REGULAR BOOKS OF ACCOUNTS IN RESPECT OF HIS BUSINESS ACTIVITIES. THE SLIP PAD AND TWO NOTEBOOK S FOUND DURING THE COURSE OF SEARCH AND SEIZURE AT THE RESIDENTIAL PRE MISES OF THE ASSESSEE CONTAINS THE ENTRIES OF ADVANCES GIVEN FOR PURCHASE OF WHEAT. THESE TRANSACTIONS FOR PURCHASE OF WHEAT ARE THUS PART OF REGULAR BUSINESS ACTIVITY OF THE ASSESSEE AND THE ADVANCES SO GIVEN ARE REQUIRED TO BE ENTERED IN THE REGULAR BOOKS OF ACCOUNTS. THOUGH TH ESE TRANSACTIONS ARE RECORDED IN THE NOTEPAD AND TWO NOTE BOOKS WHICH AR E IN NATURE OF OTHER DOCUMENTS, HOWEVER THE FACT OF THE MATTER I S THAT THESE TRANSACTIONS ARE REGULAR BUSINESS TRANSACTIONS WHIC H ARE REQUIRED TO BE MAINTAINED IN THE REGULAR BOOKS OF ACCOUNTS MAINTAI NED IN THE NORMAL COURSE RELATING TO SUCH BUSINESS AND WHICH HAS NOT BEEN ENTERED ON OR BEFORE THE DATE OF SEARCH. HOWEVER, THE QUESTION TH AT REMAINS IS WHETHER THE ADVANCES SO GIVEN TO THE FARMERS FOR PU RCHASE OF WHEAT QUALIFY AS UNDISCLOSED INCOME. AN ADVANCE REPRESEN TS AN OUTFLOW OF FUNDS AND WHAT HAS BEEN ENVISAGED BY THE LEGISLATUR E WHILE DEFINING UNDISCLOSED INCOME IN SECTION 271AAB IS AN INFLOW OF FUNDS WHICH HAS NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS ON OR BE FORE THE DATE OF SEARCH. FURTHER, THE DEEMING FICTION SO ENVISAGED I N SECTION 69 AND 69B ITA NO. 1436 & 1377/JP/2018 THE DCIT, KOTA VS. SHRI VASUDEV AG ARWAL, KOTA 12 CANNOT BE EXTENDED AND APPLIED AUTOMATICALLY IN CON TEXT OF SECTION 271AAB WHICH CONTAINS A SPECIFIC DEFINITION OF UNDI SCLOSED INCOME. A SIMILAR ISSUE HAS BEEN DEALT BY THE TRIBUNAL IN CAS E OF M/S RAMBHAJO VS ACIT (ITA NO. 991/JP/2017 DATED 11.01.2019) WHEREIN IT WAS HELD AS UNDER: 39. NOW, COMING TO SURRENDER MADE ON ACCOUNT OF CA SH ADVANCES FOR LAND PURCHASES IN THE STATEMENT RECORD ED U/S 132(4) OF THE ACT. DURING THE COURSE OF SEARCH, A DIARY HAS BEEN FOUND WHEREIN THERE ARE NOTINGS RELATING TO ADVANCE GIVEN TO VARIOUS PERSONS TOWARDS PURCHASE OF LAND. THE NOTI NGS DESCRIBE THE NAME OF THE PERSONS, THE AMOUNT ADVANCED WHICH RANGES FROM RS 2 LACS TO RS 50 LACS TO 4 PERSONS TOTALING TO RS 1.12 CRORES AND THE DATE OF SUCH ADVANCE DURING THE PERIOD 28.07.2013 TO 3.9.2013 JUST BEFORE THE DATE OF SEAR CH ON 4.9.2013. THEREFORE, WHAT HAS BEEN FOUND DURING THE COURSE OF SEARCH IS CERTAIN ENTRIES RELATING TO UNDISCLOSED I NVESTMENT IN PURCHASE OF LAND. BESIDES THE SAID ENTRIES, THERE A RE NO OTHER DOCUMENTS/MATERIAL IN TERMS OF ANY AGREEMENT TO SEL L, THE DESCRIPTION OF THE PROPERTY ETC, WHICH HAS BEEN FOU ND DURING THE COURSE OF SEARCH. AS PER THE DEFINITION OF UNDISCL OSED INCOME U/S 271AAB, THE UNDISCLOSED INVESTMENT IN SO CALLED PUR CHASE OF LAND CANNOT BE STATED TO BE INCOME WHICH IS REPRESENTED BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING. WHETHER IT CAN THEN BE SAID THAT SUCH UNDISCLOSED I NVESTMENT REPRESENTS INCOME BY WAY OF ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132. AN INVESTMENT PER SE REPRESENTS AN OUTFLOW OF FUNDS FROM THE ASSE SSEES HAND ITA NO. 1436 & 1377/JP/2018 THE DCIT, KOTA VS. SHRI VASUDEV AG ARWAL, KOTA 13 AND AN INCOME PER SE REPRESENTS AN INFLOW OF FUNDS IN THE HANDS OF THE ASSESSEE. THEREFORE, ONCE THERE IS AN INFLO W OF FUNDS BY WAY OF INCOME, THERE COULD BE SUBSEQUENT OUTFLOW BY WAY OF INVESTMENT. INVESTMENT AND INCOME THUS CONNOTES DI FFERENT MEANING AND CONNOTATION AND THUS CANNOT BE USED INT ER- CHANGEABLY. IN THE DEFINITION OF UNDISCLOSED INCOM E, WHERE IT TALKS ABOUT INCOME BY WAY OF ANY ENTRY IN THE BOOK S OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COU RSE OF A SEARCH UNDER SECTION 132, WHAT PERHAPS HAS BEEN EN VISAGED BY THE LEGISLATURE IS AN INFLOW OF FUNDS IN THE HANDS OF THE ASSESSEE WHICH HAS BEEN FOUND RECORDED BY WAY OF ANY ENTRY I N THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS, AND WHICH HAS NOT B EEN RECORDED BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS MAINTAINED BY THE ASSESSEE IN THE N ORMAL COURSE. WE ARE ALSO CONSCIOUS OF THE FACT THAT THER E ARE DEEMING PROVISIONS IN TERMS OF SECTION 69 AND 69B WHEREIN S UCH INVESTMENTS ARE DEEMED TO BE TREATED AS INCOME IN A BSENCE OF SATISFACTORY EXPLANATION. IN OUR VIEW, THE DEEMING FICTION SO ENVISAGED UNDER SECTION 69 AND SECTION 69B WHERE IN VESTMENTS WHICH ARE FOUND EITHER NOT RECORDED OR FOUND RECORD ED AT A LESSER VALUE IN THE BOOKS OF ACCOUNTS, AND SUCH INVESTMENT S ARE DEEMED TO BE INCOME OF THE ASSESSEE OF THE YEAR IN WHICH S UCH INVESTMENTS HAVE BEEN MADE, CANNOT BE EXTENDED AND APPLIED AUTOMATICALLY IN CONTEXT OF SECTION 271AAB. IT IS A WELL-SETTLED LEGAL PROPOSITION THAT THE DEEMING PROVISIONS ARE L IMITED FOR THE PURPOSES THAT HAVE BEEN BROUGHT ON THE STATUTE BOOK AND HAVE THEREFORE TO BE APPLIED IN THE CONTEXT OF PROVISION S WHEREIN THEY HAVE BEEN BROUGHT ON THE STATUE BOOK AND NOT OTHERW ISE. IN THE ITA NO. 1436 & 1377/JP/2018 THE DCIT, KOTA VS. SHRI VASUDEV AG ARWAL, KOTA 14 INSTANT CASE, THE DEEMING PROVISIONS ARE CONTAINED IN SECTION 69 AND SECTION 69B AND THEREFORE, THE SAME COULD HAVE BEEN APPLIED IN THE CONTEXT OF BRINGING TO TAX SUCH INVESTMENTS TO TAX IN THE QUANTUM PROCEEDINGS, THOUGH THE FACT OF THE MATTER IS THAT THE AO HAS NOT EVEN INVOKED THE SAID DEEMING PROVISIONS IN THE QUANTUM PROCEEDINGS IN THE INSTANT CASE. THEREFORE , EVEN ON THIS ACCOUNT, THE DEEMING FICTION CANNOT BE EXTENDED TO THE PENALTY PROCEEDINGS WHICH ARE SEPARATE AND DISTINCT FROM TH E ASSESSMENT PROCEEDINGS AND MORE SO, WHERE THE PROVISIONS OF SE CTION 271AAB PROVIDE FOR A SPECIFIC DEFINITION OF UNDISCL OSED INCOME. WHERE A SPECIFIC DEFINITION OF UNDISCLOSED INCOME H AS BEEN PROVIDED IN SECTION 271AAB, BEING A PENAL PROVISION , THE SAME MUST BE STRICTLY CONSTRUED AND IN LIGHT OF SATISFAC TION OF CONDITIONS SPECIFIED THEREIN AND IT IS NOT EXPECTED TO EXAMINE OTHER PROVISIONS WHERE THE SAME HAS BEEN DEFINED OR DEEME D FOR THE PURPOSES OF BRINGING THE AMOUNT TO TAX. IN LIGHT O F THE SAME, THE UNDISCLOSED INVESTMENT BY WAY OF ADVANCE FOR PURCHA SE OF LAND CAN BE SUBJECT MATTER OF ADDITION IN THE QUANTUM PR OCEEDINGS, AS THE SAME HAS BEEN SURRENDERED DURING THE COURSE OF SEARCH IN THE STATEMENT RECORDED U/S 132(4) AND OFFERED IN TH E RETURN OF INCOME, HOWEVER THE SAME CANNOT BE SAID TO QUALIFY AS AN UNDISCLOSED INCOME IN THE CONTEXT OF SECTION 271AAB READ WITH THE EXPLANATION THERETO AND PENALTY SO LEVIED THERE ON DESERVED TO BE SET-ASIDE. 13. IN LIGHT OF ABOVE DISCUSSIONS AND FOLLOWING TH E EARLIER DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S RAMBHAJO VS ACIT(SUPRA), WE DELETE THE PENALTY LEVIED UNDER SEC TION 271AAB OF THE ITA NO. 1436 & 1377/JP/2018 THE DCIT, KOTA VS. SHRI VASUDEV AG ARWAL, KOTA 15 ACT ON CASH ADVANCES OF RS 7,43,79,200 PAID TO FARM ERS TOWARDS PURCHASE OF WHEAT. SINCE THE ISSUE OF LEVY OF PENA LTY U/S 271AAB OF THE ACT HAS BEEN DECIDED ON MERITS, THEREFORE, THE ISSUE OF VALIDITY OF INITIATION OF THE PENALTY PROCEEDING DUE TO DEFECTI VE SHOW CAUSE NOTICE BECOME ACADEMIC IN NATURE AND WE DO NOT PROPOSE TO ADJUDICATE THE SAME. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/04/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 04/04/2019. *GANESH KR VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- DCIT, CENTRAL CIRCLE, KOTA 2. IZR;FKHZ@ THE RESPONDENT- SHRI VASUDEV AGARWAL, KOTA 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 1436 & 1377/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR